When Jeremy Corbyn first came into prominence to take over the leadership of the British Labour Party, his offsider, now Shadow Chancellor John McDonnell started talking about “deficit deniers” and he and the Labour Party were avowedly not so inclined, as if questioning the fiscal surplus obsession was a demonstration of stupidity. In fact, for a political group claiming to be the ‘end of austerity’, who aimed to seize control of the Party from the neo-liberal Blairites – those austerity-lite mavens – I thought he was sounded distinctly neo-liberal himself. His defenders who also understood perhaps a bit of Modern Monetary Theory (MMT) wrote to me and said we should be patient – that this was just a political ploy designed to snare the Conservatives in their own hubris. After all, George Osborne has categorically failed to achieve his goals of fiscal cutbacks. I noted that it was actually good that he had ‘failed’ because the U-turn Osborne made in 2012, albeit rather subtle, saved the British economy from a triple-dip recession and has allowed it to continue to grow. Britain is not an example of a successful austerity implementation. It looks rather Keynesian to me. John McDonnell decided he had better make a U-turn of his own in the last few days. This one won’t save the nation and will probably sink British Labour further into the mire. Why McDonnell supported Osborne’s crazy ‘Charter of Budget Responsibility’ two weeks ago is one question. It showed a monumental lack of understanding of what it would mean for the nation to lock the government in, legally, to achieving overall fiscal surpluses. The U-turn now betrays a capricious approach to policy and one that will fail to cut through and offer a truly progressive path. Very sad really.

In Part 1 of this two-part blog I laid out a general analytical framework for considering fiscal rules that might allow governments to borrow for infrastructure as long as all current expenditure is at least matched by taxation and other current receipts. This is more or less the rule that the British ‘Charter of Budget Responsibility’ imposes and the approach that the new (previously called radical left) British Labour Party leadership aspires to obey. I use previously called ‘radical left’ advisedly because as the days pass the utterances of the economic leadership make it difficult to differentiate between Labour and the Tories. The main difference appears to be the worn out “we will tax the rich and the crafty tax dodgers to balance the budget”. A nonsensical stance for a progressive political force and verges on Game Over syndrome. John McDonnell’s presentation to the National Labour Conference yesterday was a further walk into obscurity. By claiming they are not “deficit deniers” and will close the deficit as a priority they have walked right through the Tory framing door. Not lingered on the doorstep and then sought more salubrious premises. But they are right inside – trapped into the same mantra – yes, they will cut the deficit but it will be a fairer cutting. The rich will pay. And pigs might fly.

One cannot but be very happy that Jeremy Corbyn has assumed leadership of the British Labour Party if you sit on the progressive side of politics. His elevation to the top job has all but closed the door on the compromised years of New Labour. The so-called Blair-ites have been declared yesterday’s new and not before time. Their embrace of neo-liberalism and the ‘light touch’ approach to the financial sector allowed the destructive period set in place by Margaret Thatcher in the 1980s to become more intense (for example, the decline of manufacturing and the increasing dominance of the unproductive financial sector). But as I have indicated before, some of the language and promises coming out of the Corbyn camp appear to be within the neo-liberal paradigm and, in many ways, not an advance on the New Labour shemozzle. I know that the claim will be that they have to be cautious for political reasons not to open themselves to attacks from the conservatives given the public fear of fiscal deficits, after years of indoctrination. But then their claims to be heralding in a ‘new politics’ would seem to be rather lame if they are prepared to lie or obfuscate about the role and meaning of fiscal deficits just to get some political advantage. Further, at some point they will have to take this issue on if they want to forge a truly progressive new political agenda. Otherwise, they will wallow in the confused space where they cannot break out of the neo-liberal mould while banging on about how fair they will be. They have five years before the next election – and that is plenty of time to reeducate the public. That process of messaging and re-framing should start now. Accordingly, they should take the political flack now and trust in their messaging and re-framing.