A Question of Credibility

30 April

 

• Ed Miliband answers questions on spending in the worst possible way – according to his own advisers and pollsters.

 

• Labour pays the price for not being consistent enough on deficit reduction.

 

• The next leader will have to restore credibility on Labour’s ability to manage the economy.

 

 

ONE SHADOW CABINET aide almost put his foot through the television screen. Another – close to Ed Balls – was more sanguine. He just had a terrible sinking feeling. And that sensation was pretty much shared by those in Ed Miliband’s camp too. They thought they had prepared him well for this, the last television encounter of the general election. Question Time was coming from Leeds, where Ed Miliband had spent part of his early childhood while his Marxist academic father Ralph taught at the University.

But there was to be no warm homecoming. Miliband’s team had been worried that only one in four audience members would be Labour supporters but in the end the numbers mattered less than the ferocity. Not for the first time, David Cameron had waved around the letter from 2010 in which Liam Byrne had told his successor as chief secretary to the Treasury that ‘I am afraid there is no money.’ He hadn’t realised that there would be a coalition government, that David Laws – briefly – would be in post rather than Philip Hammond and that he would make the wry comment public. Many journalists groaned when the Prime Minister subsequently produced it but clearly Conservative research was telling him it was resonating with the voters he needed to win over.

The very first question – from audience member Elizabeth Moody – seemed to reflect the Conservative attack: ‘Five years ago the outgoing Labour treasury minister left a message – “there’s no money left.” How can we trust the Labour party with the UK economy?’

Miliband referred to the letter as David Cameron’s ‘regular prop’ and he answered in line with his preparations – that he would get the deficit down every year, and would balance the books – and that Labour had learnt the lesson of lax regulation of the banks in the past.

But some in the audience weren’t satisfied – the follow-up question was from the owner of a marketing company, later identified as Catherine Shuttleworth. She said Ed Balls had regarded the letter as a joke, but running a business wasn’t a joke so if that is how Labour treats the economy, how can they be trusted?

The Labour leader used the stock answer that had taken so long to formulate – how Britain would succeed if working people succeeded – and combined this with reminding her he was offering a cut in business rates for small enterprises. That wasn’t good enough – Catherine Shuttleworth wanted Ed Balls sacked.

She denied being a Tory stooge and later told newspapers that she had voted Lib Dem in 2010 and wasn’t a member of any political party, though she had worked closely with Andrew Jones – who became the Conservative MP for Harrogate – when setting up her business.

But then the killer blow. A simple straightforward question.

‘Do you accept when Labour was last in power, you overspent?’

And an all too simple, straightforward answer: ‘No, I don’t.’

Chairman David Dimbleby then interjected. ‘Even with all the borrowing?’ Once again, Ed Miliband said ‘No’ and got a hostile reception as he reeled off the achievements of the previous government: ‘there are schools that were rebuilt in our country, hospitals were rebuilt, there were sure starts centres that were built that would not have happened so I don’t agree with that’.

He did go on to say the global financial crisis had caused the deficit to rise and he would reduce spending but the damage had been done. The next questioner said it was ‘ludicrous’ for Miliband to say he hadn’t ‘bankrupted’ the country – that he was lying. The questioner cut across his response, accusing him of ‘spending irresponsibly’. Then a young woman kicked out as he was going down: ‘If you can’t accept that you overspent in the last government, why on earth should we trust you not to do it again?’

Miliband tried to shift the ground by responding with the dividing lines so beloved of his old boss Gordon Brown: ‘You have to make a choice… David Cameron would cut the NHS’ while Labour had a ‘balanced plan’ – ‘we can balance the books without sacrificing our public services, without sacrificing tax credits… tax credits are on the ballot paper at this election. I do disagree with Mr Cameron. I have a different plan.’

By now some of his own supporters were coming close to hiding behind the sofa to escape the unfolding horror before their eyes. A Shadow Cabinet aide confided:

Westminster remembers what he forgot last year – that he didn’t mention the deficit at conference – but that was way before most voters even thought about the election. When you screw up a week before polling day, that’s a different matter.

One of his own advisers said ‘getting his answer wrong on spending was the biggest single mistake of the final week of the campaign.’

And another member of his inner team began thinking of paint ­stripper:

The gloss we had managed to put on the first few weeks was exposed as just that, and we now knew what the public thought when they saw underneath.

The answer Miliband had prepared earlier – rather longer than the one he gave on the night – to the question ‘did you overspend’ was as follows:

I understand why you are asking the question – I take the view that it wasn’t Labour’s spending that caused the financial crisis. It was the crash that caused the deficit, not the deficit that caused the crash. But the world has changed, money is tight now, there’s a premium on every pound, so I’ll be straight with you. Did overspending cause the crash? No. But we are going to take a different approach to spending now in difficult times? Yes.

