The Absence of War: caution, conventionality and the 35 per cent

nature of the crisis that could, on the one hand, help it move beyond the New Labour years whilst, on the other hand, maintain party unity. At the same time, the Labour leadership had difficulty developing a cognitive discourse that could respond to what it saw as the ‘correct’ economic strategy whilst simultaneously appealing to an apparent ‘common sense’ public understanding that austerity was the medicine the British economy required. These tensions were only compounded by the first sustained quarter-on-quarter growth beginning in early 2013 and the changing political context in Scotland following its referendum on

independence in late 2014.

Whilst sensing the crisis had ‘shaken’ the electorate, as growth returned to the UK economy, Miliband and Labour strategists – including Morris and later US-based strategic advisor David Axelrod – increasingly felt that a bolder, normatively oriented message of political economic reform ‘that promised big change’ was politically risky (see also Wintour 2014).148 _{This growing sense pushed Miliband to attempt to re-establish the party’s economic}

credentials before making ‘a more adventurous argument’.149 _{Increasingly the party moved}

away from discussions around the appropriateness of a social democratic political economy post-crisis and towards a focus on the necessity of a strong fiscal consolidation programme to burnish the party’s economic credentials.

Whilst it was recognised in some quarters that a Keynesian argument could be made to massively slow the rate of consolidation – an argument consistently expressed by

economists such as Simon Wren-Lewis (2010; 2014) – the Labour leadership and many within the PLP saw this as unpalatable to an electorate convinced of the need for a tough

146 _{Jon Cruddas, personal interview, 10/03/2016.} 147 _{Stewart Wood, personal interview, 05/02/2016.}

148 _{Marc Stears 2016, personal interview, 17/02/2016; Senior Economic Advisor A, personal interview,}

03/12/2015. Axelrod was appointed as a strategic advisor in April 2014.

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consolidation programme.150 _{Alongside this political strategising, there was also an economic}

rationale behind the party’s plans; consistent with New Keynesian theory,151 _{Balls and}

Labour’s economic advisors held ‘a more restricted conception of the output gap and the new potential of the UK economy’ compared to Keynesian theory (see Bremer and McDaniel 2019: 26). The time for stimulating demand in the economy was over, they felt; ‘the Keynesian argument’, as one advisor put it to me, was now ‘for spending to be cut back in order to prepare for any future shock’ (see also Bremer and McDaniel 2019: 26).152

At the same time, however, there was a consistent desire to demonstrate that

Labour’s plans were different from those of the Conservatives, and thus more ‘responsive’ to its constituents’ interests. In order to demonstrate this, the party developed its own approach to austerity through appeals to the idea of how Labour would address ‘the cost of living crisis’ whilst simultaneously dealing with the debt and deficit (Chapter 7 develops this issue further).153 _{Internal GQRR (2011b; 2013) research told Miliband that Labour were polling}

strongly on the issue of people’s living standards and Miliband felt he could build upon this advantage with arguments underpinned intellectually by Resolution Foundation research (see Plunkett 2012) highlighting a break between economic growth and living standards.154 _To

this end, Stears reflects upon the fact that ‘the confluence of those two made Ed one hundred per cent certain that this was the direction we had to go. And after that it was very difficult to persuade him to move into the terrain that a year before, with the One Nation-y stuff, he had been tempted by’.155

With these changes came a shift in electoral strategy towards what became known as the ‘35 per cent strategy’. This approach involved securing Labour’s traditional core

working-class vote and winning over disaffected, largely middle-class Liberal Democrat

150 _{Senior Economic Advisor A, personal interview, 03/12/2015; Chris Leslie, personal interview, 13/03/2017.} 151 _{For an overview of New Keynesian theory, see Galí 2018; Gordon 1990; Blanchard 2000.}

152 _{Senior Economic Advisor A, email exchange, 09/11/2015; Senior Economic Advisor A, personal interview,}

03/12/15; Senior Economic Advisor B, personal interview, 20/01/2017.

153 _{Whilst ‘the cost of living crisis’ concept had been employed since 2011, in the latter half of the parliament}

Miliband saw how it could be utilised more effectively and consistently.

