Brexit on the ballot 

Facing this election, once again Labour faces the challenge of explaining clearly what it will do to promote a better economy. This subject cannot be avoided. Credibility is key. Yet this time it is linked, of course, to Brexit.

The United Kingdom’s economy has been performing better than many expected. Survey data suggests that GDP grew around 0.5 per cent in the first quarter of this year. The International Monetary Fund has caught up with the optimism and upgraded its growth forecast for this year. It now expects GDP to grow by two per cent this year. However this is still below the trend seen well before the financial crisis and forecasters expect a slowing in growth next year.

Regular wages are up 2.2 per cent on last year and inflation is 2.3 per cent, so already real wages are being squeezed. Inflation is expected by many forecasters to rise to around three per cent later in the year as the fall in sterling pushes up import prices. The Bank of England will be watching carefully to make sure inflation does not take hold beyond that. As far as the economy is concerned, it may well be a good time to call an election.

The wider story is that, as the Institute for Fiscal Studies has noted recently, GDP per person is not that much higher than just before the financial crisis. Inequality, of income, wealth, and opportunity remains stubbornly apparent. The government’s economic policy, despite the tweaks since the referendum, seems rather stale. Borrowing is projected to be billions higher than was expected a year ago, yet spending growth remains constrained and there is still no convincing growth strategy after seven years of Conservative rule. Recent growth has relied on higher levels of unsecured consumer debt, which is hardly a sustainable approach.

Without more investment and without a stable, pro enterprise economy, the UK will struggle to afford to pay for the increases in public spending it desperately needs. We can ill afford a Brexit but we certainly cannot afford the hard Brexit desired by the Conservative party. The Conservative vision – or lack of vision – for Brexit must be challenged extensively during this election campaign.

Though the election has come upon us earlier than most expected, in some ways Labour is in not too a dissimilar position than before the last election. A collection of popular policies has been announced. A fiscal rule exists, which in this case means we would no longer borrow to finance current spending within five years while being free to borrow to invest. Where we must part ways with the Ed Miliband years is to have a convincing and credible narrative about what kind of economy we want to see and how it will work for everyone.

We have to rise above seeing business as a means to an end. Our vision for social justice has to be integrated with a positive approach to finance and business. What counts more than a tax break for a small business is whether or not we really are pro (sustainable) business. Just how will we promote more investment that benefits everyone while Brexit negotiations are underway? What is our vision for a healthy, ethical, and growing City of London? Labour’s fiscal policy has to be knitted into every part of its economic policy and now linked to our vision for a socially just Brexit. One key mistake made last time was to reel out lists of well-received policies and then become confused that this did not lead to an electoral triumph. Let us not repeat that mistake, again.

This article was first published by Progress on 19 April 2017.

Progress, 19 April 2017, 21/04/2017


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