Although the bulk of controversy surrounding the Conservative Party Conference this week will probably be about Europe, perhaps an equally important thorn in Cameron’s side is the fact that the Sun has launched a campaign opposing the cut to tax credits. While a large part of the left-wing media (as well as the Economist) have already criticised the Conservative government for cutting the working tax credit, an attack from one of Murdoch’s papers is much more likely to do some lasting damage, and perhaps even push the government to compromise; let us not forget that it was partially down to the Sun’s front page showing Aylan Kurdi’s body on a beach in Turkey that pressured Cameron into accepting more (albeit too few) refugees. Murdoch’s motives are difficult to pin-down: on the one hand, it could be merely a populist appeal to the Sun readers. Murdoch knows that a large portion of the Sun’s readership will be affected by the cut in tax credits and that cutting In-work tax credits goes against one of the main themes of the Conservative’s election campaign, the idea that hardworking families will not be affected (or will be affected minimally) by Osborne’s austerity programme. On the other hand, Murdoch’s motive could be to begin a Sun campaign for Boris (or somebody else) to lead the Conservative Party. The splash page against the cut in working tax credits shows a picture of George Osborne and says, “George Osborne faces a storm of calls to rethink the bonkers cuts … The Sun calls on the Chancellor to do everything in his power to help hard-working families on low pay.” The clear emphasis on the policy as one of the Chancellor’s, rather than the Conservative Party’s as a whole, and the labelling of the policy as bonkers, raises questions about whether Murdoch, who is known to be a fan of Johnson, has ulterior motives in introducing the campaign.
Osborne has done well to present himself as a ruthless pragmatist; somebody who makes ‘difficult decisions’, but makes them because they are ultimately best for the country. This image has partially been bolstered by a more emotive narrative: The Conservative party are the party of working people, if you work hard, you will be looked after by the Tories. This narrative could be hampered by the cut to tax credits. As the splash page in the Sun points out, the IFS has issued a report that suggests that the increase in the minimum wage will be more than offset by the cut to tax credits. The Conservatives tread a fine line between maintaining their image of fiscally responsible and economically credible without abandoning the ideas of compassionate Conservatism and the idea of being a worker’s party, but the cut in the working tax credit puts them firmly into nasty party territory. The Working Tax Credit is a very economically literate way of helping the poor. The recipient sees the vast majority of the benefit and, unlike the minimum wage, they don’t face the criticism that they increase unemployment (if anything, they lower it through incentivising businesses to employ more people).
The cut to tax credits is both politically and economically ill-advised, but it also is symbolic of a wider issue within the Conservative Party, which is the fact that they say one thing while doing another. A couple of weeks ago on Question Time, Yanis Varoufakis pointed out that the actual fiscal austerity carried out by the Conservative/Coalition government has been minimal. Although there was a brief period of ‘belt-tightening’ between 2010 and 2012, when growth stagnated the Chancellor essentially embraced Keynesianism, spending more to stimulate the economy. What the Chancellor calls austerity is his continual cutting of services that people need the most: housing benefit, disability living allowance, Job seeker’s allowance, Employment support allowance, mental health services, and now working tax credits and child tax credits. The mantra of ‘socialism for the rich and capitalism for the poor’ is one that rings true with Osborne, his cuts to the top rate of income tax and to corporation tax are Keynesian policies that make some sense, but not when simultaneously cutting for people at the bottom. Some Conservative policy has been good for the low-waged, such as raising the personal allowance, but raising the personal allowance while cutting other benefits so much is a bit like giving somebody an ice-pack after you’ve punched them in the face. Yes, technically, it’s the right thing to do, but you shouldn’t have punched them in the first place.
It will be up to Jeremy Corbyn’s Labour Party to expose this hypocrisy. Running on an anti-austerity platform has a big advantage in that it gives Labour a lot of scope for criticism of the Conservative government. Austerity is not easy to criticise; it has all but become economic orthodoxy in the UK. There are three key arguments that Labour must make if it is running on an anti-austerity ticket. Firstly, and obviously, they must argue that austerity is morally reprehensible. This is the argument that Corbyn has almost exclusively made so far, and while he is good at making it, it alone will not be enough to convince the general public. Secondly, Labour must make the argument that austerity does not make economic sense. The metaphor of Labour maxing out the credit-card is a strong one (although misguided) and one that Labour will need to respond to in kind, invoking similar imagery about how a small business would borrow money to invest and how they would see a return on that investment. Labour also ought to point to the fact that the majority of economists in the UK oppose public service cuts, with two thirds of economists surveyed by the Centre for Macroeconomists saying that the cuts that Osborne has implemented have damaged the British economy. Finally, Labour must point out the hypocrisy in the narrative being set out by the Conservatives. How can they claim with a straight face that they are the party of working people while cutting working tax credits? How can they claim that they believe that we must all tighten our belts while cutting the top rate of income tax? How can the cuts to welfare be considered pragmatic while spending in other areas is increasing? These are the arguments that Labour must make, and must make well, if they want to win while opposing austerity.