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We cannot rely on George Osborne to push Labour into power – we should be much further ahead

August 23, 2012 10:50 am

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The Coalition government’s economic strategy appears to be deteriorating by the day but we cannot rely on George Osborne to push Labour into power at the next General Election.  The latest borrowing figures show that public sector borrowing rose £0.6bn in July compared with a fall of £2.8bn a year ago.  The recent rise in borrowing was driven by lower tax revenues from companies and higher government spending, including on benefits.  Corporation tax receipts were probably affected by renewed recessionary conditions as well as a gas leak in theNorth Sea.  Last November, George Osborne had to scrap his ambition to meet his fiscal targets before the next election and instead committed to a further £15bn of unidentified spending cuts after 2016/17.  In such circumstances, it is no wonder that Labour is ahead in the polls but we should be much further ahead.  Coalition economic failures will not be enough to catapult Labour back into power.  Labour has to get it right on public spending to regain the full trust of the country.

Should we have any doubt about this we should look at how people view the ability of Labour to deliver in government.  The second thing we need to do is think ahead two or three years.

Ipsos MORI records this month that while there has been a slight reduction in pessimism about the economy, most people expect either no improvement or a deterioration in the economic outlook.  Yet YouGov recorded this week that the Conservatives and Labour are more or less level-pegging when people say which party would best manage the economy.  An earlier poll put the Conservatives in the lead when people were asked which party was most likely to take tough decisions.  For Labour, the context is that the financial crisis was our equivalent of the 1992 exit from the European Exchange Rate Mechanism.  That event undermined Conservative economic policy.  We can argue endlessly that by international standards the public finances were relatively healthy before 2008, as indeed they were.  However, Labour had allowed its economic credibility to erode in the run-up to the crisis while people were experiencing falling living standards.  Recent steps, such as the encouraging words about forming a national investment bank (as I advocated last year) are important.  We need to show that the belief that Labour cannot sufficiently control spending is unfounded.

If we look forward to the next General Election, there is a very tempting strategy for Labour to adopt.  It is simply to dust down the 1990s strategy and promise to follow whatever constrictive spending plan the Coalition/Conservatives propose, focusing instead on a battle about choices in public spending and maintaining that we will be fairer than our opponents.

This will not be sufficient.  Such spending choices might be important but they will limit our campaign to the micro policy level and concede the macro agenda to the other side.  What worked in 1997 cannot simply be repeated.  Besides, Labour spent years developing a reputation for prudence.  This time around, faced with an economy growing slowly at best perhaps and two political parties offering to cut spending, there is no guarantee that people will choose Labour. It is also unlikely that we will face a Conservative Party stuck rigidly to the current economic policy, whatever the rhetoric.  The good news is that our economic strategy is being run by people who saw a return to credibility last time around and know what it takes.  Ed Balls for example has been robust on refusing to reverse Coalition spending cuts across the board.

Today, Labour needs to convince people that it will not only prevent spending getting out of control but ensure future spending is effective.  Stella Creasy was right to say we need to review all spending.  Labour needs to make an extra effort to show we will be a wise steward of peoples money.  That is not the same thing as saying we will bind ourselves to Conservative/LibDem austerity.  It must mean some sort of guarantee that spending will deliver and that spending that does not produce results will be cut or focused elsewhere. It would have to come with the promise of independent monitoring, probably by a beefed up National Audit Office.  Such an Effective Spending Guarantee should be a major pledge at the next General Election.

Stephen Beer is author of The Credibility Deficit – how to rebuild Labour’s economic reputation and is an investment manager at the Central Finance Board of the Methodist Church.  This article represents his personal opinion.  He blogs at www.stephenbeer.com .

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  • AlanGiles

    Stephen: I think the main reason Labour isn’t benefitting from the absolute disaster that is the Coalition, is that there is a perception that all three main parties, by and large, are following the same prescription. They don’t see it working now or anytime soon, so it is understandable that if Labour continue to be cautious – basically offering a milder dose of the Coalition meidine – the public will continue to feel that there is little difference between the parties.

    You have to give the public hope, you have to stop scapegoating benefit claimants. It is not a good idea – as one LL writer did last weekend – to start a “them and us” scenario where the “baby-boomer” generation were painted as greedy and selfish at the expense of the young.

