https://leftfootforward.org/2024/03/the-labour-party-must-not-follow-tory-economic-policies/

Labour is counting on the unpopularity of the Conservative Party to catapult it into power but in the absence of specific policies and failure to improve quality of life, electoral goodwill will quickly evaporate.

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Labour and Conservatives have become slaves to arbitrary fiscal rules even though they have failed to deliver almost every target relating to economic growth, inflation, public debt, investment and more. Labour emphasises that it wants to reduce the government debt to GDP ratio in five years’ time. However, no rationale is presented for such a straitjacket. No assessment is made of the consequences of removing billions of pounds from the economy. No rationale as to why low debt to GDP ratio is an indicator of the prosperity of a nation and why this should take priority over investment or redistribution. Analogies with household budgets or maxed out credit cards are misleading as governments, especially those with global currencies such as the Pound Sterling, can create money to achieve desired social objectives and levy selective taxation to eliminate inflationary effects. But Labour is no student of the modern monetary theory.

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Debt can be used to rebuild the economy even if Labour and Conservatives are hostile to it. The Post-Second World War boom was built upon direct public investment in new industries and social infrastructure. In 1946, public debt stood at over 270% of its GDP. This provided jobs and fuelled demand. It fuelled corporate investment as the state bought goods and services from the private sector. It laid foundations of emerging industries, such as biotechnology, information technology, aerospace and more specially as the private sector showed little appetite for long-term investment and risks. Within a generation, the public debt came down to 49% of GDP and I can’t recall our parents and grandparents fretting about the public debt.

Instead of a dynamic state, both Labour and Conservatives support further cuts in public spending even though that will reduce investment, slow economic growth, and inflict long-term damage. Too many public buildings and schools are crumbling away. The government response is that college spending per student aged 16–18 in 2024 will be 10% below 2010 levels, and about 23% below them for school sixth forms. Since 2010 local council funding has been cut by 23.3% in real terms, leading to degradation of public services and higher council tax on hard-pressed households. Hospitals in England have a waiting list of 7.6m appointments. None of this can be addressed by adherence to arbitrary fiscal rules.

There is a strong case for redistribution of income and wealth, but Hunt and Reeves ignore it even though higher disposable income for the less well-off has a greater multiplier effect. No amount of economic growth can be sustained unless people have good purchasing power to buy goods and services. Both parties reaffirm their faith in trickle-down economics which has seen wealth sucked upwards and prevent economic recovery. The UK has 171 billionaires with combined wealth of £684bn. The richest 1% of the population has more wealth than 70% of the population combined. The richest 10% of households hold 43% of all wealth, and the poorest 50% own just 9%.

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https://leftfootforward.org/2024/03/the-labour-party-must-not-follow-tory-economic-policies/