John McDonnell Guardian Opinion 24th June 2016
The Brexit vote has delivered the most enormous shock across the political system. And as the resulting market turmoil demonstrates, it is creating an enormous economic shock too. The greatest danger we face is that this event, under this Conservative government, will be felt across the whole of society and fall most heavily on the most vulnerable.
It is impossible to understand this vote without recognising that huge numbers of people in our country have been let down, repeatedly, by successive Tory governments. While high finance has been allowed to run rampant, our historic industrial areas have been starved of investment. Secure, well-paid jobs have ebbed away, to be replaced by insecurity, zero-hours contracts and poverty wages. Many there feel, rightly, ignored and cast aside by the Westminster political system.
The campaign to leave made three claims to the disenfranchised. First, they claimed that pressure on public services and the lack of jobs was caused not by Tory governments imposing austerity and failing to invest, but by migration alone. We understand people’s concerns and will work to address the real insecurity that lies beneath them. But the leave camp’s second claim, that exiting the EU would be a simple solution here, was quite wrong.
And third, they were convinced by those on the leave side, including Boris Johnson, who said there would be no economic consequences from a decision to leave. Every reputable economist and economic institution warned the shock would be substantial. I don’t doubt that Boris Johnson and others knew this full well. The biggest danger here is that the shock will be felt most in those communities least able to withstand it. We should not let the leaders of leave shrug off their responsibilities here.
George Osborne has already threatened an emergency budget in the event of a vote to leave, doubling down on austerity and reversing his manifesto promises not to raise income taxes and VAT. There is no economic justification or mandate for this. Sixty-five of his own MPs have refused to support it, and Labour will oppose him every step of the way.
Labour and the whole labour movement will need to rally now in defence of working people and their families. That means immediately scrapping George Osborne’s fiscal surplus target for 2020. It has no support in the economics profession and Osborne’s desperate efforts to achieve it have resulted in the misery of spending cuts and the short-sighted slashing of vital investment. If a recession breaks, as forecasters now predict, maintaining spending will be essential to help avert an even deeper downturn than necessary. This will also mean abandoning the third pillar of the fiscal charter the government pushed through only last year: a comprehensive failure of economic policy within 12 months.
When an overwhelming consensus now exists on the necessity of public investment to support weakened economies – from the CBI to the TUC to international organisations such as the IMF and the OECD – it was clearly mistaken for the chancellor to pursue major cuts in investment, which is now scheduled to fall until the end of the decade.
Under current circumstances, with shockwaves still being felt, it is critical that the government is prepared to bring forward shovel-ready investment projects – not only to create jobs today, but to lay the secure foundations for the future economy. Investment spending should be targeted on those areas of the country that have most suffered from neglect and long-term decline under the Conservatives. We should no longer tolerate a situation in which some privileged areas of the country receive the lion’s share of public investment.
These are uncertain and dangerous times for all of us. Labour must be at the forefront of putting forward an alternative to the present economic mess, which makes unity more important now than ever. At a time of such economic uncertainty, with the Tory party split clean down the middle, Labour members and voters will not forgive us if we descend into infighting and introspection only a year after Jeremy Corbyn won his landslide victory as our leader.
The current Conservative administration has piled failure on failure. Its economic legacy will be the continuing devastation of communities across the country, the shoddy low-paid jobs it has created, and now the shock of Brexit. Together we can, and now must, do better than this.