    Ms Creasy asks for a review of all spending. I don’t disagree, but when we examine defence, please don’t ever let us forget the waste – in both human lives and money – that our Iraq and Afghanistan adventures cost us – and are still costing us, in all meanings of the word

  • Daniel Speight

    Or maybe instead of all this hand-wringing and doom-laden cries by the Sainsbury elite we need a little more passion for an FDR-like response.

    • http://twitter.com/_DaveTalbot David Talbot

      Oh good Lord, change your tune Daniel.

      Good article, Stephen, and I wholeheartedly agree. This, in particular, caught my eye:

      “For Labour, the context is that the financial crisis was our equivalent of the 1992 exit from the European Exchange Rate Mechanism.”

      Great line, and very true. There has got to be an acceptance, wilfully or otherwise, that Labour cannot commit to the spending levels we saw ’99 – 07. They were unsustainable and, moreover, Labour wasted vast swathes of the public purses’ money.

      It may be hard to shallow but the British public are two steps ahead of the Labour party at the moment; they don’t like the cuts, they don’t want the cuts – but they accept they need to happen. Spending money prudentially, not just how much of it you spend, categorically is not a right wing ideal.

  • trotters1957

    There is a lot that can be done that is both populist and necessary without spending too much money or increasing the deficit.
    QE needs to be used creatively rather than as a way of increasing the bust banks profits and improving their balance sheets. “Helicopter” funding was Milton Friedmans last ditch prescription in the type of liquidity trap we have.
    Increased Corporation tax on the monopolies, supermarkets, gas, electricity, water, oil, railways, banks et al. The more they rip the British people off the more CT we would get back.
    This government are ideologically and intellectually challenged, Labour aren’t and need to be creative (eg car scrappage scheme).

  • http://www.facebook.com/people/Mike-Homfray/510980099 Mike Homfray

    The evidence is that the Tories are very, very unlikely to ever drop below 28% at a general election. That is their core vote. It is ever more concentrated in seats they already hold in the south of England, where people generally agree with their agenda, largely because they are the people who are least affected by the consequences.

    This article makes the false assumption that we should be gaining many of these voters and so have to offer policies to attract them. 
    Whereas we will not be gaining them, and don’t need to

  • http://profile.yahoo.com/JNCTPY54L5PWVMREGWZ7GXGRLY stuart

    Well done.
    I have thought it strange that being against running-up a debt that will cost more to service than the Education budget is been seen as ‘right wing’ or ‘Conservative’, and being in favour of running-up a debt that takes increasingly more money away from public services is seen as being ’left wing’.
    You don’t have to be a Tory to think ‘How are we going to pay for this?’

  • http://twitter.com/waterwards dave stone

    “all three main parties, by and large, are following the same prescription.”
    Broadly speaking this is my perception.

    Much of the current debate presents a contrast: austerity or/then growth. But, thinking beyond the immediate crisis, are the two approaches really that different from one another?

    How can we have growth (enhanced profitability) in a globalised environment without embarking on a rush to bottom in terms of conditions and wages? And if the rush to the bottom is accepted as a precondition for growth then, for the electorate, the experience will identical to the misery experienced by population of Greece.

    As far as the 99% are concerned, one may as well say: growth means austerity.

  • Daniel Speight

    Keep digging that hole David.

    Do you really not see that cutting your way out of a recession doesn’t work? Do you really think it was spending that caused that this recession rather than an under-regulated banking sector?

    It’s not working David so why should Labour also promote Tory austerity policies? Coming up with policies to balance government spending to tax receipts can wait until after we get the kids into jobs.

    • http://www.facebook.com/people/Mike-Homfray/510980099 Mike Homfray

      Agreed. And the last thing we need are MP’s like Stella Creasy promoting solutions which just make us look like a pale copy of the coalition. You can be aware of the need to provide efficient services without a full review of all spending (and language which suggests even more cuts)

      • jaime taurosangastre candelas

        The problem for you Mike is that the man or woman “in the street” can actually quite believe in the logic of the tories approach.  Spend too much in the past = need to spend less in future.  It is a narrative they understand when there is so much month left at the end of the money.  Whether or not the tories are making things up, the narrative took hold.

