Causes to fight for: sustainable economic growth

By Mark Dominik

The need to address the UK’s £178 billion budget deficit has generated a great deal of press over the past year. George Osborne has repeatedly called for an “age of austerity” to reduce the deficit, with one-year pay freezes for public sector workers, deferral of state pensions, and the reduction of tax credits for the middle class.

While spending cuts and tax increases will need to be part of any credible deficit reduction plan, the Conservatives have neglected what is most important as we emerge from the deepest economic downturn since the 1930s: ensuring that we foster sustainable economic growth that can reduce the deficit, build a more diversified economy, and generate high-quality jobs.

Growth is critical for reducing the deficit. In the Pre-Budget Report, the Treasury forecast that GDP growth will pick up to 1¼% by 2010 and return to rates above 3½% in 2011 and 2012. Returning to these growth rates as quickly as possible will allow us to cut the deficit, while avoiding the most painful cuts to public services and increases in taxes.

As we promote growth over the next few years, we need to be conscious of what sectors it is taking place in, and how it is distributed geographically. In his recent speech to the Work Foundation, Lord Mandelson acknowledged that “for the past decade we allowed ourselves to become too over-dependent on the City and financial services for growth and our tax revenues.” Certainly, we should ensure that Britain remains a world centre of financial services. But we must be more conscious of promoting development in other industries, and in regions outside London and the Southeast. The Government’s renewed interest in industrial policy clearly acknowledges that, while we must avoid the mistakes of the 1960s and 1970s, Government has an important role to play promoting manufacturing, science, engineering, technology and skills.

Well-crafted growth policy has the potential to generate high-quality jobs. When we privatised industries in the 1980s, we didn’t spend enough time thinking about how to deal with the social consequences of these privatisations. As factories closed and whole industries moved overseas, millions were left unemployed. Many of them lacked the skills to access new jobs, or were geographically removed from the new centres of job creation.

As we go forward, we need to ensure that our economy and workforce evolve in tandem; that we generate jobs where people live at the same time as we train people to take up these new jobs; that we pay much more attention to upgrading our infrastructure, which is a key enabler of both growth and social mobility; and that government works closely with business and the third sector to set joint long-term goals for our economic development.

Clearly, we need to cut the deficit, but this can be accomplished most effectively and least painfully through economic growth. As the General Election approaches, Labour must forcefully articulate its plans to restore prosperity to Britain through well-crafted growth policy.