I'm still of the firm belief that government spending was not to blame for the economic crash and that cutting spending is not the solution. But the last government got complacent and let things carry on as they were for too long, so that when the crash happened and they lost the next election, it was far too easy for the Tories to blame overspending and hack away at vital services. What Labour should have done is ensure the growth we were experiencing was sustainable and that the country was seeing it's fair share of the money.
Large employers got greedy. Despite making millions in profit, they found ways of avoiding paying taxes that not only deprived the country of vital tax income, it also affected hundreds of thousands of employees. Reduced hours means less NI payments for employers but it also means less income for the employee and less income tax for HMRC. The country and the employees lose out; the only winner is the employer. Many employers also reduced their own workforces and replaced staff with contract temps which reduces pay and rights and creates instability but saves the company on recruitment costs and loss of working hours to sick leave. These things were going on whilst our economy was healthy and the economic slowdown had already started in earnest before the government had to find the money to bail out the banks.
The public had also become complacent. In 2006 the company I worked for was bought out by a larger rival (who wanted our clients but not our staff or premises) and I was made redundant. Within a week I'd been offered a better job. People had got used to being able to get work. They were used to being able to buy homes, cars, luxury goods, holidays etc, and get credit and loans without being worried about whether they could pay them off. Then, all of a sudden, redundancies or cuts in hours put mortgage, credit card and loan repayments out of reach and what seemed like manageable debt became uncontrollable. Many people, hopeful they would get a new job soon, got into a lot more debt whilst trying to keep up with payments. Many did get new jobs but for much less pay and found their debts too much to cope with in what quickly became a grey and austere country.
At the moment, Labour seem caught between the right-wing arguments that "it's all Labour's fault/they can't be trusted on the economy", and their roots as a party who invests in the protection of and future prosperity of the working-age population. It's an impossible balancing act: they cannot hit back at the government's treatment of the poorest whilst also talking about cuts. When questioned about borrowing, Labour MPs should say: "YES! We need to borrow money to invest in the sort of projects that will turn our economy around." They need to make the clear point that the last Labour government only borrowed too much when they bailed out the banks; before that point, budget deficit was healthier than the previous Conservative government had left in 1997 (they don't need to admit that they could done better while the going was good by tightening up on tax avoidance etc - after all, their record on this is entirely identical to the Tories: they did nothing).
They need to be bold on spending. The NHS will not be improved by making cuts. Nationalisation programmes will be expensive but will pay back and the "hard working people" the Tories bleat on about would love cheaper rail fares and energy prices. Investment in transport, renewable energy, healthcare, education etc also means more proper jobs. And more proper jobs means a smaller benefits outlay, greater tax revenue and the added boost to the economy of extra spending on non-essentials as a result of more comfortable incomes.
It's not a difficult concept to grasp that if the next government can spend wisely on projects that will improve services and provide jobs, we will see the benefits. Labour could raise what happened after the second world war. Churchill's Conservatives fought against the introduction of the NHS and improving public education. He said that Attlee's Labour party would introduce "...some form of Gestapo..." The result was Churchill's loss. Labour's nationalisation programmes, NHS and social security improvements were accepted by Labour and Conservative governments for thirty years until one Margaret Thatcher, supreme leader of the 'modern' conservatives, began to chip away at it.
Labour are simply not tough or bold enough anymore. They're running scared of the toffs and right-wing stick-in-the-muds who would see workhouses and shanty towns return rather than make sure we all benefit from the wealth we all create. They are being controlled by Thatcherite politics, even now she is gone.
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