Steve Richards: Mr Darling, the master of contortion

Labour is busking its approach to policy-making. So where are its values?
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The Independent Online

The government has performed a U-turn. It has moved from having a conveniently flexible economic policy to having no economic policy at all. Since 1997 economic policy was never as consistent as it appeared to be. Behind the familiar and constant language of "stability", "prudence" and "fiscal rules" Gordon Brown and, more recently, Alistair Darling spent and taxed as political expediency demanded. It is amazing what they could do behind the cloak of "affordable tax cuts and spending increases".

Now their view of expediency demands that they more or less busk their approach to economic policy-making. There has been much misguided speculation as to whether Mr Brown and Mr Darling have become disciples of John Maynard Keynes as they borrow and spend in the midst of a recession. Such a view implies that they were followers of another recognisable philosophy in the past, when they were not, and have made a dramatic ideological leap now, which they have not. Their current economic policy can be summarised in a single sentence: "Whatever it takes to win the next general election". In that sense there is no change from the government's previous approach to economic policy making.

Under the deceptively elevated guise of the Mais lecture, Mr Darling confirmed he will borrow and bring forward his spending plans. In interviews he has hinted there may even be tax cuts for low earners. Such a move would be aimed at partly wooing the disaffected core vote and also wrong-footing the increasingly confused Conservative leadership, which is currently opposed to government borrowing levels, having indicated support for them two weeks ago. Only by borrowing more could Mr Darling cut taxes.

Mr Darling stressed in his lecture that his approach was not inspired by a single economist who is suddenly back in fashion. Instead he was doing what it would be "perverse" not to do, which is to borrow more in a recession. He promised in the medium term that the government would return to a course of prudence, although he did not explain what that would mean. I can offer a translation. Taxes will rise once the election is safely out of the way.

In hailing a prudent course and putting the case for spending and borrowing, Mr Darling got into the unavoidably contorted position of arguing that the government's famous fiscal rules brought about stability. Nonetheless it was necessary to drop the rules in order to achieve stability in the medium term.

What he did not explain was why the fiscal rules were being violated long before the collapse of the financial markets. The answer is simple, but is never articulated. With good cause other priorities came to matter more. The rules were always too rigid given that the government was committed to a revival in the decrepit public services.

But the government did not adopt its fiscal rules or indeed give the Bank of England independence for economic reasons. It acted in this way in order to be trusted politically, to hem itself in or give an appearance of being hemmed in, so no one would accuse it of going on a reckless spending spree. Before very long after 1997 it became clear that a spending spree was required, and ever since ministers have been working out how to claim they were applying the rules when they were not.

The earlier spending spree was presented as a technocratic decision. The current levels of borrowing will be presented in a similar light. No economist will get a decisive look-in from this still ideologically defensive administration. If the left tend to follow Keynes and the right hail the works of Hayek, Mr Darling sought to place a foot in either camp during his lecture: "Hayek liked rules," he declared. "Keynes liked discretion. I believe in a combination of the two". Would even Tony Blair display such chutzpah? The government is steering a third way in the battle of the economists, hailing strict rules for the economy that are applied flexibly.

Quite deliberately, Labour has never had an economic policy that was recognisably rooted anywhere. Mr Brown, as much as Mr Blair, seeks obsessively a big tent of support. He has presented economic policy always in terms of stability, prudence for a purpose, acting for the many and not the few, economic competence.

I am told that Mr Brown has been a little alarmed in recent days about being suddenly associated with Keynes – in the same way that he got in a state about the prospect of nationalising Northern Rock. He is only at ease in public as a technocrat. He does not want to engage in a deep debate about the values associated with an economic policy in case that places him somewhere on the political spectrum that is a millimetre to the left of the centre ground when he wants to be – seen as a leader who personifies the national consensus.

The irony of such defensive pragmatism is that in the midst of this crisis Labour would have a better chance of winning the next election if it presents the political battle in terms of values. As far as it is possible to follow the latest position of the Conservative leadership it seems that the party is arguing against higher borrowing, which means it will have to propose some deep spending cuts. As one Labour MP put it to me: "We could easily get blamed for this shipwreck unless we ask which party you trust more not to throw anyone else overboard, and which you have most faith in to get people back on the boat". In other words he wanted to hear more rather than less about the principles that shape his party's fluctuating policies.

You can understand why. "Vote for us. We have taken the long-term decisions that got us into the recession and only we can take the long-term decisions to get us out" is hardly a message to get a long-serving government very far. Labour could do with a little more Keynes and a little less of talk about long-term decisions taken on the basis of a national consensus, which raise a thousand unanswered questions about why the decisions are being made and over what issues the consensus is being formed.