...This is Labour’s problem when opposing the cuts now. Their own policy, on which they fought an election, was to halve the deficit over four years. As the Institute for Fiscal Studies demonstrated, this would mean public spending cuts, for each department, in the region of 20 per cent. Nonetheless, Labour tried to fight an election on the investment vs cuts narrative. With no credibility on the deficit, it is hardly surprising their campaign was a disaster (as Mandelson freely admits in his book).
Now Labour’s leadership candidates find that the debate has moved on. The coalition government has persuaded the public that cuts are inevitable, that Labour was profligate and had turned public spending into a false idol. The Lib-Con government is thereby absolved of all responsibility for these cuts. So when the axe starts to fall in the autumn, with the 25 per cent cuts that the Chancellor warned about in the Budget, Labour will have difficulty complaining given that their own plan was for cuts of a similar magnitude.
Some of the leadership candidates believe they can argue that Labour’s cuts would have been more compassionate, in contrast to the ideologically driven and unfair cuts being planned by the government. Some candidates are striking out to the left. Ed Balls, for a few weeks now, has been saying he regarded the Brown–Darling deficit reduction plan as too aggressive. This frees him to oppose government cuts now.
Another leadership candidate (with a better chance of winning) is, I understand, developing a similar stance on the public finances. To the all-important question — where to find that clear, red water — he proposes a simple solution. First, he would declare that the public finances are better than Labour had thought when it drew up its own deficit reduction programme. So, it can be argued, Labour’s cuts would not have been so harsh as it had previously imagine. Next, propose higher taxes, thereby reducing the need for further cuts.
But whoever is elected Labour leader on 25 September will face a substantial logistical problem. By then, there will be just four weeks remaining until George Osborne announces his spending review. It is a tight deadline on which to forge an economic policy, especially if the new leader has to wait until the results of the shadow Cabinet elections to find out who the shadow chancellor will be.
Labour's leadership contest has been very uninspiring. None of the candidates has even tried to think the unthinkable or launch a real 'change' manifesto. It's 'same old same old' from all of the main four contenders. Most of them still act as if there in government and as if the deficit hardly exists, and if it does, it's not their fault.
Compare this with the Tory leadership contest in 2005. That contest captured the imagination and lots of new ideas were batted around. It showed a party wanting to learn from its past and move on to a new future. The 'change' message was one which the party responded to, even though it knew it could be an uncomfortable journey. Ed Miliband is possibly realising this at last and adopting the same message as the Cameron campaign in 2005 - Change to Win.
But is it too late? Will anyone notice if they have been switched off already?
UPDATE: Mehdi Hasan's NS column last week is probably the best analysis of the state of play in the leadeership contest so far.