Why our approach to the economy is one every Labour member should support

Earlier this month, Labour’s Shadow Chancellor Anneliese Dodds shattered the glass ceiling in the world of economics by becoming the first woman to deliver the Mais lecture in its 43-year history. One of the most high-profile events of the year in the banking and finance community, she used her lecture to set out Labour’s responsible framework for a resilient economy and a better, more secure future for Britain. After the worst recession of any major economy, action to secure our economy, protect our NHS and rebuild our country cannot come too soon. 

A decade of irresponsible choices from the Conservatives left our economy on shaky ground, with many businesses and households teetering on the brink even before Covid hit. A quarter of UK households went into this crisis with less than £100 in the bank, 3.6 million people were trapped in insecure work, and the UK was one of the most unequal countries in Europe. That’s the cost of a decade of the Conservatives: a weak, unequal and unbalanced economy that meant some of the most vulnerable people in our society bore the brunt of this terrible pandemic.

The Chancellor has made things so much worse by calling this crisis wrong time and again. Instead of following the science, he’s followed his own irresponsible agenda – and that has cost jobs and livelihoods. Last summer, when virus rates were low and there was time to plan ahead, Labour called on the Chancellor to bring in a full Back to Work Budget focused on jobs, jobs and jobs again. Instead, he started to wind down economic support when all the evidence showed it was still needed, ignoring the impact of fears around the virus on how people behave.

Since then, he has consistently set up a false choice between the economy and public health, flying in the face of expert scientific advice and pushing against SAGE recommendations to lockdown earlier despite the much larger cost of imposing stricter restrictions further down the line. His constant chopping and changing on wage support has damaged the economy and created chaos in the middle of the pandemic. His failure to integrate a training offer into pandemic support, set out an effective long-term strategy to support businesses through this crisis and invest to support the clean jobs of the future will also harm our recovery and cause long-term scarring for no good reason. 

These mistakes have left us with big questions about how the country should be run, how we recover and how we face the challenges ahead. One of the things the pandemic has exposed is the sheer scale of waste and mismanaged spending by the Conservatives. As a member of the public accounts committee for five years, I was repeatedly amazed by the egregious overspends or eye-wateringly expensive procurement exercises coming out of government. The amount of money successive Conservative governments wasted before the pandemic would be life-changing for the communities I represent. And we all know what’s happened since Covid hit: tens of billions poured down the drain on outsourced contracts that didn’t deliver, dodgy PPE deals and a test and trace system that still doesn’t work. 

As someone who benefited immensely from the last Labour government’s education maintenance allowances (EMAs), I am often struck by the observation that only people who don’t understand the difference even a small amount of money can make in the lives of those who need it could ever spend it as badly as this government. So when the Shadow Chancellor made a cast-iron commitment to delivering value for money for the British people this month, it was because Labour understands that every penny wasted and mismanaged is a penny that won’t go towards securing our jobs, securing our high streets and securing our communities through this crisis and into the future.

That’s why Labour is serious about protecting the public finances. And it’s why the approach that Anneliese set out, so clearly and so thoroughly, is one every Labour member should support. 

One thing is for certain: there can be no going back to the economy we had before this crisis. A decade of mismanaged public spending, short-term decision-making and over-reliance on monetary policy not only weakened our economy but caused profound damage to our society. The Conservatives subjected the public finances to no less than 16 different debt and deficit targets over the last decade, yet they missed every single one.

Their irresponsible and inflexible approach damaged our economy, exacerbated inequality and concentrated economic gains in the hands of those who were already asset-rich. Now we’re in a serious economic mess, trying to rebuild from the worst recession of any major economy with a Chancellor who lurches from one last-minute decision to another and has landed us with a jobs crisis to boot.

Labour in government would take a much more long-term view.  Every councillor will know how challenging it is to make sensible decisions about resourcing vital public services when you only know a few months before the year starts how much money you will have to spend.  And yet the Tories have turned irresponsible short termism on funding decisions into an art form, setting ambitious targets designed only to deliver headlines, not services. 

We would look to introduce ten- and 20-year revenue and income projections for taxation and spending decisions. This is a responsible, honest and transparent approach to the scale of the challenge posed by the major issues we face – things that governments absolutely have to get right but are too often kicked down the road, like tackling the climate crisis and the future of social care. This doesn’t mean a fiscal strait jacket.

A ten- or 20-year horizon that goes far beyond the current electoral cycle would allow a Labour government to make the responsible investments for the future our country is crying out for. We support the principle of running a balanced current budget over the economic cycle – but we are clear that this must, critically, leave room for manoeuvre if we are affected by future shocks and allow us to be able to invest in a way that will grow the economy and make it more resilient.

A responsible government wouldn’t shirk the big challenges or the big decisions needed to meet them. And precisely because we understand that sensible investment is needed to meet these challenges, a future Labour government would do far more to ensure public money was spent properly. While the current government has wasted and mismanaged billions in this crisis without batting an eyelid, we think the public want to see their money spent well and spent wisely in the national interest. That’s what our cast-iron commitment is all about.

A responsible government should also have no qualms about telling people exactly how well their money had been spent and what it has delivered. At the moment, the OBR produces an economic and fiscal outlook twice a year that focuses on the level of public sector spending. But while the NAO produces several value for money reports a year, there is no single overarching analysis of how the government is delivering value for money for the taxpayer as a whole. We get a major focus on how much money the government is spending, and much less on how well it is spending that money.

In the Mais lecture, the Shadow Chancellor committed the next Labour government to inviting the head of the NAO to present a single report to parliament assessing the overall value for money of government spending based on the NAO’s work that year. It would respond to that report with clear commitments as to how we would improve the quality and effectiveness of public spending. Labour would also make delivering value for money a central part of the budgetary process, by ensuring that the effectiveness of public spending over the previous year becomes a core part of each year’s Budget.

After a year of last-minute, irresponsible decisions from Rishi Sunak and Boris Johnson, people are crying out for a grown up, responsible approach to this crisis. And they are desperate for the security that comes from a resilient economy – a good job, a reliable wage, a roof over their head and the confidence that comes with those things. The responsible framework that the Shadow Chancellor set out this month would deliver that resilience our economy so desperately needs.

We know that, by getting that right, we can rebuild Britain to restore pride and prosperity to every corner of our country. And more than that, we can give every family a secure future and make Britain the best country to grow up in and the best to grow old in. That can be more than a dream, but it’s on all of us in the party to win the next election and start making it a reality.