Could a win in 2015 destroy the Labour Party?

We’ve just come to the end of the 2014 Labour Party Conference. This was their last chance to set out what policies the party would bring in should they be elected in May – yet there has still been no in depth acknowledgement of the country’s financial issues.

Ed Balls was supposed to address this issue with his speech. He claimed that Labour would seek to balance the books but that this had become harder, and more difficult decisions would need to be made, because there had been 3 years of lost growth under the Conservatives.

How would the party do this? Within the speech were ideas such as reducing ministerial pay by 5%, removing winter fuel allowance for the richest 5% of pensioners, capping rises in child benefit at 1% per year until 2017, having a one-off bankers bonus tax, reintroducing the 50% rate of taxation and a mansion tax.

These are all relatively minor changes affecting very few people. The 50% tax rate is likely to provide a large chunk of the hoped for boost to revenue, but as it is targeted at the top 1% of earners it remains to be seen how much it is feasible to raise. Indeed when the Tories cut the 50% rate to 45% this was done on the argument that the higher rate had raised little or no extra revenue, and Treasury claimed the cost was only £100 million. Even if you accept the Labour figure that it would raise £3bn a year, this is less than 5% of the deficit.

This raises a fundamental problem for the Labour party. If this is going to be their policy heading into the 2015 election, both to promise the electorate that they will only raise taxes on the very richest and they will start to balance the budget without large cuts, then they will have been given a mandate by the British people to do those things. It will be expected by those that vote on these promises that they at least try and deliver.

One of the most prominent areas that Labour have tried to show differentiation between themselves and the Conservatives since 2010 is on austerity. For years they have claimed that cuts have gone too far and too fast. They have used this to attract members, and the argument that the people impacted by the cuts did not cause the financial crash and are therefore unfair targets has been oft repeated by activists, candidates and MPs.

Economic growth cannot fill the entire gaping hole in our national finances. Most people seem to now agree that there will have to be cuts made to public spending and the Labour Party have started to agree, although simultaneously blaming the Conservatives for this due to the lack of growth between 2010 and 2013.

However they have still not begun to spell out what these cuts may be. If they do not mention them now, and again refuse to elaborate on the issue in their manifesto then millions of people will be voting on the assumption that it isn’t going to happen, and in many cases as an explicit rejection of these policies.

When Ed Balls announced during his conference speech that the Labour Party would start to close the fiscal deficit and suggested the retirement age rises may come faster, he was booed.

Whichever party is in power in 2015 will have to deliver cuts; the financial situation, when looked at in a clear eyed apolitical fashion, requires it and what was announced at conference is nothing compared to what is likely to come.

A large proportion of Labour voters are adamant that austerity is wrong and are specifically voting for the party to avoid it. A large proportion of activists joined the party on this basis and a lot of their Members of Parliament have been arguing along these lines for the last four years. The minor cuts suggested at the Conference were poorly received, anything major is likely to have an exponentially worse response.

It looks like the Labour Party are going to provide our next government, either on their own or as part of coalition. They will likely have to alienate a huge percentage of their supporters, not just in the Unions but in their grass root support as well.  If they do take on austerity policies this will cause huge disillusionment for their members and cause rebellions amongst their MPs. The Unions will start cutting their funding of the party and activists will leave. Members of Parliament, even if they understand the arguments from their leadership, will feel under pressure to rebel from the local supporters who are resigning their memberships. We could be left with a bankrupt Labour Party with a destroyed base and rebellious politicians.

Labour need to start preparing the ground for what is to come, and that means saying more than that difficult decisions would need to be made. They’re running out of time to do this, and if they don’t they might be better off losing in 2015.

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