Bill Jamieson: Miliband stuck in the doldrums

The Labour Party expected a public spending cuts inspired backlash that hasn't come. Picture: Phil Wilkinson

Year Four of Austerity Britain and Labour’s Ed Miliband cuts an increasingly lonely figure. He has stood on the mountain, railing at the approaching storm and waiting to reap the whirlwind. He is waiting. And waiting.

It’s not as if spending cuts haven’t happened or that their pace has slowed. On the contrary. Whoever wins the Westminster election next year, and no matter the spending promises to voters, public sector spending will continue to be cut – next year, the year after that and for the following years.

Yet the political backlash Labour confidently expected has not appeared.

The economy, far from continuing to flatline, has shown a robust and continuing recovery. Unemployment did not hit those anticipated fearsome peaks, but has declined sharply. Far more private sector jobs have been created than public sector jobs lost. And the contraction in real wages and household spending has not sparked an era of industrial unrest and record strikes and stoppages. The grief of the late 1970s has not returned. The pinch – or more accurately bite – on our pockets has been broadly accepted.

Sullen voters may be, but hardly simmering in revolt. A whirlwind of public anger hasn’t struck. And the Labour leader still waits on the mountain for the storm to break. And waits. And waits.

Historians looking back on this period will wrestle with this strange and baffling paradox: how it is that in a country where belief in rising expectations had seemed inviolate, where retail politics looked to have secured a timeless triumph, that all of this has stopped and reversed – and with no end in sight?

It is certainly the case that the coalition does not stand high in opinion polls and that the Conservatives continue to trail Labour. But there is no conviction that there will be an inevitable Labour victory next May, still less a landslide.

Meanwhile, the dark forebodings of Ed Balls, the shadow chancellor, that there would be no recovery to speak of, that the economy would forever flatline, that the government’s “austerity politics” will have choked it off, sound increasingly bizarre, like the babble of an animated stranger talking to himself in the street.

Where is the great uprising, not just against austerity, but against that wider failure of rising expectations – long considered to be central to our political stability?

Here in Scotland the campaign for a Yes vote in the independence referendum has been fuelled by a deep unpopularity over “London’s austerity agenda” and a belief that an independent Scotland would be able to maintain public spending and throw off the shackles of Westminster debt and deficits. The campaign offers an escape from George Osborne’s miserly, Micawberish chancellorship.

And it may well be that the sullen mood of voters may yet crystallise into a powerful swing to Labour in the final months of the election campaign. Possible, but not, I suspect, likely.

In any event, it will be difficult for Labour to articulate a clear rejection of “austerity politics” and offer a radical alternative in the period ahead. As matters stand, the only difference between Labour and Conservatives on public spending is that while both parties are committed to deficit elimination, Labour will take two years longer to do so: hardly a siren call to tear up the cobbles and man the barricades.

One explanation for the whirlwind that didn’t happen is that the public has a greater understanding and tolerance of the vagaries of the economic cycle than Labour has allowed for. The financial crisis of 2008-9 when banks toppled and stock markets plunged was one of the scariest moments in the history of post-war Britain. It forged an impossible coalition. And it brought an acceptance of the need for retrenchment and pull-back.

The scale of that pull-back remains a colossal challenge to our political system. The budget deficit may be falling – the amount by which the totality of public debt continues to rise – but the debt mountain itself continues to grow. It is forecast to rise from £1,185 billion in 2012-13 to £1,500bn in 2018-19. The traditional Westminster election Punch and Judy show of competing spending promises and voter goodies pales before such a prospect.

Yet, ironically, one reason for voter acceptance of deficit reduction so far is that, contrary to widespread belief, overall government spending, far from falling, has risen. And total managed expenditure will continue to increase – from £702bn in 2012-13 to £732bn this financial year to £773bn in 2018-19.

Such a trajectory defies use of the word “austerity” to describe it. Yet there is no doubt that there has been severe spending reduction and budget pain across many government departments and local authorities. Massive cuts have been made to central and local government current spending.  And the reductions still to come could see the disappearance of whole departments as their budgets have already been substantially reduced. There’s nothing left to cut but the bone.

So what explains the paradox of painful cuts when public spending continues to rise? Two lines in the Budget Red Book explain this apparent contradiction. One is the spending total for social security benefits. This is forecast to rise, from £183bn in 2012-13 to £184bn in  2014-15 to £203.3bn in 2018-19 – this despite the government’s welfare reform measures.

And the other is annual debt interest. This will climb from £47.6bn in 2012-13 to £52bn this financial year to £75.2bn in 2018-19. For successive chancellors of the Exchequer, this is equivalent to “dead money”: an invisible suction machine drawing revenues out of the Treasury coffers for no visible public or voter benefit. But debt interest has to be met for government to function. For Labour chancellors particularly, this feels like a millstone. The spending “good” they may wish to do is frustrated by a spending item that claws at their ambition. That is why debt reduction should be as much of a priority for Labour administrations as for Conservative ones. As for millions of voters who know from their own household budgets how debt interest and charges can blight their lives, the message is arguably more widely understood than the Labour leadership has allowed for.

And the future holds out little prospect of improvement. Even if the economy remains in a steady state of growth of around  2 to 2.5 per cent, the imperative of debt reduction will remain.

If it is tough for the coalition to sell this message, imagine how much more difficult it is going to be for a party of the centre-left committed to the ideology of ever rising public expenditure and an ever bigger state. That is why, for Ed Miliband, reliance on public support for the politics of yesteryear is just not cutting it. The whirlwind has not come, anger has not exploded. Nothing has changed – and yet everything has.