        And against that, Labour won’t say anything specific, other than to say “no more cuts”, which is in man-on-the-street terms, the same as saying “borrow more”.

        Until Labour can reinvent the laws of mathematics, at least in the public eye, you will have a problem with your approach, even if it is brilliant and wise and will get everyone out of trouble.

        • Brumanuensis

          Jaime does make a fair point, Mike. The concept of ‘living within your means’ is far more comprehensible to a layman or woman, than the idea of ‘multipliers’ and ‘liquidity traps’.

          • jaime taurosangastre candelas

            I would hope it is more than a “concept” Brum, it is to my mind a reality.  Just imagine if not only individuals but also Governments did:  there would be no need at all for such things as “multipliers” or “liquidity traps”, and they would disappear, at least in terms of discussing public finance.

            My mother has a phrase:  “if you cannot afford the bus, you cannot afford to go into the city to buy a wool scarf, and you can make a scarf from wool you buy in the barrio“

          • Brumanuensis

            I do try and structure my personal finances along the lines of ‘never a borrower nor a lender be’, but I also recognise that if my preferences were adopted by everyone, the economy would come juddering to a halt. Classic case of the paradox of thrift.

      • Daniel Speight

        Of course what the austerity advocates fail to mention is that deficits are also due to the lowering of taxes on the wealthy and corporations since the late seventies. Maybe instead of promising to cut welfare out of the state they should be cutting tax breaks for those that don’t really need it.

        The American economist Jeffrey Sachs certainly sees a balanced budget being a goal by repairing the damage done to the taxation system during the Reagan years and under subsequent governments in his book The Price of Civilization (a very worthwhile read).

        Then again I doubt Sachs is arguing for the balancing to be done in the middle of a recession.

      • http://twitter.com/renieanjeh Renie Anjeh

        Mike, how does it look like the Coalition? All spending should be reviewed and there should be a public value test on all areas on spending because we want to get 100% value for money in public services. Surely we should be supporting that.

  • PeterBarnard

    David T,

    Labour’s spending levels between election in 1997 and the onset of the great financial cock-up were not extravagant :

    (i) the average for Total Managed Expenditure for the years 1997-98 to 2007-08 was 39.0% of GDP ;

    (ii) in 1999-00, TME at 36.3% of GDP was the lowest recorded since 1967-68 ; the six lowest levels of TME (% of GDP)  since 1967-68 were recorded under Labour

    (iii) the lowest level that Margaret Thatcher achieved was 38.9% of GDP in 1988-89 – Labour was lower than this in its first six years, and its average for the first eleven years was just a smidgin above this;

    (iv) TME was 39.9% of GDP in the last Conservative year. Labour was lower than this in its first seven years and, in 2007-08, was just one % point higher (at 40.9%).

    Labour = “tax and spend” is just not true for the majority of its years 1997-2010.

    Public Finances Databank (HM Treasury), Table B2 refers.

    • http://twitter.com/waterwards dave stone

      But why allow facts to get in the way when there’s ideological axe-grinding to be done.

      Labour’s Hard Right share the fundamentalist habit of mind found in the Trotskyist Left – they deserve each other.

      • http://twitter.com/_DaveTalbot David Talbot

        Well you’d know Dave, eh? I still remember your gushing over Galloway, don’t forget.

        • http://twitter.com/waterwards dave stone

          Come, come now David, here’s the evidence for “gushing”:

          Me [commenting on a post by Mark F. titled 'Could we lose Bradford West*]: “I saw a clip of George Galloway (an ex-manual worker) making a speech while campaigning for this seat. He described himself as Real Labour.
          It made me think: if New Labour was a party where check-out operators and nurses were considered deserving of the same opportunities as London lawyers then it would be worth voting for.”
          Your response: “Of course, Dave, you have conveniently overlooked Galloway’s history of rampant anti Israeli comment, penchant for whipping up racial tensions, inciting the murder of British forces, his alliance with various murderous dictators and his (only alleged, of course) siphoning off of Iraq Oil for Food funds. 
          But at least he’s an ex-manuel worker and “real Labour” – huh?”
          Now, what was I saying about having an ideological axe to grind…
          *http://webcache.googleusercontent.com/search?q=cache:KX9CswL_L5QJ:labourlist.org/2012/03/could-labour-lose-bradford-west-tomorrow/+&cd=1&hl=en&ct=clnk&gl=uk

      • PeterBarnard

        Unfortunately, Dave S, Labour’s quite respectable public finances record prior to the mayhem that was let loose in the financial markets has been drowned out by the hysteria generated by the Conservatives and their friends in the media and the City regarding the DEFICIT.

