With Tory confusion on the economy, the general election looks to be very close, writes James Turley

Alastair Darling’s budget was in effect the opening shot in Labour’s election campaign and, given the global economic crisis, he made a fair fist of it. As everyone knows, he had to promise financial responsibility, while offering a few sweeteners to voters.

The spiralling public debt – enormously inflated by the astronomical bank bail-outs of the last two years – is being talked up, especially in the rightwing media, as a source of economic catastrophe in coming years. Powerful sections of the capitalist class demand enormous cuts in public expenditure and austerity measures to ‘get things under control’. Then there is the precarious position of the Labour Party. Gordon Brown’s premiership had been riven with crisis; he had looked every bit the Labour counterpart to John Major. Now, however, with polling date looming (and in line with traditional electoral dynamics), the Tories – whose lead once looked unassailable – no longer seem assured of even emerging as the largest party in parliament.

Not only that: the ground that David Cameron and his shadow chancellor, George Osborne, have lost is precisely on the economy. Osborne opposed the nationalisation of Northern Rock, a position that looked incredibly daft when the initial failure of the US senate to pass the Paulson bail-out fund put the global financial system as close to collapse as it has been since the 1930s. Osborne also promised ‘slash and burn’ austerity measures; people do not like to vote the shirts off their own backs if they can help it, though, and, as a possible bloodthirsty Tory government gets nearer to power, it seems many people have recoiled from this programme.

So there is a political opportunity for Labour to draw clear dividing lines between itself and Cameron, on the one key issue on which this election will be fought and won. The incentives do not end there: it does not take a genius to work out that a switch from government support of the economy to immediate and savage cuts is a suicide option. This is a time of mass unemployment – downsizing the public sector would in fact mean hundreds of thousands more becoming reliant on state benefits to survive. Along with attendant wage cuts, this would have the effect of slowing down consumer spending, and with it VAT, income and corporate tax takings, compounding the deficit. No reduction in state debt will occur – the state will simply get less value for the money it does not have.

In reality, UK net government spending has not fallen year on year since the Callaghan government in the late 1970s – least of all under Thatcher, whose much vaunted commitment to ‘rolling back the state’ existed more or less only on paper. The reason is transparent – economic activity, even in boom times, relies on state support, and suffers when that support is withdrawn.

What have Darling and Brown come up with, then? There are, for a start, those proposals that amount to political showmanship (not something commonly associated with either) – in particular, the Commons resounded with laughter at Darling’s intent to regularise tax relationships with several tax havens … including Belize, home to Lord Ashcroft’s many millions.

The rest of the headline figures and policies, unsurprisingly, can be divided into those pitched at an electorate wavering before the prospect of a new age of austerity, and those pitched at the bourgeoisie. Darling has managed to fiddle himself another £2 billion or so, interestingly in part because the one-off bonus levy imposed on banks this Christmas – which, we were assured by the apoplectic rightwing media, would raise no money anyway – has proved four times as lucrative as predicted by the treasury.

This cash will be used to start up a Green Infrastructure Bank, which is supposed to provide capital for environmentally conscious (or at least environmentally marketable) public works. It will provide support for small businesses, which have been unsurprisingly squeezed in recent times, along with the availability of credit and consumer spending. Darling’s ‘edgiest’ proposal, as far as the sensibilities of the City go, is for a so-called ‘mansion tax’, which will scrap stamp duty on homes under the value of £250,000 and increase duty on those over the value of £1 million.

All this is part of the ‘short-term’ plan, however – the ‘medium-term’ plan is, naturally, to cut the bulk of the deficit. Details on this are conveniently scarce; Darling promises a spending review in the autumn, which will be the toughest for decades. The BBC drew him into admitting that he would be going in harder even than Thatcher in the early 80s. There is an awful lot of guff about ‘efficiency savings’ – Darling rather laughably expects to find £30 billion of such savings in the national health service, such as by reducing the general practitioner target time for patient consultation from 12 to eight minutes; although, if that is the picture on one of the two ‘ring-fenced’ public services, one shudders to think what attacks will be like further down the priority list.

It is clear, then, which way this budget is weighted – towards the need for savage cuts. £30 billion off the NHS budget – however ‘efficient’ – alone dwarfs the piddling few billion in stimulus measures. Darling’s promise to the electorate is that the onslaught will be put off for a year or so.

Given the other option on offer, however – a shadow cabinet on record as advocating an emergency budget within 50 days of assuming power – it does appear to work in Labour’s favour. Rather it seems to be working against the Tories. The first televised election debate took place on March 29, between Darling, Osborne and Liberal Democrat would-be chancellor, Vince Cable. Osborne’s performance was widely criticised, and the Channel 4 poll following the debate had him in last place, with Cable taking the top spot. (The Lib Dems, it should be noted, have also rounded on the notion of immediate cuts, and declared their refusal in advance to participate in a government which planned to introduce them.)

That said, the short-term/medium-term compromise between cuts and stimulus measures, shared by both Darling and Cable, should not be confused with a workable strategy. The economy is unlikely to recover in any substantial way – crucially with any major reduction in unemployment – in the next year. At that point, the notion that savage cuts are not prone to send Britain into a ‘double dip’ recession is as risible as it is today. The truth is that any timetable for cuts – whether from a crusading Tory monetarist or a tentative liberal Keynesian – will be determined by forces well beyond the control of the government, whether that is the slow pace of recovery on the one side or the pressure from the City on the other. The three parties objectively offer us the same programme of cuts, in different packaging.

The international dimension brings its own worries. The examples of Ireland, Iceland and Greece do not augur well for those countries unable or unwilling to control their sovereign debt. Britain is somewhat buttressed by its relationship with the US – but that patronage is equally a poisoned chalice, as it prevents efficiency savings in, for example, the entirely pointless slaughter of Afghan civilians.

It is this dimension, in the last analysis, which renders a wholesale lurch into Keynesian economic policy highly unlikely. Running an enormous deficit, as any government with a serious New Deal-type programme of public works necessarily would, relies on being able to ‘borrow’ the capital of others on an indefinite basis. It thus means ensuring preferential treatment on world markets, which can only be achieved through other than economic means; in other words, the inequality between states that characterises imperialism. Keynesian stimulus packages offload some effects of crisis onto more peripheral economies, and are possible only inasmuch as that con-job can actually be completed. In the case of America, the global military hegemon, stimulus certainly is possible, and the US is already on a stronger footing than anyone else in terms of the present crisis. The claims of America’s subordinate imperialist partners are far less secure.