The first moves of a new prime minister can have lasting consequences. When Clement Attlee went from being wartime deputy prime minister to Labour prime minister in 1945, he had little alternative but to offer the nation the peacetime equivalent of Churchill’s blood, toil, tears and sweat.
The age of austerity was born as the UK rebuilt its wartorn economy. Shortages necessarily involved rationing until a fully fledged peacetime economy could be restored. The contrast with the Conservative-Liberal Democrat policy of austerity from 2010 onwards could hardly have been starker.
Post-2010 austerity, championed in particular by the then chancellor, George Osborne, was founded on a false economic premise, and on a rightwing approach to cutting back on previous rates of growth of public services in favour of tax cuts. The false premise was that the financial crisis and rise in the budget deficit had been caused by Labour’s putative overspending, whereas the culprit had been the banking crisis. Absurd comparisons were made with the plight of the Greek economy, which was in much more serious trouble. These were made the justification for austerity.
Last week’s election result was in part the electorate’s reaction to the cumulative impact of the austerity programme. Austerity seems to have been a slow burner, but by the time the hapless Rishi Sunak called what turned out to be a historic election, one could hardly move without being told that the country was broken, and nothing worked.
The examples that have stoked public anger are legion: the strains on the NHS, the state of the railways, the overcrowded prisons, the pollution of the rivers caused by the privatised water companies, soaring poverty necessitating food banks – you name it, there are many reasons why people expressed their frustration.
In the run-up to last Thursday, Keir Starmer had several field days rubbing in the Conservatives’ disgraceful record. But he spent precious little time on what should be done about the Brexit horrors which were superimposed on an economy already suffering from austerity.
I come back to my opening line, and the lasting consequences of early action, or inaction, by new prime ministers. A classic example of inaction with deleterious consequences came in 1964, when the newly elected Harold Wilson overruled his advisers and resisted their calls to devalue a patently overvalued pound. The misalignment of the currency was hampering the export drive; a series of sterling crises forced resort to deflationary measures which did no good to the government’s growth plans. Eventually, devaluation was forced by the markets on a reluctant Wilson in 1967.
But back to Starmer. His equivalent of the devaluation error is a decision which is likely to inhibit his growth plans, with echoes of Wilson in 1964. In this case, however, it was not his first major economic decision in government. No: he took it last week, from what we might call a poll position which more or less guaranteed that he would be in government within a few days.
Although Starmer and his shadow chancellor, Rachel Reeves, had several times been dismissive about rejoining the single market and customs union, many pro-Europeans were hoping that this merely reflected Starmer’s fear of upsetting so-called red wall voters who had deserted Labour last time. After all, the press – especially the rightwing press – has been replete in recent months with examples of Starmer changing his mind.
But last week, the now prime minister dug in his heels, saying he was ruling out rejoining the European single market in his lifetime: “I’ve been really clear about not rejoining the EU, the single market or the customs union or a return to freedom of movement.”
This at a time when the thinktank UK in a Changing Europe has concluded that Labour’s existing plans to improve our trading relationship with Europe will have “minimal” impact on reducing the huge and mounting costs of Brexit. And when the same thinktank finds that 78% – repeat, 78% – of Labour voters say they would vote for a return to the EU!
In Labour’s manifesto, the party commits itself to tearing down unnecessary barriers to trade. If ever there were an unnecessary barrier to trade, it is surely our exclusion from the European Union.
Don’t get me wrong. The above is intended to be constructive criticism. I admire Starmer and happily join the chorus in marvelling at his achievement in making the Labour party electable in such a short time. This succession of dreadful Conservative governments was crying out for its comeuppance.
But Starmer has got to get his act together over the EU. Not in his lifetime? In 1988, Chancellor Helmut Kohl said that he did not expect German unification in his lifetime. Two years later, Germany was reunified.
