The Shadow Chancellor is quite rightly embarrassed about his U-turn – it is after all a hole which he dug for himself. But how much of a U-turn is it really? Superficially, it’s a question of saying one thing one week and the opposite the following week, but he doesn’t really seem to have changed his mind much on the substance at all.
In reality, he’s still signed up the deficit fetishism which has come to afflict politicians and parties – his disagreement with the Tories isn’t over whether deficits are bad and should be eliminated, it’s only about how and in what timescale. He has completely accepted the underlying premise – and many in his party have also accepted the Tory arguments on timescales and methods as well.
The economics is much more complex than the politics. As long as real interest rates remain negative, borrowing money makes eminent sense – the government will, in effect, have to pay back less than it borrows. Deficit fetishism also overlooks another important factor – at the moment, people are queueing up to lend money to the government. What would they do if the government simply stopped borrowing? The economy doesn’t start and end with the government and the public sector, but political debate seems to assume that that part of the economy can somehow be considered in isolation, independent of what’s happening elsewhere.
Seeing through the politics of the silly suggestion for a new law is one thing – a step forward of sorts. But they’re still not seeing through the politics of the deficit itself.