Steve Richards: Labour's profligacy is a myth that Miliband must debunk

From the day after the election, Cameron, Osborne, and Clegg placed their every single move in the context of an apparently bleak inheritance

When a week is supposed to be a long time in politics the past can seem like a distant land. The current raging debate about Labour's economic record in power shows that there is no such easy escape from what went before. At Ed Miliband's monthly press conference yesterday, the first three questions related to whether he would apologise for the level of spending during the boom years, the alleged cause of Britain's current fragility. The past haunts the present and will determine the future.

The row began before we had much chance of moving on. From the day after the election Messrs Cameron, Osborne and Clegg placed every move in the context of their apparently bleak inheritance. With heavy sighs they regretted what they were being forced to do because of Labour's reckless profligacy. Last week, Miliband responded belatedly with an article in which he pointed out that there had been a global financial crisis after the 2005 election, one that could not be blamed on the spending plans of the last Labour government.

Miliband's unapologetic arguments were too much for some columnists of a Blairite persuasion. In The Times, Philip Collins, who was a brilliant speechwriter for Tony Blair, wrote a column arguing that Miliband must acknowledge Labour's failure to rein in spending as an insurance against economic crisis. Here at The Independent, John Rentoul sought the same apology about the past. At The Guardian, Martin Kettle revealed that a minister had phoned him to point out that Blair had wanted a review of spending after the 2005 election and that the Coalition was yet again showing itself to be the heir to Blair by cutting now. Once more, leading Tory ministers and those that worship at the altar of Tony Blair dance to more or less the same tunes, this time in their interpretation of the past.

Except that what actually happened after the 2005 election was more complicated than they suggest. The missed complexity is important, not as an arcane debating point about the past but as a guide to the difficulty or desirability of cutting public spending. Blair did reveal in his memoir that he was worried about spending levels in 2005, and sought a review in an attempt to get them under control. The fact that no such review did take place at a point where he was at his most assertive, and prevailing in virtually every dispute with Gordon Brown, shows that his hunger was limited.

More revealing is that many of the spending increases that followed arose from Blair's policy initiatives. A lot of the additional spending was focused on city academies, defence, the short- term cost of NHS reforms, the anti-crime agenda and the Olympics. Like many British voters Blair was against public spending in theory and became an ardent advocate when faced with the specifics.

This was the case throughout his leadership, and not just after 2005 as the financial crisis moved into sight. In 1998 he gave an interview to The Independent in which he argued that tax cuts and tight public spending were the way the "world was going". A year later he announced rightly that Britain would increase health spending to reach the European average. After the 2001 election, his adviser Peter Hyman reports in his book a meeting in Chequers at which Blair was lukewarm about further public spending rises. The Prime Minister soon found causes that required additional billions.

Blair was right to be vigilant about public spending and wary of Brown's spending priorities towards the end. But it is a fantasy to argue that there was scope for a big cut in overall public spending. In 1997 the Labour government inherited a crisis in the quality of public services and infrastructure as deep as the industrial relations emergency that Margaret Thatcher sought to address after 1979. For all the hype about Labour "spin", it failed to present the under-investment in public services as a crisis. As a result their spending is seen now as profligacy when a lot of it was urgently necessary.

For a time Cameron/Osborne acknowledged the urgency, if only because in opposition they feared they could not win an argument about spending cuts. They went further then, arguing that Brown's spending plans would result in cuts for the NHS, and they would spend more than him. The Conservative-supporting columnist Daniel Finkelstein went beyond political expediency to argue with good cause that in the short term the Conservatives' proposed reforms would need additional funding.

During the boom years the demand on public spending was as great as ever, and the consensus that investment was necessary was wider than at any point since 1979.

The lessons of the recent past suggest that, on this issue at least, the internal tensions within Labour are more emotional than connected with a forensic examination of the evidence. Those who tend to worship at the altar of Blair condemn Miliband for stating his opposition to the war in Iraq as an act of opportunistic disloyalty, and yet they want him to dump on his party's recent economic record.

Labour failed to address inefficiencies in the public sector and some of the additional investment was wasted needlessly, but the overall spending was necessary at the time, as Blair discovered then and some senior Tories discover now. Look at the way Boris Johnson hails with a Keynesian ardour the spending in London that benefits the rest of the country, or why even the Coalition of miserly spenders recognise the economic value of a high-speed railway. The Coalition will find it much harder to cut in real terms than it realises, and will find plenty of legitimate reasons to spend more money.

The final lesson applies to Labour. Miliband must win the argument about the causes of the economic crisis as a precondition to a strong recovery. If he cannot convince even a section of his own party, he faces a tough task. Yet failure to prevail will doom Labour to defeat at the next election. For government and opposition, the past is dangerously powerful and refuses to go away.

s.richards@independent.co.uk

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