        Labour’s record wasn’t helped by comments such as ”cuts worse than Thatcher” and “no money left.”

        Your second sentence – I can’t really comment except to say that ideology is a poor guide, wherever it’s found.

    • http://twitter.com/_DaveTalbot David Talbot

      Um. Okay. So, I take it, all those successive Labour boasts of “investment” were a myth then?

      Because how I interpret the data is that between ’97 and 2007, prior to the financial crisis – the UK had the 2nd largest  increase in spending as a share of national income out of the 28 industrial countries for which we the IFS had comparable data for. In fact, over the period from ’97 to 2010 – including the crisis – the UK had the largest increase. This moved us from having the 22nd largest proportion of national income spent publicly in ’97, to having the 6th largest proportion spent. That’s quite, a Labour-driven, increase.

      This is of course not necessarily a bad thing. Our public services, and the state and its infrastructure, was crying out for capital investment. It’s just that Labour became intoxicated on spending, driven by Gordon Brown’s desire to constantly say he had increased spending by “x billions”.

      Money, well spent, is not the problem. But we as a party became fixated on spending money as a means in itself, not as an ends to a mean. We wasted billions, billions that could have been much, much more wisely spent or, even, saved.

      • Brumanuensis

        Yes, but the proportions within that headline amount will have changed quite considerably, relative to the 1980s and early-90s. Spending on out-of-work benefits and defence would be lower and spending on social services much higher. What Peter has rightly pointed out is that the pre-crisis financial picture was far from catastrophic. The deficit had been falling for two years prior to the onset of the financial crisis.

        Where, specifically, do you think we wasted money, David?

        • http://twitter.com/_DaveTalbot David Talbot

          The waste inherent in Gordon Brown’s Tax Credits, for one example, was obscene.

          By all means people can believe, and fight for, a Labour party that is purely about ‘spending money’ (though, in a time of austerity, surely that has got to change) but what I can’t get my head round is why some people never seem overly bothered on the strain on the public purse. It is solely about being able to say ‘well, we spent x millions’.

      • PeterBarnard

        To be truthful, David T, I don’t take a lot of notice of international league table comparisons (who was it who remarked that “comparisons are odious?”), and I don’t take a lot of notice of  rhetoric from any politician, of any party.

        It’s also difficult to debate that “Labour became intoxicated on spending” (more rhetoric) except to say that the public record up to 2007-08 shows that Labour had a grip on the public finances in the historical context. Public sector net debt had also been reduced from an inherited 42.4% of GDP to 36.7% by 2007-08.

        Politicians, the media*, the City and Uncle Tom Cobley an’ all became mesmerised by the DEFICIT, and ignored the real measure – public sector net debt as a proportion of GDP – and in  a historical context, this was not at a troublesome level.

        There was also more rhetoric about “landing our children and grandchildren with our debt.” The British government has been in debt since 1688 and every generation has been paying interest on debt accumulated by previous generations. Because our government is able to roll over debt, we are still, effectively, paying interest on debt that financed the Napoleonic Wars (and earlier wars, come to that).

        On the actual level of interest payments, no-one ever points out that gross interest payments by 2009-10 were just 2.2% of GDP (and had been as low as 2.0% of GDP in earlier Labour years). Net interest payments were just 2.0% of GDP in 2009-10 (IFS). Net interest payments have been a lot higher in the past, in a range of 3-4% of GDP .

        For 2016-17, IFS is forecasting net interest payments of 2.8% of GDP (and gross payments of 3.4%). Again, in  a historical context, these should not be troublesome, ie we have been in “worse” positions.

        The British people have been misled on our actual situation (ie it hasn’t been placed in a historical context) and the Coalition has used the DEFICIT for naked ideological purposes. Some Labour politicians, wanting to appear “responsible,” panicked and have been worse than useless, and have joined in.

