A response to Tim Montgomerie of ConservativeHome: The economy

July 30, 2009 9:24 pm

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ConHomeBy Alex Smith / @alexsmith1982

Hi Tim,

Thanks for your post earlier today and the invitation to engage on a series of policy matters. It’s great to be able to discuss the big issues with you in this exchange between LabourList and ConservativeHome. In the world of political blogs, we often gaze too intently at our own navels and forget that the real dividing lines are across the aisle.

I think those lines are particularly pertinent on the economy and our two parties’ approaches to dealing with the recession.

Labour’s proactive response – the £20 billion fiscal stimulus, quantitative easing, the VAT cut – has been widely applauded. Those policies, oft-derided by the Tories, have saved jobs and helped begin the process of rebooting the economy. Even the right wing press are beginning to admit that!

Just as importantly, those actions have also shown that, when people need their government most, it will act. This wasn’t big, meddling government; it was just good government, targeted government.

But as we know, these actions also do something worrying: they shift much of the pinch on our wallets to a point further down the line. That means, starting in 2011, public spending will have to be reduced, sharply and in a way that we are not accustomed to after years of prosperity under this government. So public sector net investment as a percentage of our national income will fall from 3% this year, to 1.25% by 2013.

As you point out, the line “Labour investment over Tory cuts” has troubled me for some time; it’s a line more suited to 2001, 2005 or even 2008.

But in 2009, it appears deliberately deceitful and doesn’t add value to the sort of politics I subscribe to. Whatever the Labour government has done to reduce the effects of the downturn today, it is clear that we will have to pay off our debts tomorrow.

A better response for a governing party would be to identify areas that seem extravagant during times of hardship – ID cards and Trident renewal are two examples that grate Labour supporters particularly – and ringfence critical and to my mind sacrosanct public services such as education, health, welfare and housing.

That’s my broad view of what Labour should do, and I believe it is something the Prime Minister will do, starting at conference if not before.

Next, you ask whether I agree that public spending cuts will be the main way in which we will return to a balanced budget.

Today, Britain has a budget deficit of nearly £100 billion. Our public sector net debt is at £798 billion compared with £641 billion a year ago. Things are not good.

But we continue to have a sound infrastructure for future growth and London remains of the world’s largest financial centre. I used to live in New York, and people there say “as long as this is a centre of global finance, America will do OK.” It’s the same here.

But we have to remember the real reason our economy is so important. It is not to create wealth for wealth’s sake; it is for the benefit of the people.

So government investments in green jobs and in skills are preparing us for that economic tussle with the emerging economies that will surely follow shortly after the imminent upturn.

Because of those things, I do not share your concerns that spending cuts are the be-all-and-end-all, or even the only part of the answer, and I do not share your concerns about brain drain, at least not yet. Our economy will recover and renewed investment will be possible after a period of recovery. Because of our georgraphy, history and dynamic culture, Britain will always be strong.

That said, you have to remember that I’m a socialist, and I believe in sharing wealth amongst all those who contributed to its creation, including teachers, nurses and cleaners.

So I would favour a small increase on corporations tax to help pay for the training and infrastructure investments, and I would also support bringing the inheritance tax threshold down to £250,000.

I would also like to see – in the longer term – the decriminalisation of soft drugs and prostitution – subject to regulation that will improve education and health measures on those tricky issues, and with a tax levied accordingly.

Second, I do not favour across the board cuts. Not at all.

I do not approve of sending 50% of young people to university. It’s a utopian ideal, but the government should remember that we need vocational training as much as academic training. When we are re-growing our economy, we will need plumbers and mechanics and builders more than ever.

So I would like to see more investment in early years learning and I would like to see the current upside-down pyramid of educational investment – with more money going to universities than early years – turned on its head.

And please, please don’t get me started on the Tory pledges on Inheritance Tax!

Finally, your notion that the political classes should share in the pain is quite right; our democracy will need to be realigned both in terms of parliamentary and voting reform and the cost of its provision.

But no, I do not want to see a reduction in the number of MPs. The MPs’ expenses crisis proves that we need more democracy, not less.

That said, if I were elected Prime Minister tomorrow, the first thing I would do would be to reduce my salary from £197,000 to the national average income of £27,000. I think Parliamentarians get enough of our money, don’t you?

Looking forward to your responses on these things.

Alex

PS – How do you set the tone for Conservatives in your comments sections? Should I cut loose the trolling on LabourList?

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