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Why is Labour not getting its economic message across?

The Shadow Cabinet is rightly concerned that Labour is not doing a lot better in the polls: austerity is beginning to bite hard and Osborne was forced to admit  that this will continue for (at least) another 6 years — a whole decade of stagnation if not actual impoverishment.

It is important to be clear about the reasons for public disquiet about Labour, however wrongheaded the evidence on which it is based. From polling the main arguments appear to be:

  1. that the constantly repeated Tory claim that they are ‘clearing up Labour’s mess’ has gained widespread currency in the electorate’s mind;
  2. that whilst the public agrees that one shouldn’t cut too far too fast, they feel that further short-term spending to generate growth would make matters worse at a time of high indebtedness; and
  3. that the sovereign debt crisis in the eurozone is the major cause of slow or no growth. How should these perceptions be countered?

The argument about clearing up Labour’s mess needs to be met head-on. The budget deficit in mid-2007 just before the crash was 2.9%, an average-to-low figure compared with most of the Western economies and below the level for much of the Thatcher years. As a result of bailing out the banks, it rocketed to 11.6%. The great majority of the public simply don’t get this. Labour’s assertion of this damning truth needs to be asserted again and again as relentlessly as the Tory canard. It was the banks, not Labour (and if failure to regulate the banks properly is the problem, then the Tories are much more guilty than Labour).

Second, while the public’s perception about limited extra spending to promote growth is not correct in Keynesian terms, the way to address it is two-fold. Keeping a million on the dole costs £8-10bn a year; for the same sum of money 500,000 jobs could be created, surely not only a more humane but also a much more economically productive response. And if then it is objected ‘how can the initial stimulus be paid for?’, the answer lies as follows:

  1. an emergency supertax on the hyper rich (the top 1-2% with incomes above £150,000 a year) via a very modest Financial Transactions Tax at a 0.01% rate;
  2. the withdrawal of tax relief on pension contributions by top earners; and
  3. a mansions tax on houses valued in excess of £2 millions.

That would drive the start of an economic turnaround which would be self-reinforcing, without any additional imposition on 98% of the population. It would be a better answer than removing the 2.5% VAT increase because that would be seen as worsening indebtedness, initially at least, by £13bn.

Third, the eurozone crisis undoubtedly aggravates UK prospects, but Labour must make the argument much more forcefully (copying Tory message discipline) that the expenditure and benefit cuts now being felt began a year before the eurozone problems and that the latter are in no way the cause of Britain’s current pain, though they may in future make it worse. The root problem is the bankers’ bailout (£70bn in taxpayers’ money plus so far £850bn increase in national debt) and the Tories’ self-destructive obsession with endless austerity.

2 Comments

  1. Ryan Carter says:

    You don’t seem to understand that the argument for a reduction in VAT is that it shows we are in touch ( VAT is regressive, as it hits the poor much harder than the rich).

    It is also artificially propping up inflation, as well as the currency, as we devalue exports would increase however if VAT is higher then the currency is artificially high thus leading to an import not export led drive.

  2. Patrick Brett says:

    I have said it for a long time now and I will keep on saying it, the first party to suggest reducing the fuel TAX to allow fuel prices to drop back to the £1 a liter mark will do more for the economy than anyone else can!

    Reduced fuel costs means more money for everyone to spend on food and luxuries thus stimulating the economy instantly, add to that the reduction in food prices as everything got expensive when the fuel got expensive and you see an added increase in household spending money thus re-enforcing the economy more.

    I remain gob smacked that a only a handful of people have realised this and they are the ones begging for a 2p and 3p cut in the fuel TAX rises, what we need is a 40p or 50p cut in fuel TAX for any difference to be noticed and don’t even tty ro tell me the Government can’t afford that when they can afford to increase their spending on a WAR that the people don’t want!

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