His pollsters believed this wasn’t an ideal form of words because he was answering a different question – not had Labour spent too much, but had Labour’s spending led to the crash? A senior Shadow Cabinet member told me they had expressed dismay at being given similar advice to ‘dodge the question’ rather than deal with it if it came up in interviews.

Nonetheless, the pollsters took the view that it was better to say anything, however unconvincing, other than ‘No’ in response to whether Labour had overspent. Any answer involving the ‘No’ word had been tested in focus groups, and had provoked horrifically hostile responses.

The pollsters had also tested in advance what Miliband would have said had his memory not failed him at the previous year’s party conference. His passage about getting the deficit down, telling people ‘there won’t be money to spend after the next election’ and that he and Ed Balls would be ‘taking a tough new approach’ to borrowing – along with what he should have said on immigration – had registered by far the most positive response. There was less approval for his attack on the Conservatives for leaving people to struggle on their own and for his 40-plus mentions of the word ‘together’. His passage about the ‘real’ people he had met – such as Josephine and Gareth – and which he seemed to manage to recall verbatim had bombed.

So having subsequently suffered for forgetting the deficit, he should at least have remembered that a downright denial of overspending could also inflict damage – that what he shouldn’t say could be as important as what he should have said.

Election campaigns have a way of finding politicians out. Miliband’s aides prided themselves on how he had avoided a ‘Gillian Duffy’ moment – when the previous leader was berated by that mouthy supporter on immigration. Miliband had no such embarrassing encounters, and had addressed the substance of the incident by telling Labour voters he, unlike apparently his old boss Gordon Brown, didn’t think it was ‘bigoted’ to talk about migration. But the bigger lesson of the Duffy incident was that the former prime minister had said one thing in public and another in private. In other words we found out what he really thought. So while Miliband’s advisers didn’t recognise it at the time, in his own way he was having his Duffy moment in full view of the Question Time audience. He had previously been offering reassurance on the deficit but ultimately perhaps he just gave an honest answer on previous spending. But one which, in the words of a close aide:

Played into people’s anxieties. They felt look, these people were involved in the crash and we just don’t know if we are ready to trust them. Our biggest failure wasn’t – as some say we did – to move to the left. Our failure was not being able to deal with the damage to our reputation that came from being associated with the crash. And I guess it was also a failure of leadership. Ed wasn’t a big enough figure to transcend our record.

Labour’s election director Spencer Livermore reminded me that no one incident in an election is ever as decisive or quite as iconic as the media retrospectively suggest. Nonetheless even in well-run campaigns, it’s difficult to hide from reality: ‘You can’t paper over things during a campaign. Our core weaknesses were found out and we paid the price’. And while he hadn’t fallen flat on his face in Leeds, the cameras picked up Ed Miliband’s stumble as he left the stage. Quick as a flash, the chancellor turned Tory spin doctor for the evening, George Osborne, told the Politics Home website: ‘I’ll leave you to interpret that and find the correct metaphor.’

When Ed Miliband returned to the ‘spin room’ he was cheered by his team but the changing expression on the faces of his spokesmen Bob Roberts and broadcasting officer Matthew Laza gave a more accurate and very visual verdict on his performance. Their cheery, chummy demeanour evaporated after the answer on the deficit, their smiles replaced by frozen, rictus grins.

One of Miliband’s aides admitted: ‘Leeds lost us momentum. It was the beginning of the end. Ed was livid with himself. He knew, he knew…’

* * *

For some of those in Labour’s inner circle, this performance was the culmination of nearly five years of indecision on how to handle Labour’s economic legacy. Many of those in the upper echelons of the party have, on the surface, reached a consensus – they will use a variation of the following sentence: ‘we could have defended the previous government’s record. Or we could have conceded and moved on. In the end we did neither.’ There is near universal agreement that the Conservatives had been able to pin the blame on Labour for overspending earlier in the last parliament while the party’s leading figures were engaged in a summer-­long battle over who should succeed Gordon Brown. Few lessons seem to have been learnt here.

The consensus breaks down over what should have been done – and who was to blame for not doing it. Some say it was the Blairites’ fault – David Miliband had two opportunities to become Shadow Chancellor. He could have accepted his brother’s offer immediately after the leadership election, or again when Alan Johnson resigned early in 2011. He could then both have defended the previous government’s record and got tougher on future spending commitments. And Alan Johnson – who didn’t enjoy his time as Shadow Chancellor – has been criticised for bailing out unnecessarily, making it all but impossible early in 2011 for Ed ­Miliband to do anything other than appoint Ed Balls.

But it’s lot easier to take that view with the benefit of hindsight. Miliband senior wanted to avoid a ‘psycho-drama’. Suppose there had been disagreements on economic policy. Or anything else for that matter – for example, over whether to back air strikes on Syria. The Blair/Brown divisions had been bad enough. Labour’s opponents in the press would have relished the added spice of brotherly spite.

