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Investment, jobs, growth must be Labour’s policy, not austerity

Miliband Hope imageLabour has had a successful party conference, Ed Miliband made a powerful speech with a strong commanding narrative of Labour’s objectives for government, but the only let-down was in the crucial area of economic policy.

Ed Balls’ embrace of the the right-wing Tory orthodoxy of prolonged austerity until at least 2020 is as unbelievable as it is indefensible. He clearly must believe that the voters don’t trust Labour because it’s profligate so we must at all costs prove to the electorate that we’re fiscally sound and hence be at least as tough as Osborne in pursuing austerity to cut the deficit. But the record shows that Labour has not been reckless with public expenditure.

The last Labour Government’s biggest deficit in the pre-crash years was 3% of GDP, yet the Thatcher-Major governments ran deficits bigger than this in 10 or their 18 years. So who was the more profligate? But anyway from my personal experience what disgruntled voters complain about isn’t that Labour is profligate, but rather: why should I vote for Labour when it’s no different from the Tories in pursuing endless spending cuts? – exactly what Ed Balls is committing to.

It’s not only wildly unpopular, but simply wrongheaded. To continue with austerity when average wages have already fallen 9% in real terms, productivity is at one of the lowest levels in the OECD, business investment is still 10% below pre-crash levels, the balance of payments gap in traded goods is at an all-time record, household debt is now tipping £2 trillions, and unemployment is still over 2 million is to squeeze out demand even further in an economy where aggregate demand is already severely lacking.

But why is austerity being pursued at all? The answer that’s always given is that it’s necessary to cut the budget deficit. But actually it’s a very inefficient and unnecessarily painful way of doing that, and a programme of public investment, jobs and growth is a far more efficient way of bringing down the deficit, as the record shows. When the bankers’ crash erupted in 2008-9, Alasdair Darling brought in two budgets which stimulated the economy and by that means cut the deficit by £40bn in 2 years. Osborne’s austerity budgets then kicked in and the reduction in the deficit slowed to a trickle, just £10bn in the next 3 years.

There is now an overwhelming need to kick-start the economy on a sustainable course of growth. A £30bn public investment package, costing a mere £150m at today’s interest rates, would create a million jobs within 2-3 years, increase incomes and thus aggregate demand, boost government tax receipts and thus pay down the deficit far quicker. That is what the economy desperately needs and the people of Britain desperately want. So why isn’t Labour backing it?

7 Comments

  1. McCurry says:

    The problem is that there is little distinction between one party and the other. Tribal rhetoric is the only sense of identity, because we are pursuing the same policy as them.

    1. Robert says:

      So so true.

  2. swatantra says:

    Too right; once we get the Country back on its feet, then we can think about growth, investment and jobs. Its a lean time and a lean message.

    1. Robert says:

      True so we need to leave the Tories in power then after all they are the best at this type of policy, while poor old labour can just copy them.

      Cameron and Osborne and then when they have done it we can vote for Blair Junior to come in and sort out the mess with Progress One Nation.

  3. john reid says:

    how can you invest in jobs without any money Michael

    Robert calling Ed, blair junior’s a joke

  4. Peter Rowlands says:

    Until the conference my assumption was that while last year’s decision ( with which I disagreed) to match the Tories on current spending was made to guard against accusations of profligacy there would be a substantial boost to capital spending via council borrowing and some form of directed quantitative easing ( From our new British Investment Bank!).
    The ludicrous Balls policy means that this is out and Labour’s commitment is to cuts and austerity. Indeed, we would not be able to finance our commitment to build 200,000 houses a year. Or are we relyingon the private sector to do this for us?

    1. Robert says:

      Labour house building program is basically we hope once we get in everything will improve so companies will build houses and we g can say told you so.

      A right wing Tory Party with a right wing Progress party, one can take ones pick really, a toss of a coin will do. Miliband was picked because he was not his brother so the Union told us but sadly he is his brothers keeper and to some degree he.s Progress.

      So the Tories or Tory Lite. as for Ball he’s taking the easy route, just state we agree with the Tories spending so we will stick with it, it’s been said by nearly every labour leader who is trying to win an election and leave it at that.

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