McFadden: Labour must remain credible on the economy

The shadow secretary of state for business, Pat McFadden, today made a speech to the Fabian society urging Labour not to retreat to default “opposition mode” in opposing all cuts. Arguing that the public would tune out if Labour politicians appeared to be in denial about the deficit, he said that the new government were attempting to trash Labour’s economic record and present all cuts as inevitable.

To defend its record and attack the government, he said, the party must speak with credibility about the difficult choices that have to be made. One of the key weakness in the economic policies of the new government was the lack of a plan for growth, he added.

McFadden admitted that the previous government had come late to activist industrial policy, but that it was vitally important in rebalancing the economy, saying politicians of all parties now agree that this rebalancing away from financial services towards advanced manufacturing is desirable, but while the last government had willed the means this government seems to be retreating from this agenda.

The decision not to loan Sheffield Forgemasters £80 million was a clear example of this kind of choice made by the coalition government, as is the abolition of RDAs – but the argument that such economic policies are choices rather than inevitabilities is at risk of being lost as the Conservatives and Liberal Democrat parties repeatedly assert that there is no alternative to across-the-board cuts, he said.

Labour must robustly defend its economic record, and ensure the current government takes responsibility for its decisions, he insisted, and that only by talking about their own plan for cuts, much of which were published before the election, will Labour be able to pin responsibility on the coalition for their decisions to go further and faster in cutting the deficit.

McFadden highlighted the key differences between the parties: the balance between tax rises and spending cuts; the speed of the cuts; regressive taxation such as the VAT increase; and withdrawal of support to industry – and said the consequences of George Osborne’s budget must not be pinned on the last government, but on the judgements of this government.

He said that with credibility on the economy, and with the government retreating from an activist industrial policy, Labour has the opportunity to talk about a new economy with aspiration at its core. McFadden said the “neither Thatcherism nor denial” approach should focus on government support for new low-carbon and digital industries, and as well as creating favourable business and planning environments, governments have a vital role in improving the capabilities of the economy.

In abandoning this agenda the current government risks “tearing up the roots of future growth”, he concluded, and that it was necessary to reduce the deficit in a less painful way.