        * Sir Samuel Brittan excepted ; in a historical context, Lord Macaulay would not have been “mesmerised” by our current situation.

  • http://twitter.com/redrenie24 Renie Anjeh

    Stephen is right but we should go further. Dan Hodges and I argued for a Five Point Plan for Fiscal Responsibility so time back: http://blogs.telegraph.co.uk/news/danhodges/100159115/labour-cant-magically-wish-austerity-away-and-theyre-going-to-have-to-admit-it/
    Though, the Tories and Lib Dems have lost economic credibility, we need to be well ahead. We need to start winning back people who we lost in 2010 and 2005. Stella Creasy’s intervention on putting all public spending under review in a public value test is right and should be seized upon by Ed Balls immediately. I also think a tougher OBR which is like the Congressional Budget Office in the USA, with powers to put traffic lights on spending as well as monitor the costs of individual legislation should also be adopted as been proposed by the ‘Black Labour’ people, Jacqui Smith, Jeremy Miles and David Miliband. Also, looking at the idea of individualised tax receipts but also including all taxes and tax credits in the receipts not just income tax and National Insurance so that people can have a very clear picture of how their money is being spent. Labour should also proposed balance budget legislation. Not only will it dispel the myth that we’d ’tax and spend’ but it will show that we will control the deficit. A form of balanced budget legislation should be what Kitty Ussher proposed by making it illegal not to save surpluses in times of growth, which actually is a Keynesian policy. These are things we should look at. 

    • Brumanuensis

      Balanced budget proposals are never a good idea. It is one thing to want to try and avoid excessive deficits, but there is no need to precisely balance a budget each and every year and trying to do so will cause more harm than good. It also raises questions as to what measure we’ll use for ‘balancing’ a budget. Do we include infrastructure spending, which may have long-term benefits? What about some forms of investment – like housing – that tend to have naturally positive ‘multiplier’ effects?

      The other problem is that makes policy ‘reactive’ rather than ‘pro-active’, during an economic downturn. If you have to wait for a recession to begin, or for one quarter of negative growth, you have to spend more money and wait for longer, to see the positive effects of counter-cyclical spending come through. Think of it like waiting for a tyre with a slow puncture to completely deflate, rather than getting the puncture dealt with when you first notice it.

      I do agree with you, Renie, about the CBO. However even the CBO can be ‘gamed’, as Paul Ryan’s ‘budget’ shows.

      • jaime taurosangastre candelas

        “Balanced budget proposals are never a good idea.”

        They are if implemented over an economic cycle, which is what all sensible people try to do.  They are more than a good idea over the economic cycle, they are fundamental to having an economy with a future.  Of course, to do that effectively, the definition of what is an economic cycle should not be wilfully changed at no notice in order to bribe some sub-element of the electorate, nor should regulation of financial institutions become ever-lighter in order merely to encourage short-term tax receipts.  

        The alternative – a “never balanced budget” – is the economics of the mad house.  Is that what you are seeking?  It does seem to be a concept that both Labour and the tories like, and look at the mess we are in

        • Brumanuensis

          Yes, but Renie appears to be propsing them on an annual basis, which is what I was critiquing. Ideally, you would try and balance out a budget over an economic cycle, but ‘balancing’ in a public finances sense is not the same as ‘balancing’ in a household sense. It does not require you to strictly spend your income only. As long as GDP growth exceeds the amount added to the national debt, public debt as a share of GDP will fall. This is how the United States, despite only very infequently balancing the Federal Budget between 1945 and 1980, reduced the national debt from 120% of GDP, to around 30% of GDP.

          If you want an illustration of where running a budget deficit during a time of economic growth is a bad idea, the US economy between 1966 and the early-70s, is a good example. The economy was at full capacity, but heavy borrowing arising out of the Vietnam War created rising inflation. But the UK is not currently in this position, nor has it been in that position for the last 100 years or so. Keynes, of course, famously thought that a deficit-financed war effort would prove disasterous, so he encouraged ‘forced savings’ instead.

