Four notes on John McDonnell’s ‘fiscal responsibility’ speech

The shadow chancellor is responding to centrist concerns, but will face criticism from his left and right


Five days before the budget, Shadow Chancellor John McDonnell laid out Labour’s alternative economic vision in a speech at the RSA this morning.

It represented a dramatic shift in McDonnell’s tone and content, and has already sparked heated debate within the party. Here are four key points to consider.

1. It was strong on attack

We’ll start where McDonnell did: with a biting attack on George Osborne. He highlighted the chancellor’s backtracks on pensions and income tax, and shone a light on the Treasury’s quiet Friday-night announcement that the British economy is, in fact, smaller than Osborne previously claimed.

“What an astonishing about-turn from a chancellor who had, just a few months before, declared that we had arrived at the sunlit uplands.”

McDonnell went on to criticise the UK’s continuing productivity lag, falling exports and decreasing investment, as well as playing to his heartland by pointing out that even as Osborne claimed the sun was shining, he slashed flood defences, policing and local authority spending.

“The truth is that George Osborne’s recovery is built on sand.”

Essentially, McDonnell’s attack was comprehensive and compelling. Let’s hope his boss manages to hit Osborne as hard next Wednesday afternoon.

2. It was a bit blue

This speech, built on a foundation of fiscal responsibility and iron discipline, was always going to be accused of being Brownite, Balls-ite, Miliband-ite and, of course, Tory-lite.

And that’s how it played out. McDonnell placed great weight on regaining the public’s trust by establishing Labour’s fiscal credibility and eliminating the deficit in current spending (although continuing investment in infrastructure projects that will pay for themselves).

McDonnell’s rhetoric, too, was markedly more conservative than it has been in the past. On housing, he focused on ‘the aspiration of our young people to own their own homes’, without any reference to social housing.

He even fell back on the kind of household spending analogy so beloved of the Tory leadership:

“Everybody knows that if you’re putting the rent on the credit card month after month, things needs to change.”

As Paul Mason insists, this policy framework is not simply a rehash of recent Labour policy, particularly because it allows for the fiscal credibility rule to be suspended in the event of an acute crisis.

However, McDonnell should brace for accusations of austerity-lite from the left, and accusations of policy theft from the centre.

Liz Kendall, in particular, will be frustrated by the striking echoes of her leadership campaign top lines, particularly that ‘there is nothing left-wing about ever-increasing government debts.’


3. It shifts the focus to electability

Policy backtracks are frustrating and it’s understandable that McDonnell’s critics in the Labour Party are put out by his sudden about-face. But at the same time, a greater focus on electability rather than ideology is what they’ve been calling for since August.

It will appear churlish if the centrists don’t acknowledge, perhaps even support, McDonnell’s attempts to remedy the failures of the 2015 election, and bring Corbyn’s Labour into line with majority public opinion.

Dan Jarvis, in yesterday’s keynote address at Demos, welcomed Corbyn’s encouragement of debate over Labour’s future. Surely, then, he and his ilk should welcome the leadership’s moves towards compromise?  

4. It’s not clear whether McDonnell believes what he’s saying

While the leadership is clearly making a pitch for the centre, we’re not convinced that McDonnell is entirely happy with the policies he’s responsible for promoting.

In contrast with his strong attack content, and compelling call for rewriting economic orthodoxy, his tone and body language on fiscal responsibility were unconvincing.

It almost felt as though he were phoning it in, an impression strengthened by his refusal to take questions after the speech.

The importance of this point really can’t be overestimated. If Labour is waging the ‘battle of a generation’ to regain the public’s trust, its leaders cannot appear half-hearted about the policies the public value most.

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