£81bn austerity: What's the narrative?
It's been a while since I've seen so many journalists stumped by a major event. So many newspaper front pages with differing lines, interpretations and concerns. Politicians too: stumped, lost for words, having to " wait and see" and read a bit more. And so many faces composed into rictus non-betrayal of their real feelings.
For the problem with the Spending Review was that there was no clear narrative. Both sides struggled to express one - and some struggled to suppress one.
If these were "The Biggest Cuts Since World War II" (and the Institute of Fiscal Studies managed to brief that they both were and weren't) then the plotline of that movie was hard to follow.
On the Coalition side the action was clear. No flinching from the £83bn cuts outlined in June. £81bn delivered (with two shaved off by previous action). £11bn of pain switched from Departmental Spending to Annual Managed Expenditure (AME), mainly through welfare and pension cuts. And the theory re-iterated that the shrinkage of the state will lead to a rapid rebalancing of the UK economy into an industrial export dynamo.
But there were problems with the story. Since they had flinched from further eroding universal benefits, the graph showing the impact of yesterday's measures on different social groups showed clearly: the poorest tenth get hammered and the richest tenth get hammered even more. Strip away Labour's redistributive tax increases and the Coalition contribution to that graph falls hardest on the poorest.
There was some attempt to explain that these poorest may include the "temporarily poor" - perhaps like the person who lost their £113m lottery ticket - but this narrative fizzled out mid-afternoon. As a result you had the Guardian going on "Axe falls on the poor" and the Telegraph going on "Cuts leave middle class £10,000 worse off".
Here's the explanation. After being shaken by the response of middle Britain to the removal of Child Benefit for those in the 40% tax bracket, the Coalition backed off from its planned extension of that cut to 16-19 year olds. In fact it backed off any attempt to erode universal benefits further - or "middle class benefits" as they were called throughout the Conservative conference.
They could have, quite logically, come out with the narrative "we have listened, we know the middle class values universality as a principle, and the cash in practice". But it would have been hard to do since the conference fringes of the Tory, Liberal and Labour conferences were one big revving up session for an attack on middle class benefits. (The Institute for Public Policy Research was outraged yesterday by the non-attack on universality).
As a result I think the combined spin machines of the Coalition were not really firing yesterday.
Likewise with Labour. Today's Spectator asserts: "In his response to the spending review statement, Alan Johnson unwittingly demonstrated that Labour no longer has a message on the economy". On the Labour backbenches there has been some out-loud wondering what Ed Balls might have made of that prime-time opportunity. Since Labour cannot do a shadow CSR, and supports about 5/8ths of the cuts in principle (having proposed them) it is hard for them to decide which of the specifics to oppose.
Labour-aligned economists are batting hard against rapid deficit reduction, on the grounds that it could cause a double-dip recession, but the view of people like Joe Stiglitz, Ha-Joon Chang and David Blanchflower are actually aligned with the Ed Balls position, not that of the current Labour leader.
So we move on today to the dissection phase, in which the IFS discovers various slights of hand, the spinmeisters get to dissing individual cuts etc.
What I take away from yesterday is that it is a giant experiment. Or as HSBC's Stuart Green puts it in a note this morning:
"Real-terms annual declines in current expenditure are pencilled in for 2012/13, 2013/14 and 2014/15, despite only four such declines having been registered since the data were first collated in 1967, emphasising both the unprecedented nature of the upcoming fiscal consolidation and the hugely uncertain implications for growth."
Basically there is no proof that slashing back the state will promote private sector growth in a country like Britain amid an economic crisis like this. The FT's Martin Wolf, no friend of hand-wringing state-ism, mobilised the evidence of the IMF to argue this earlier this week. That does not mean deficit reduction is wrong, nor does it dictate which of the two deficit reduction paths (Labour's "halve it" and the Coalition's "eradicate the structural part") is better. It just means we are engaged in an experiment.
If it goes right then, as the Spectator cannily predicts today, then in 2015 "the Tory election campaign will write itself. It will be morning in Britain - and why would we want to go back..."
If it goes wrong, then, conversely you would expect Labour to benefit. For the Libdems either scenario will be tricky (their manifesto, all those months ago in April 2010, actually proposed a "one year stimulus" which, had they won, we would have been in the middle of right now).
Because Conservative strategists cannot guarantee it will go right, nor that the essential benefit reforms will work, nor that the new private sector jobs created will go to UK citizens, nor that an army of volunteers will come forward to provide services in lieu of the state, they are wary of launching a metanarrative.
In fact what is striking is that the metanarrative that pervades every page of the Speccy cannot really be embraced by the Conservative front bench: chief whip Patrick McLoughlin has been enforcing the line that the Tories "don't want to do these cuts". However there is a perfectly good argument that they should want to do them: that if the British state is a millstone around our necks it should be lighter.
Labour meanwhile has two narratives. Nobody with any experience of the Balls/Cooper philosophy and modus operandi can be in any doubt that this part of the Labour clan would have handled yesterday very differently. Indeed, in the bowels of Parliament this week Labour's no-show leadership contender, Jon Cruddas, offered the opinion that the party was in an even deeper existential crisis than it was before the election:
"There is a pervasive sense of loss around our Party," Cruddas said, in the Nye Bevan memorial lecture. "It is a loss of identity. We do not possess some kind of historical right to exist."
So basically there's a struggle for narrative going on in British politics - and that's what explains the confused storylines of the British press this morning.