Over the weekend, all eyes were on Brussels while the Prime Minister attended a two-day summit with fellow EU leaders. They were busy thrashing out proposals to defuse the eurozone crisis and calm the financial markets. However, David Cameron would not have found any realistic advice from his opposite number in the Labour Party.
Labour's response to the eurozone crisis is the latest manifestation of its fiscal fantasy. When Hollande became President of France, Miliband rushed to claim him as an ally "against austerity". But President Hollande is more grounded in reality than Labour. Hollande admits that "national debt is the enemy of the left and the enemy of France". Hollande has been even clearer that the solution to dealing with the deficit "cannot be extra public spending since we want to rein it in". The French are now having to play catch up by cutting their deficit much faster than the UK, as are the Spanish and the Irish. It comes as little surprise that no-one is listening to Labour in Europe. Labour is an isolated voice, economically aloof, adrift and awry.
T.E. Lawrence wisely observed in his seminal Seven Pillars of Wisdom that "all men dream: but not equally". Lawrence of Arabia braved the desert storms acting out his dreams with clarity of purpose. In stark comparison, the Labour Party has faced the economic crisis with nothing more than daydreams: wishful thinking that is out of touch with reality.
The wishful thinking, inspired throughout by both Ed Miliband and Ed Balls, has evolved through each stage of the economic cycle. In office, they encouraged Gordon Brown to grandly boast about having put an end to "boom and bust", but all too clearly had not. After the credit crunch, they deteriorated into a bout of "deficit denial". Now, with the Eurozone crisis, we are seeing the patient presenting the symptoms of an equally concerning "fiscal fantasy."
The flaws in Labour's thinking while in office have been confirmed by senior figures of the day. Lord Turnbull, the former Cabinet Secretary and Permanent Secretary at the Treasury from 1998-2002, explained to me during a Treasury Select Committee hearing, how 60 quarters of uninterrupted growth had contributed to a deep sense of "wishful thinking" on economic policy. In this delusional state, the previous Government thought that it had actually cracked the economic cycle and that nothing could go wrong.
Labour steered our economy on unsustainable growth and straight into the biggest economic bust in living memory. Despite Labour's protests to the contrary, their staggering deficit was not the product of a mythical global economic crisis. Even before the credit crunch, there was clear evidence that spending and the burden of tax were too high, as Labour ran up a structural deficit for six years before the banking crisis hit. As a result, the UK entered the financial crisis with the largest structural deficit in the G7. The previous government was caught completely flat-footed as it faced the economic crisis.
As the credit crunch unfolded, Labour's wishful thinkers started to exhibit symptoms of 'deficit denial.' Labour chose to shy away from confronting the scale of the challenge and from setting out how it would tackle the deficit, ensuring defeat at the General Election.
In opposition, Labour's 'deficit denial' was most clearly defined when the Party tore up deficit reduction plans laid out by former Chancellor Alastair Darling. Since then, Labour has lashed out, opposing every saving put forward by the overnment. Labour's lamentable mindset has not been lost on Darling, who earlier this year said that Labour had to "restore [its] reputation for economic credibility", and offer a "credible and compelling position on the economy".
Let's take a closer look at the cost of Labour's fiscal fantasy. According to the Institute for Fiscal Studies, the UK would now be borrowing £200 billion more under a Labour government. Labour's five point plan would add an additional £20 billion on top of that. Labour won't admit that with all this extra debt, our country would be at far greater risk in the Eurozone crisis.
Labour's numbers simply don't stack up. Just look at their much vaunted bankers' bonus tax. The amount needed for the policies it would fund is over ten times as much as it is likely to raise.
Before the election, Gordon Brown said his party was made up of people who "dream the impossible dream". Actually, Labour is still daydreaming, pursuing the unworkable and ignoring the real world. Labour's dreams will remain in tatters until they get to grips with reality. While its leaders may have changed since the election, one thing is clear: the wishful thinkers are still in control.