Tuesday 11 June 2013

Labour and the Economy

The speeches last week by Ed Balls and Ed Milliband on what Labour's economic policy will be if they win the 2015 election have been something of a damp squib and will probably do their prospects of victory more harm than good.

Of course their views are filtered through a violently pro-Conservative press, but the main  impressions that  remain are  that they will:

  • stick to George Osborne's spending plans
  • place a cap on welfare benefits
  • end the principle of universality.
All this is in a bid to gain respectability with a Tory-dominated media, and give the impression that they are responsible and competent. 

For Keynesian it is a depressing picture.  As even some Labour supporters have pointed out, now that all three major parties are, incredibly, locked into this neo-conserviative con regarding our problems and their solution, where is the meaningful voice for the voter seeking an alternative?

Sticking to the Tory spending cuts means that Labour has accepted the incredible distortion that our current economic problems stem from government overspending rather than the collapse of the deregulated financial markets which were introduced and so much lauded by the Tories themselves.  (It was sad to hear Peter Hain, not one of my heroes, shouted down and virtually told to shut up by Jonathan Dimbleby on last week's radio "Any Questions".)  Or Labour has simply accepted that the Tories have won the propaganda battle on this had haven't the guts to fight back. 

The next government, in which I hope and expect Liberal Democrats will participate, needs to follow a policy of government-induced Keynesian stimulation and those who take that view, which should include all we "social" Liberals,  need to have the courage to make the case, and so does Labour.

The cap on welfare benefits is a craven surrender to tabloid populism.  Welfare benefits should be paid on the basis of need.  The idea that we cannot afford this is ludicrous.  The per capita income (of every man, woman and child) of the UK is around £23 500 a year.  That means the if it were evenly shared out every family of four would be receiving.just short of £94 000 per year.  Of course it isn't evenly shared out, and I'm not advocating that it should be: just pointing out that with wealth like that we can afford to protect the most vulnerable members of our society.

I do, however, have some sympathy for Labour's proposal, already Liberal Democrat policy, to discontinue the winter fuel allowance to pensioners in the higher income tax band, and would, indeed, extend it to the less wealthy, such as myself, just paying the standard rate.  I understand Old Labour's aversion to means-testing, but by simply  excluding taxpayers rather than  means-testing the poor removes the perceived humiliation of having to apply.

 The one benefit where this device would not be appropriate is our free bus passes since, if these were issued only to non income tax payers, those who possessed them  would be identifying themselves as "poor."  (cf  free school meals).  For bus passes, then, I advocate universality, but would find it acceptable for a token payment, say 30p or 50p for each  ride, to reduce the cost.

In the economic sphere what is needed for 2015 is a party which advocates:
  • Keynesian expansion, particularly on infrastructure development (housing, local transport networks) and boosting research and development, including proper financing of our universities ( financed by scrapping HS2 and the like-for-like replacement of Trident)
  • taxation reform: cutting tax relief for pension contributions  over and above those required to provide a pension equivalent to the median wage; serious tackling of tax avoidance and evasion; land taxation and a financial transactions tax
  • reform of the banking system by splitting merchant from retail banking; retention of RBS and LLoyds TSB as publicly owned banks, split into regional banks charged with providing long term finance at modest interest rates to local enterprises
  • taking the heat out of welfare by introducing a citizen's income
  • the introduction of democracy into work places, including the fair sharing of profits and the control of excessive payments to directors and a managers.
There's plenty there for Liberal Democrat apparatchiks to be getting their teeth into, and two years before 2015 to get it right.

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