A Blue (and Brown) plan for economic credibility, growth and jobs

Yesterday I said that there is an economic strategy out there that could be backed by both “Blue Labour” and Labour’s Treasury team – if they’re willing to reach out to each other and work together to deliver it.

You could write whole books or dedicate whole think tanks to this, but I’m going to try and give you the gist in just a few hundred words. So bear with me…

The fiscal responsibility bit:

For Labour to get a hearing on the economy, first we need to stop the bleeding. That blood is pouring out through a still weeping, scabby wound called “economic credibility”. That wound is nearly five years old now, and it runs the risk of being a sore that infects the whole body.

After everything Labour has said about the failure of Osborne’s plan and the need for growth, Labour can’t possibly accept Osborne’s spending plans. But to be ambitious in some areas of the economy, we need to hold down – or cut further – spending in some areas compared to the Osborne plan (with the exception of wages. Holding wages at a below inflation level for the poorest public sector workers would harm growth). That’s going to be fairly gruesome (don’t worry, there’s better news coming) but it will involve those “tough choices” that politicians are always rattling on about – as well as giving us permission to be heard on the economy. Which takes us to…

The attention grabbing stimulus bit:

There are numerous ways in which money can be pumped into the economy to produce growth. We don’t need to look back too far to see this in action either – back in 2010 this is exactly what Labour was doing, and healthy growth returned. Then the Tories pulled the stabilisers off the bike and the country went trundling into the gutter.

It’s fairly clear to those who have been watching the party closely what the kind of growth stimulating policies Labour will adopt. A significant house building plan is a no brainer – it brings growth, is a long term investment, calms the housing market, slashes the housing benefit bill and lowers unemployment. Oh – and there’s also the small matter of providing homes for families who thought they might never have a place of their own. It’s a no brainer – but will require significant investment.

Other policies that have a short term cost but which produce a long term saving – such as a compulsory job guarantee – are also likely to be funded at this point. Getting people off benefits and into well-paid (living wage or better) work also brings spending down too.

And finally, the Blue bit:

So far, so standard, right? So where does Blue Labour come in to the equation? Well, in a Britain where the vast majority of public sector budgets have been held down or cut further, we’re going to need some innovative approaches to service delivery and a radical rethinking of the relationship between the public and the state. A devolution of power and spending down to communities, relational welfare and the contributory principle are all likely to play their part.

This is what is currently on the table for what we might call Blue Labour and (Gordon) Brown Labour, if they wish to grasp it. It would give Labour a shot at winning the argument on the economy, stimulate growth, create jobs and build homes – all of which might help get such a strategy past party activists. And it would allow Labour to fundamentally reshape the role of the state. Additionally – this happens to be a strategy that has the backing of many close to Ed Miliband (and quite possibly the Labour leader himself).

This is what’s on the table for the party – if they’re smart enough to grasp it. Alternatively internecine internal warfare might take over. In which case we’ll lose, and none of this will happen. That’s the choice.