Getting a grip - why Labour's own growth plans must be radical
In my cover story for the Fabian Review out this weekend, I argue that a Labour Party serious about growth has to break with conventional wisdom and embrace radical reform if it is to succeed.
The political battle over growth plans should be about more than Liz Truss's risky tax cuts versus conventional economic policy. Otherwise we will be doomed to stagnation and failing public services.
The Bank of England needs to rethink too. It could undermine any government's efforts to improve the economy.
My key points are:
Because Brexit is so damaging to the UK economy, Labour has to really go for sustainable growth, beyond current expectations. Everything else depends on this.
Government is failing and needs reform. It will not suddenly become efficient because Labour wins a general election.
Labour gave the Bank of England independence but that does not mean it’s now working well. Independence needs to be reaffirmed but so does accountability.
My solutions include:
Tax changes that recognise market dynamics (radical for the Left), promote investment, and give everyone a 'citizen's stake' in the economic upside.
Key policies delivered by taskforces, procurement in separate departments, and an effective spending test.
Review the Bank of England’s time horizon for getting inflation down and the impact on fiscal policy of reversing Quantitative Easing.
It will be tempting for Labour to be conventionally prudent in contrast to Liz Truss's highly risky policy of general tax cuts funded by borrowing.
However, financial markets ultimately focus on sustainable growth: Truss economics will not get us there but neither will going back to doing conventional economic policy just a bit better.
The full article can be downloaded here.