Page last updated at 11:41 GMT, Monday, 22 June 2009 12:41 UK

Labour dividing lines 'need more subtlety'

Matthew Taylor was Number 10's chief strategist under Prime Minister Tony Blair. He is one of four high profile panellists taking part in Newsnight's Politics Pen where, in Dragon's Den style, hopefuls pitch ideas on cutting public spending.

Here he assesses how Labour must temper its public spending message in the run up to the next election.

Some elections are about promises, others are about risks.

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It seems likely that the big question for voters next year will not be, who has the most attractive and credible offer, but which party should I worry about most?

This is why Prime Minister Gordon Brown continues to believe that the "investment versus cuts" dividing line can work for Labour.

If we are to believe the Sunday papers it appears that some of the prime minister's Cabinet colleagues have reservations.

'Thatcherite triangle'

It is often said that the dividing line worked in the 2005 General Election.

As someone who was closely involved in that election, I am not so sure. Remember that Labour actually did very badly, polling only 35%.

Matthew Taylor
In 2005, Matthew Taylor headed up Downing Street's Policy Unit

In 1992, when Labour's Neil Kinnock was crushed by Conservative John Major, his party got almost two million more votes than Tony Blair did 13 years later.

Also, it was clear from opinion polls and focus groups that in 2005 the voters just could not face having Michael Howard as prime minister.

David Cameron's greater credibility is the first challenge to the Brown strategy.

No doubt Labour will put together Conservative commitments on inheritance and other taxes to "prove" that a Cameron government would have billons less to spend than Labour.

But, despite the complaints of the "Thatcherite triangle" made up by the Telegraph, Spectator and Tory blogosphere, Mr Cameron has made clear that his commitments on tax will only be delivered when he considers them affordable.

Spending squeeze

If Labour tries to produce an eye-catching top line cuts figure based on extrapolating Tory aspirations they will face a much more sceptical press and public than in previous elections.

But the even bigger problem is this - we all know that whoever wins the next election we face a big squeeze on state spending.

David Cameron meeting voters
David Cameron's credibility is the biggest challenge for Labour

At the moment Labour seems to be suggesting it can avoid this fate by engineering a faster than expected economic recovery.

True, it is starting to look like Chancellor Alistair Darling will be able to say "I told you so" about the return to growth when he unveils his autumn pre-Budget report, but unless there is a spectacular turnaround the upturn will wipe out only a small proportion of the underlying deficit.

Also, if a fast recovery means higher interest rates it also means higher debt payments for the government.

The way Mr Brown has traditionally dealt with charges of over spending and waste has been to establish a variety of efficiency reviews, implying that tens of billions of pounds can be saved though painless back office reorganisation.

Identifying waste

This too is wearing a bit thin as a tactic, so this week we will see an attempt by Number 10 to develop another strand of the efficiency argument.

Based on work by former Permanent Secretary Sir Michael Bichard, the government will announce that it is accelerating its "total place pilots".

Michael Howard
For a many Michael Howard was unpalatable as a potential premier

These studies calculate every penny of public money being spent in a local authority area, identifying waste, duplication and a failure to get funds to the front line purposes for which they were intended.

As many of these problems are the consequence of an overload of central government targets and guidance, ministers will argue that devolving more power to local government would enable councils to achieve better outcomes with the same or less money.

"Less cash but more freedom" will be the deal on offer from new Local Government Secretary of State John Denham.

Although whether central government can ever be restrained from spewing out new demands, especially with a record number of ministers looking for something to fill their hours, is another matter.

None of which will stop Labour from hoping to frighten the public with the prospect of a Conservative cuts plan.

Election phenomenon

There is a surprising link here to another debate - about electoral reform.

Find out more about Newsnight's Politics Pen

In a major study published a few years ago, political scientist Professor David Soskice showed that left-of-centre parties have consistently done less well in first past the post (FPTP) electoral systems, like that for the Westminster Parliament.

Prof Soskice's tentative explanation for this phenomenon takes us back to the issue of risk.

In more proportionate systems the government is almost inevitably a coalition, so the junior partners can curb the excesses of the major party.

But, Prof Soskice suggests, in FPTP elections one party tends to win outright control, meaning voters worry more about it using office to pursue its own political agenda.

Forced to choose, voters have tended to be more concerned about the dangers of the left-of-centre reverting to type and raising taxes than the risk of right-of-centre governments cutting services.

Awkward questions

The election is probably 11 months away and much may have changed by then. But Labour's hope must be that an electorate which feels a public service squeeze is inevitable would rather have a party in government that does not like making cuts, than one they suspect may rather relish it.

Politics Pen panel
Also in the Pen are Deborah Mattinson, Lord Digby Jones and Greg Dyke

Of course, the Conservative counter-attack is to accuse Labour of having a secret tax-raising agenda, even over and above those increases already in the pipeline.

But this in turn lays the Conservatives open to awkward questions about how they will raise revenue.

Being so far behind, Labour has to do something.

Mr Brown and Lord Peter Mandelson may hope to emulate the Conservatives' recovery in 1992 on the back of Central Office's "tax bombshell" campaign.

But the reality for both major parties between now and a polling day in 2010 is that any attack they launch is likely to open up gaps in their own defences.

Perhaps it is not surprising that even close allies of Mr Brown are saying Labour may this time need something a bit more subtle and credible than a two big clunking fists tattooed "Tory" and "Cuts".

Newsnight's first edition of Politics Pen will be broadcast on Monday 22 June 2009 at 10.30pm on BBC Two.

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