So let’s assume the older brother option wasn’t realistic. Ed Miliband didn’t appoint Ed Balls instantly as Shadow Chancellor and had a long discussion on economic policy before confirming him in post.

Those close to the Shadow Chancellor would point out that Balls had to do much of the heavy lifting on deficit reduction in the latter half of the parliament and that it was Miliband who either forgot to talk about the deficit or forgot, as in the Question Time encounter, how to talk about it because it was never really at the front of his mind. They would also argue that he had to do much to repair Labour’s relations with business – even if he famously forgot the surname of the man who had chaired his small business task force, Bill Thomas. Asked on BBC Newsnight about where the 63 business leaders who had backed Blair in 2005 had gone and who supported Labour now, he had said ‘Bill somebody…’

But those in Miliband’s inner circle believe Balls’ five-point plan to stimulate growth while the economy was flat-lining was a political error. It may well have worked had Labour been in power and had to deal with sluggish growth but it wasn’t focused enough on how Labour should position itself in 2015 when there was a good chance that the economy would be expanding again. And with proposals for a further temporary cut in VAT it looked like Labour hadn’t learned the lessons about tax and spending.

I have spoken to various advisers and allies of Ed Balls and this charge uniformly riles them most. They point out in his Reuters speech in the June of 2013, Balls himself effectively called time on the VAT cut and argued instead for productive investment in infrastructure. But he also delivered a warning to the Shadow Cabinet two years before the election:

I have a tough message for my Labour colleagues. The situation we will inherit will require a very different kind of Labour government to those which have gone before. We can expect to inherit plans for further deep cuts to departmental budgets at a time when the deficit will still be very large and the national debt rising.

And as one of Balls’ allies told me:

It was his idea to change Labour’s position on spending. We signalled a much tougher approach. Ed (Balls) caused a huge row by saying winter fuel allowances would no longer be universal. He was booed at the 2014 conference for being willing to take tough choices on child benefit. For almost two years it was the treasury team which was single handedly hammering away at a fiscal responsibility message when it was actually the whole Shadow Cabinet and the leader in particular who needed to say it every day if it was to have any hope of getting through to voters.

But whatever their criticisms of Ed Balls, some of Ed Miliband’s own advisers believe he himself missed two opportunities.

Not long after his appointment to advise on strategy and communications, the former Times journalist Tom Baldwin – along with his friend Alastair Campbell – assessed that the Conservative attacks on Labour’s economic legacy over the summer had been toxic and could in fact become more potent, not less – unless a strong antidote was deployed. Baldwin wanted a bold response early in Miliband’s leadership – a counter-attack on the ‘Tory Big Lie’ – contacting and wheeling out economists and experts to take issue with the idea that Labour’s spending caused, or at least significantly contributed to, the financial crisis.

In the end, what was supposed to be a concerted campaign in the winter of 2010/11 was boiled down to one 800-word article by the party leader. It became part of that approach – described over and over to me by several of his confidants – ‘to tick a box and move on’. But for others close to Miliband, it was more important to ‘move on’ than go back. The leader himself did not want – they said – to squander airtime reliving arguments on Gordon Brown’s behalf rather than looking to the future. And, actually, lax regulation of the banks was partly to blame for what happened so that should be conceded rather than simply, staunchly defending all that went before. Polling at the time, too, suggested there was little to be gained from defending New Labour’s record too prominently.

The second potentially missed opportunity came when George Osborne abandoned plans in 2011 to eliminate the deficit by the end of the parliament.

Some felt at this stage Labour had the perfect cover to go from stimulus to consolidation – to say ‘we told you so, you couldn’t bring the deficit down in one parliament, you are now accepting that Alistair Darling (the Labour chancellor before the 2010 election) was right.’ Tom Baldwin was pressing to go further: ‘We needed a clearer and more ­coherent argument. Big reform without big spending.’

In other words, similar spending to the Conservatives but a clear set of different priorities. It never quite happened. Miliband did use the ‘big reform without big spending’ formulation closer to the election – notably in a speech to business leaders in June 2014 – but many of those around him felt it was too little, too late.

Jon Cruddas believes that too much complacency had set in following what was being called publicly George Osborne’s ‘Omnishambles’ budget of 2012, and privately the ‘clusterf***’. This had included reducing the top tax rate while placing a levy on Cornish pasties, before various U-turns were effected. While it was disastrous in the short-term for the ­Conservatives – in its aftermath Labour even enjoyed occasional double-digit opinion poll leads – Cruddas believes it was also damaging for his own party:

Labour had an unearned poll lead that they thought could be banked which disincentivised the heavy lifting that was needed.

When the economy – and the Conservatives’ political fortunes – recovered, it then became apparent Labour hadn’t fixed their own economic roof when the sun was shining.