154 _{Marc Stears 2016, personal interview, 17/02/2016.} 155 _{Marc Stears 2016, personal interview, 17/02/2016.}

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voters, in order to secure a small parliamentary majority.156 _{Despite a period in 2012 wherein}

the party felt it might have been able to pursue a ‘big tent’ strategy based on radical reform and a normative vision of the British political economy, ‘when [Miliband] had to make choices between a move which looked big and bold and all encompassing, or a move that looked more tactical, “cost of living”-y, he lent that way’.157 _{In shifting towards a focus on}

tight fiscal management as a prerequisite for economic credibility and thus the basis of the party’s electoral strategy (as advocated by the Purple Book and the Black Labour group), the climate around Miliband, as Cruddas put it to me, became ‘one of caution, conventionality, 35 per cent, couldn’t lose’.158

This new approach changed how the leadership engaged with new political economic ideas as the party tried to nail down its economic credibility with the electorate. As a number of interviewees noted, this was to be promoted through the delivery of a more ‘retail-policy’ focused manifesto – that is, a policy package of specific, ‘costed’ proposals designed to achieve ‘cut through’ with the electorate rather than promote deeper systematic change (e.g. the party’s ‘energy price freeze’ policy).159 _{There was a shift away from promoting a message}

around what the party ought to do (in a normative sense) towards one based solely around what was perceived to be economically necessary (in a cognitive fashion).

Accompanying these changes were movements in the leadership team and around it, including a shift in power from Wood to Greg Beales, a former advisor to Blair and Brown who focused more directly on electoral strategising (see Wintour 2015b).160 _{As a result, the}

leadership team began to overlook some of the more radical political economy ideas on offer, including stakeholder capitalism and pre-distribution, as well as the more innovative

economic and social policy ideas that emerged during the period, including the IPPR’s Condition of Britain report. For instance, Miliband relegated ideas such as pre-distribution,

156 _{This strategy was first presented as the party’s most likely route to power as early as 2010 by James Morris,}

and as Stears acknowledges, the data Morris presented in 2010 ‘lodged away in [Miliband’s] head’ (Marc Stears 2016, personal interview, 17/02/2016).

157 _{Marc Stears 2016, personal interview, 17/02/2016.} 158 _{Jon Cruddas, personal interview, 10/03/2016.}

159 _{Shadow Cabinet Minister A, personal interview, 11/01/2017; Senior Economic Advisor A, personal}

interview, 03/12/2015.

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which were seen by some on the right of the party, as Chris Leslie MP puts it, as a tactic ‘to skirt around the economic credibility problem’ rather than address it head on.161

This development created a fractured strategic oversight. There was little effective cooperation between different units in charge of the party’s policy renewal, such as the leader’s office, the official Policy Review and the National Policy Forum. The Policy Review, which had pushed a more radical, Blue Labour-oriented political economy since 2012, was left at this stage like a ‘satellite in orbit, circling the PLP and the Shadow Cabinet without ever really touching, incorporating itself into the political business of the party itself’.162 _{This process is what Cruddas describes as the effect of ‘the dead hand’ of the}

Labour leader's office on policy development by this point (Cruddas cited in Watt and Newell 2014). The intellectual and sociological legacies of New Labour’s social liberalism and statecraft strategy within the party throttled the development of a new social democratic vision.

The party’s ability to secure electoral victory via this route, nevertheless, relied upon securing strong support in the traditional Labour heartlands, including, of course, Scotland. As the election campaign neared, the evolving political context in Scotland increasingly highlighted the limitations of Labour’s strategy. Arguably, this started with the Scottish independence referendum in September 2014; whilst Labour supported the winning ‘No’ campaign, ‘the consequences of the campaign were catastrophic for Labour in Scotland. The SNP [Scottish National Party] became the voice of opposition to the Coalition government and to austerity in Scotland’ (Cowley and Kavanagh 2016: 90). Labour’s ability to effectively represent its Scottish constituents was thus damaged by the referendum. Indeed, SNP

campaigns during the General Election played on the idea of Labour supporting the Coalition government’s austerity measures (see Sturgeon 2015).

This created a negative dual dynamic for Labour. On the one hand, internal polling told the Labour leadership significant losses in Scotland in the General Election were likely as a result (see Morris 2015). On the other hand, as the likelihood of Labour requiring SNP help to form the next government increased, the Conservatives were able to exploit the

161 _{Chris Leslie, personal interview, 13/03/2017.}

162 _{Jonathan Rutherford, personal interview, 23/02/2016; This sentiment was reflected in statements by Maurice}

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situation by playing on the ‘SNP threat’; that is, as Balls (2016: 340) has described it since, the ‘perception that Ed [Miliband] did not care about fiscal discipline left us vulnerable to the inevitable Tory attack that the SNP would be deciding our first Budget if we ended up with a hung parliament’.163 _{Labour’s statecraft was thus caught in a pincer movement and party}

strategists struggled to navigate out of a seeming choice between two undesirable outcomes: widespread electoral defeat in Scotland or falling foul of the Conservatives’ claims that Labour lacked economic credibility and were ‘in the pocket’ of the SNP. So late in the parliamentary term, this was an intractable dilemma.