          The problem, Jaime – and I know this will sound very patronising, so please forgive me – is that you are thinking of public finances as if they were your own personal finances. You or I have to pay back our debts at some stage during our lifetimes, including the gross amount we borrowed. Governments never actually pay back their debts – with a few very rare exceptions. What they do is continually re-finance their debt by rolling it over. Because a state is effectively immortal, this means the government may reduce its stock of debt as a share of economic output, but almost never will it actually reduce the actual amount of debt. This is why focussing on the fact that the UK has £1 trillion of debt, is irrelevant. What matters is what proportion of our economic output – our ability to pay – that figure represents.

          Only a fool wants to run large deficits forever. But it is equally foolish to try and straight-jacket yourself into an artificial posture, purely for the sake of appearances.

          • Brumanuensis

            One thing we could use, if we were deficit-constrained, is a balanced-budget multiplier, as Robert Shiller – whose book ‘Finance and the Good Society’, I’m currently reading, sets out here: http://www.nytimes.com/2010/12/26/business/26view.html?_r=3

            For the more theoretically-inclined, Raghuram Ragan has a write-up here (a Chicago man no less): http://wps.prenhall.com/wps/media/objects/1310/1341480/ragan_econ_11ce_Ch22_topic.pdf 

          • jaime taurosangastre candelas

            Brum,

            tell your latter paragraphs to those living in the Weimar Republic, or Zimbabwe more recently.

            The problem is not debt (gross), it is deficit.  Of course there is linkage, but assuming a nation has not run up deficit to extreme levels, the time granted by the markets to sort it out is longer than economic cycles.  That is a difference from household to national finance, where deficit spending is normally only achievable for about a year.

            You probably mis-categorise my views as “household”.  I do not worry much about debt levels in my household – taking away the mortgage, we run a surplus, and even with the mortgage it is about -50%.  I worry more about cash-flow, as should everyone.  Negative cash flow is deficit spending, so long as you can get the credit.

            The problem is, Brum - and I know this will sound very patronising, so please forgive me – is that you are thinking of public finances as if they were different from your own personal finances. 

          • http://www.facebook.com/profile.php?id=671176264 facebook-671176264

            Jaime

            The fact is that the National Debt is better described as the National Equity, which it literally was until the Bank of England began to purchase stock (sovereign credit/equity) from the Treasury in 1694.

            So as Brum says, the UK government has nothing in common with a household: in fact it is analogous to UK Incorporated (but not UK Plc).

            Like all gold bugs and voodoo monetarists you rot out Weimar and Zimbabwe in support of your views, but in fact both are examples of fiscal – and not monetary – disasters,

            Weimar incurred massive liabilities in gold, and had its productive capacity hijacked, thereby removing the fiscal underpinnings of its money.

            Zimbabwe also saw its fiscal base destroyed by disastrous confiscation policies, and printed and spent money which had no fiscal backing. In both cases money printing was the effect not the cause. 

            To contradict Friedman, asset price inflation is everywhere and always a monetary phenomenon, and retail price inflation is everywhere a fiscal phenomenon.  But in fact recently we have seen commodity prices becoming financialised into an asset – through the phenomenon of ‘inflation hedging’ and correlated bubbles and inflation have been the result.

            Chris Cook

          • Brumanuensis

            Jaime,
             
            Neither Zimbabwe nor Weimar Germany are appropriate comparisons for the UK at the present time. Deficit-financed stimulus is usually only undertaken when the economy is at zero-lower bound, i.e. the ideal interest rate the BoE could set is negative – which is obviously impossible. In such cases, you have an incipient excess of savings which will not be mobilised unless, in effect, the government borrows from savers and uses the proceeds to encourage investment/spending from other actors within an economy. Weimar Germany actually resembles modern-day Greece, in that it was faced with an unsustainable reparations-burden imposed upon it by the Treaty of Versailles. To meet this shortfall, it printed money. The circumstances are somewhat sui generis. Zimbabwe is somewhat similar. No-one, not I nor any other Keynesian, thinks that borrowing is the be-all and end-all to every funding problem.
             
            I’m not sure I follow the argument in your second paragraph, but if you are arguing that the markets reward ‘discipline’, then I think the answer is ‘yes, but’, in that a country obviously has to display some initiative to reduce its deficit, but the importance attached to this particular rubric varies depending on the broader economic circumstances. At present, the bulk of the UK’s deficit has arisen from the consequences of the financial crisis of 2007-8, with its collapse in tax revenues and increase in spending. By attempting to pay down the deficit too quickly, the government has exacerbated the underlying weakness of the economy.
             
