Ed Balls' speech over the weekend announcing that Labour will aim to run a surplus by the end of the next parliament raises significant questions about public service reform. No matter whether you viewed the pledge as necessary political positioning or not, to make it a reality the next Labour government will need to significantly reform the state, without more money to spend.
There has been much talk in Labour circles over the past few days of Theodore Roosevelt. Commentators and activists alike have been debating the merits of 'trust busting' since Ed Miliband's speech on banking reform. While the Roosevelt comparisons are certainly a fitting parallel for Ed's plans to reform the private sector, it is less clear thus far what the party's plans are for the public sector.
This has not always been the case. When he launched his campaign to be leader of the Labour party Miliband declared: "we need a new way of thinking about the state...We need to show we are the people who can reform the state to make it more accountable and give power away." After Ed Balls' speech it is clear that this strand of thinking will need to be revisited.
In doing so perhaps it is a different American president, Lyndon Johnson rather than Roosevelt, from whom Labour should draw inspiration. As fifty years ago this month he showed how the state can extend opportunity, even while reducing spending.
It was January 1964 when Johnson used his first State of the Union address to declare "unconditional war on poverty in America". The chief weapons in that war, Johnson said, would be "better schools, better health, better homes, better training, and better job opportunities". Its aim was "to help each and every American citizen fulfil his basic hopes...for a fair chance to make good".
Lyndon Johnson's father once told him that "the duty of government is to help people who are caught in the tentacles of circumstance" and he was determined to make this a reality now that he was President. His 'war on poverty' would require the biggest expansion of social provision in America since FDR's new deal in the 1930′s. The scale of the measures proposed ranks, in British terms, alongside only those of the 1945 Attlee government.
However, unlike the traditional left's approach in Britain, Johnson's war would be fought not through an expansion of state spending, but a reduction. The budget the president put forward in 1964 was $500 million lower than the previous year and would halve America's deficit. These were substantial cuts to make in a single year, which in today's money would equate to roughly £24 billion, or around a quarter of the UK's deficit.
And it wasn't just spending that was going to be lower. "We need a tax cut to keep this country moving", he said, announcing $11 billion worth of tax reductions to boost a struggling economy.
How was Johnson to accomplish this seemingly impossible task of increasing public services whilst reducing taxes and spending? It was simple, he told one aide before the speech, "I'm going to take money from stuff and give it to people". Rather than large centralised programmes, Johnson's war on poverty would devolve power to lowest level, giving those on the front line freedom to deliver services in a way that best solved the problems they found.
He was true to his word. Record amounts of funding were allocated to be spent on education, health, employment schemes and support for the disabled. However, the funding would not mean more of the same, Johnson was clear that a different way of doing things was required. He told Congress, his administration would "close down obsolete installations, curtail less urgent programs, cut back...and insist on a dollar's worth for a dollar spent".
While the coalitions' economic policies are slowly begging to produce some growth, the cuts they have implemented so far have led to greater inequality, increased homelessness, more food banks and even less belief amongst people that they can lift themselves out of the difficulties they face. Johnson's policies by contrast reduced the poverty level from 32 per cent in 1963 to 12 per cent in 1979 and the American economy enjoyed strong growth in the years after his speech.
The lesson for Labour then is clear. It is possible to lower the deficit and protect the things that really matter to people, but only if you are prepared to be ruthless about which services you are going to fund and challenge them to innovate. Miliband's One Nation Labour should draw inspiration from Johnson's radical approach, putting forward a vision of the state that is leaner, but more effective at extending opportunity in education, healthcare and the workplace.
To do this successfully will involve more than judgements about spending priorities and the management of ever decreasing resources. It requires a fundamental evaluation of how the state should operate in the modern age. In every policy area shadow ministers must begin from first principals and ask if there is a better way than the established order.
This will mean asking tough questions. Are job centres a place where people actually can find work, or have they become a place where people just go to sign on? Is doctor always right, or should patients have a greater say over the treatments they receive? Should local councils be given greater freedom to raise their own finances, or remain dependant on Whitehall handouts?
Providing answers to these questions, and more, will be no small task. At times it will mean taking on established thinking in the party and a way of doing things that has prevailed since the post-war welfare state was founded. Miliband much to his credit, has had the courage to take on vested interests in the private sector, now he must show he can do so in the public sector as well.
Labour's historic duty has always been to extend opportunity and 'to create for each of us the means to realise our true potential'. Ed Balls set us the challenge of doing so again, but this time with the most limited of resources. Lyndon Johnson has shown that cutting spending need not mean cutting adrift the poorest in society.
Let's hope that when Labour's leader has to decide what to cut it is Johnson's example he chooses to follow.
Rich Durber is a former press adviser and speechwriter to a Shadow Minister, he now works freelance
This article first appeared on Labour UncutSuggest a correction