Matthew d’Ancona is correct to say in The promise and the threat (TNE #396) that Keir Starmer and Rachel Reeves’ fiscal rules will “as things stand” see a return to austerity and cuts in exactly the areas that the present restive, disillusioned, untrusting and easily disappointed electorate are craving to see improved.
Reeves makes much of her time working for the Bank of England. She should therefore listen to the advice of its former chief economist Andy Haldane, who in recent television interviews proposed that these fiscal rules should be “junked” for something more sensible that would enable the investment required in the economy. He also dismissed the idea that growth will somehow be conjured up to pay for such investments, comparing it with a visitation from the now distrusted “growth fairy”.
What is lacking in the growth debate is a clear explanation of what it exactly covers and where the demand needed is to come from. These shortfalls could be addressed were growth to be redefined as the increase in economic activity directed towards rebuilding public services and turbocharging a green transition. This must include ensuring retention and recruitment of those working in these sectors through adequate pay levels, and in the process will also boost the businesses connected with them. Labour could then credibly claim that it is increasing business opportunities whilst providing secure employment across the whole country.
Also, were Labour’s much-vaunted growth to be redefined, the transition could be funded substantially by a redirection of domestic savings. However, this will hardly be encouraged by Labour’s emphasis on foreign private investment. On the other hand, ‘savers for society and the planet’ could be the funding rallying cry that would improve people’s lives and decrease the insecurity felt by so many, whilst both undercutting the rise of populism and increasing the chances of Labour’s re-election.
Tax expert Richard Murphy has shown how to positively involve millions of UK savers in the transition by ensuring that all new Isa funds and 25% of all new pension contributions are invested in social and green infrastructure projects.
This approach could mean that eventually up to £100bn of funds a year might be made available for that purpose. Sticking to fiscal rules will be a Farage recruiter and must be ‘junked’.