            I was not suggesting anything about your household finances, which I’m sure are as impeccable as you say they are. But I cannot stress enough how misguided it is to try and compare household and government finances. Like all companies, governments sometimes have to borrow for the purposes of long-term investment. Ideally, no government borrows to fund short-term shortfalls in a current spending budget. Sometimes this can be the lesser of two evils. But the broader point I’m making stands (see Krugman’s ‘Sam and Janet’ example: http://krugman.blogs.nytimes.com/2011/06/08/reposted-sam-janet-and-debt/).
             
             

          • http://twitter.com/renieanjeh Renie Anjeh

            No what I was proposing, which is what Kitty Ussher proposed in her pamphlet for Policy Network, was to make it illegal not to save surpluses in times of growth. That was my proposal.

      • http://twitter.com/renieanjeh Renie Anjeh

        Well we need to show the public we can be trusted on the deficit and proposing balanced budget legislation would not only out step the Tories on policy but also show that they are lying when we say we’d borrow too much.
        Infrastructure spending is something we should be done now but I am talking about the long-term on regards to the deficit. There is nothing Labour or nothing progressive about running up big debts and deficits because at the end of the day the poorest people will get hurt. Saving surpluses in times of growth, like they’ve done in Scandinavia, would be a very wise move.

    • AlanGiles

       With all due respect, Renie, you talk about the need to win back voters lost in 2005 and 2010 and then go on and endorse Jacqui Smith and David Miliband.

      A lot of the lost votes in 2005 was down to Iraq, which D Miliband enthusiastically supported (and might still do for all I know) and those in 2010 lost thanks to the antics of Ms Smith and her chums who couldn’t be trusted with their expenses. If only people like that were as keen on “prudence” in their own lives as they are on inflicting it on ordinary people.

      Smith and her celeric whatnot appeals to the City, and D Miliband and his great desire to make money, merely makes Labour look as if it has learned nothing from the past.

      The last thing this country needs is a return (or perhaps I should say a continuation) of the sort of right-wing rhetoric that has infested the party since 2003.

      • http://twitter.com/renieanjeh Renie Anjeh

        Thanks, Alan. I see where you are coming from but we will not win the voters we lost in 2005 and 2010 by moving to the left. A lot of voters left us in places like Peterborough and Croydon Central, not because of the war but because on issues like crime and they felt that Labour were not listening to their concerns on immigration, welfare and also Europe issues were we have been less comfortable. Iraq was important but Iraq is an issue of the past, the economy matters now. 
        I read Jacqui Smith’s article on Progress and she was talking about selling ‘responsible capitalism’ to the City which is a good thing. We want the City to embrace responsible capitalism, right? Many people want to make money, nothing wrong with that. Ken Livingstone wants to make money and uses private healthcare, too. David Miliband has still got a great contribution to make and we should welcome it. He is very popular in the party and in the country too.

  • Brumanuensis

    On a semi-related note, here is one more future fiscal challenge: http://www.guardian.co.uk/business/2012/aug/21/north-sea-tax-revenue-fall-treasury

  • Brumanuensis

    David, I certainly agree Labour wasted money. PFI, ‘Firecontrol’ centralisation, defence procurement – not even counting Trident renewal, and the national ID cards project are all low-lights.

    I suspect that attacks on ‘waste’ aren’t talking about those things though, but about new schools and hospitals. To ask the blunt question, considering the state public services were in, in 1997, would you have not spent the money? 

    • http://twitter.com/_DaveTalbot David Talbot

      Politically I can see exactly why Brown and Blair committed to the Conservative spending plans from ’97 to 1999. After 18 years in Opposition they desperately needed to convince the public that they were prudent (an old GB buzzword) with the public finances and, moreover, could be trusted with the economy.

      • Brumanuensis

        True, but Stephen’s article does argue against that view too.

  • Brumanuensis

    One more point: I’ve got quite a lot of time for Stella Creasy and her proposal wasn’t bad, in and of itself. However, the problem is that the long-term efficiencies required – in social care for the elderly and in health care – require large-scale up-front investment in the near future. What I suspect is going to happen is that we will try and ‘economise’, all whilst kicking the can down the road, and failing to make the improvements in provision that will save money in the long-run. The ridiculous prevaricating over Dilnot’s proposed reforms is a depressing case-in-point.

