By Shibley Rahman / @shibleylondon

Opinion polls consistently return the verdict that Labour is economically incompetent compared to the Conservatives. Many would indeed agree that Labour didn’t get its economic messages across competently in the 2010 campaign. Labour tried to explain its economic strategy through a series of university-style tutorials, and sloppily allowed various ‘facts’ to go unchallenged. Ed Miliband and his team will have to learn from these mistakes.

This article looks at just three assumptions of the Tory Story on the economy. The true success of the Tory Story is its simple but misleading messages. The story has various components: for example, NI is “the jobs tax” but VAT isn’t, Britain is going bankrupt, and government debt is like a credit card debt. Perhaps Labour new year’s resolution should be to stop these corrosive myths from going unchallenged. Rebuilding the trust and confidence of the electorate in Labour’s economic strategy is a marathon not a sprint, so the sooner we get started the better.

Will the VAT have no effect on jobs?

To shift the limelight onto NI as the “jobs tax” is also to present an attractive story to the voter that a VAT hike presents no threat to jobs. The British Retail Consortium (BRC) in May 2010 forecast that as many as 163,000 jobs could be lost in the next four years if VAT is increased. They said that, in its first year, a VAT rate of 20% would reduce the deficit by £11.3 billion, but by the end of that first year there would be 30,000 fewer jobs in the UK, across all employment sectors, than if there had been no increase. The BRC has, instead, urged the government to prioritise public spending cuts over tax rises to tackle the budget deficit, as well as to aim to half the deficit over four years rather than the proposed three. Voters will be looking carefully at the unemployment count, while the expert economists forensically examine the GDP statistics, over the course of 2011.

Is government debt like a credit card debt?

David Cameron and Nick Clegg have consistently likened government debt to credit card debt (like paying for your weekly groceries). This is a plausible common-sense approach based on the electorate’s instinct for belt-tightening, and the hardships they will be experiencing in difficult times. The analogy is clearly weak, but analysis of that is way beyond the scope of this article. Given that the public appear to like this comparison, it might be useful to explain also what might go wrong in such terms. The biggest threat for the UK in 2011 is that unemployment goes up and therefore benefit payments go up, while tax receipts go down. This would be like credit card bills beginning to “flood in”, while you are unable to deposit any money into your bank account.

Is Britain going bankrupt?

In January 2009, David Cameron suggested that there was a “risk” that Britain would go bankrupt. George Osborne also has repeatedly warned that the country was facing financial meltdown. When asked on the BBC’s ‘Andrew Marr Show’ whether it is possible that Britain would go bankrupt, Ken Clarke said in contrast:

“I don’t think it’s a realistic possibility. Though, I mean I’m as gloomy as most people…I think it’s very important to realise the constraints of a responsible opposition.”

The media and the public seem disinterested in discussing this, but the spin of a bankrupt Britain relentlessly goes on unchallenged. Foreign investors currently fund about 35% of the government’s total debts, and there is currently little sign yet of them losing their appetite for government bonds, or gilts – the German government has had more problems selling its debts at recent auctions than the UK.

The solution

Thankfully, official data from the Office for National Statistics about GDP and unemployment will be hard for the coalition to put a positive spin on. When commentators say “it’s the economy stupid”, they fail to appreciate one further addition to that for 2015, that is, “and its social and economic consequences”.

In the meantime, Ed Miliband and team will have to work hard at identifying the reasons why the public trusts the Conservatives with the economy more. It is undeniably hard to explain in a punchy manner why the deficit grew so big under Labour, but a good start would be to point out that the Conservatives did indeed match our spending plans until the collapse of Lehman Brothers.

I wonder what resolutions Labour will make in getting its message across more successfully in 2011…

This article was originally published in LabourList on 2nd January 2011. It has had 69 comments so far.