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People need hope, not more of the Tory austerity fairytale

Austerity Stops hereHa-Joon Chang in the Guardian is right that “the country is in desperate need of a counter narrative” to the Tory story on the economy. I believe it should go like this.

First, Labour did not leave behind an economic mess; the bankers did. Labour was not profligate: the biggest Labour deficit in the pre-crash years was 3.3% of GDP; the Thatcher-Major governments racked up deficits bigger than that in 10 of their 18 years. So who was the profligate? It’s a no-brainer.

Second, the Tories have claimed that the reason for enforced austerity is to pay down the deficit. Yet, after six years of falling wages, private investment flat, productivity on the floor, and fast-rising trade deficits, the deficit is £100bn, when Osborne promised in 2010 it would now be next to zero. To cap it all, the deficit will almost certainly rise this year because income from taxes has sharply fallen as wages are increasingly squeezed. Austerity is now a busted policy that has turned toxic. It should be dropped.

Third, Osborne’s so-called recovery is bogus because it is too dependent on a housing asset bubble, too dependent on financial services rather than manufacturing, and has no demand to sustain it. It is already fading as growth slows.

Fourth, the only way now to get the deficit down is by public investment to kickstart sustainable growth via housebuilding, upgrading infrastructure, and greening the economy. Funding a £30bn package at interest rates of £150m a year would create 1.5m jobs within two/three years. Or it could be financed without any increase in public borrowing by printing money, or instructing the publicly owned banks to concentrate lending on British industry, or taxing the 0.1% ultra-rich whose wealth has doubled since the crash.

People need hope. The Tories are continuing with austerity because their real motive is to shrink the state and public services, not to cut the deficit. The alternative offers investment desperately needed, growth in the real economy, genuine jobs, rising wages – and really will pay down the deficit.

5 Comments

  1. Pauline Sharp says:

    I tell you what Labour party, you need to start talking plain English, so half of us can understand what you are on about. I am still unable to see the passion. And why are you not condemning work practices such as Sports direct and Care UK more publicly. Principles , where the hell are they . I certainly am not hearing them.

  2. Robert says:

    And a labour party which says we will do the same, we will stick to the Tories spending plans, and austerity and with Ball’s saying in fact we will hammer down even more.

    Benefits will be cut and wages held down and then labour says we have a cost of living crises and then the Progress lad who now runs the Progress party Miliband comes out and states in six years time we will have a min wage of £8 a rise of £1.50 over six years and he thinks this will make us vote for him, according to him the people of this country are going to rush out and vote for what is more or less worse then what we have now.

    “Arbeit macht frei”

  3. Peter Rowlands says:

    Michael is, as usual, quite right, both in terms of the deficit myths and the policies needed. Labour needs to campaign along these lines.It is probably the only way to win a majority next year, it is certainly the only way to begin getting out of the mess that we’re in.

  4. Mukkinese says:

    What? You mean supply side economics don’t always work “If you build it they will buy”.

    Osborne’s strategy could not have been better designed to slow down recovery. The tragedy is that this non-economist has ignored real economists from all around the world, some Nobel laureates, warning him that his policies would almost certainly slow growth.

    But George knows best…

    1. Robert says:

      But George Knows best? Seems so because he’s got Labour agreeing with him, and Ball’s telling us labour will do more and Reeves saying she will hammer down on the unemployed .

      And now the Tories are laughing at labour promise of £8 min wage by 2020 even I know with the way this country is going £8 pound rise would mean labour is again holding down wage rises.

      I suspect the £9 wage rise by 2020 is more likely.

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