  • jaime taurosangastre candelas

    As a matter of enquiry, and I know that advertisements are targeted, does anyone else get the two advertisements on LL, one for investing more than £250,000 to secure a retirement, the other for leveraging £40,000 for only an outlay of £100 on gold futures?  They seem to me to be not well targeted at LL readers – perhaps Con Home.  

    I do look at the price of gold daily so it is in my browser history, but it is the last thing in the world I would do to leverage myself and there is huge risk in such an activity – not just because leveraging has a huge downside that may leave you bankrupt, but also because that particular company advertising is well known in the gold trade for having unbacked reserves (ie buys in gold to meet demand, and cannot react to a shortage or to a glut, and passes on these problems to investors).

    The retirement fund is also nonsensical.  After the last 5 years, who on earth would ever trust some City spivvolini with their life of savings?  It seems insane.

    • Brumanuensis

      We get endless adverts for events on at the Institute for Economic Affairs – a think-tank founded by Anthony Fisher in protest at Labour’s victory in 1945. I suspect the advertising is not targeted, but you’ll have to ask Mark for more detailed information.

      • Winston_from_the_Ministry

        It’s an Adsense unit. So the adverts it displays will be based on an number of factors and most likely different for each visitor.

        Factors will include: Browsing history, the device you are using, applications you have downloaded, information from sites partnered with google and inferred demographic information (e.g. your age, gender).

        You can opt out of it if you like using your preference manager: https://www.google.com/ads/preferences/?hl=en

  • http://twitter.com/_DaveTalbot David Talbot

    Still seems rather misty-eyed to me, Dave.

    I noted, at the time and since, that you never really bothered to engage with my comments re Galloway. Perhaps you just turn a blind eye to it all. But given his performance in the past few days, it is unseemly to even suggest he has anything to do with the Labour movement – “Real” or otherwise.

    • http://twitter.com/waterwards dave stone

      ”
      engage with my comments re Galloway.”

      Well, I suppose you want confirmation of your two-dimensional view of the world and have me launch a gushing defence of Galloway.

      But rarely can politics be reduced to such simplicity, and you should resist the ideological  impulse to make it so.

      In politics one should learn lessons at every opportunity. For example, you may not like President Obama but it was widely reported that social media was useful in securing Obama’s victory. Therefore, if one wants to win an election, one should consider using the same, regardless of one’s view of Obama.

      Do I really have to spell this out for you?

  • Brumanuensis

    Thanks Winston, that’s very handy information.
    So why do I keep getting ads for helping to quit smoking? I’ve never been a smoker. Oddities I suppose.

    • Winston_from_the_Ministry

       If you keep seeing them across a number of sites then it’s most likely just poor targetting.

      There’s no way an advertiser can tell if you smoke. Not 100%, so it may be related to your age range, a health related site you’ve visited or the activity of  someone else using the same computer.

      While Adsense is capapble of targetting down to the level of individual identity, the majority of adverts you see will be more generally or poorly targetted. It’s no Minority Report.

  • RoyBoffy

    What we need to focus on is reforming the system that caused the crisis, that is the lightly regulated financial “services” sector. It is hard to overstate the public anger at the sight of those who caused the crisis getting away with it whilst the rest of us, including particularly the poorest members of society, pay the price of reckless, greedy, cynical money manipulation. The financial sector needs to be rooted in trust and integrity – after all, the money at risk is not owned by the controllers of that money – not in short termism and personal reward. We need a clear distinction between investment for wealth-creation – that is, the transformation of the useless into the useful – and investment in financial instruments that all too clearly, now, result in wealth destruction – the transformation of the useful into the useless, for the personal benefit of those with the facility to salt away the returns in offshore havens. This is rentier capitalism on a grand scale, snatching out the wealth created over generations and returning nothing in its place. It is effective asset-stripping on a grand scale and it has to be stopped.

    Get this right and we’ll be in power for a generation. Focus on merely winning that semi-mythical and ever-changing “middle ground”  and “economic competence” and I doubt we’ll even win the next election. We have to offer much more than this -  a sense of a future worth having. Fundamentals need to come first.

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