This is a good question for two reasons. First, it’s a way for the party to avoid two common cognitive biases. One is ego-involvement; we all tend to defend decisions not because they are good ones, but simply because they are ours. The other is Bayesian conservatism; we stick to our prejudices too much in the face of contrary evidence.
If we were in opposition right now, and the country were facing exactly the same challenges as it is now, and we were determined to form the next, new, government, what would be in our manifesto?
Secondly, it allows the party to ditch some policies which were, at best, only temporary expedients. There are four I have in mind:
1. Targets in public services. Julian Le Grand called this well in this fine book. Targets, he said, can work as a remedial measure, to redress serious problems - such as long hospital waiting lists or illiteracy. But they’re a bad long-term policy, as people learn to game the system by fiddling the figures and become demotivated by endless top-down diktats.
Labour in virtual opposition would, like the Tories, want an end to targets.
2. PFI. The credit crunch has revealed what has always been the case - that there’s one thing government can do better than the private sector; borrow money. Whilst credit is tight for private firms, government can borrow at a real rate of less than 1 per cent. Infrastructure spending should therefore be funded by government; if there’s a case for private sector involvement, it’s in project management, not finance.
And we can forget that pish about fiscal prudence. This was only ever a 1990s rhetorical device intended to show that New Labour wouldn’t frighten the City. That battle’s been won. If people are prepared to lend to government at such low rates, let’s bleed them dry, because cheap money won’t last forever; infrastructure spending should be undertaken now, whilst it's cheap.
3. A low top tax rate. Again, this was a 1990s policy intended to show that Labour was safe for the middle class. Since then, though, we’ve learned that the rich don’t have special indispensable skills but are, to a larger extent than previously thought, just rent-seekers and chancers; another lesson of the credit crunch, surely, is that traders and bank bosses weren’t skilful risk-assessors but just mug punters. And if the state is going to help bail out banks, why shouldn’t it get a bigger slice of the action in good times? Risks shouldn’t be pooled only in hard times.
4. Tax credits. Again, these are a legacy of the 1990s, when Labour was desperate to show that it would only redistribute to the deserving (ie working) poor. Since then, though, we’ve learned that the cost of complex tax credits is high, and in a downturn the distinction between deserving workers and undeserving unemployed is even more meaningless than usual. It’s time, then, for a simpler system - a basic income?