Labour conference 2011

I'm writing this on the train back from Labour's 2011 conference. This was the week when Ed Miliband was able to set out his stall to the country as Labour leader and prospective prime minister, which he succeeded in doing. I'd say the week saw the Labour Party build in confidence and become more sure of itself as each day went by. This was clearly seen in Ed's question and answer session yesterday afternoon, when he faced questions from members of the public outside the Labour Party.

The week began with questions and suggestions about how Labour will rebuild its economic credibility, not least from my Fabian Society pamphlet, Credibility Deficit. The pamphlet was launched at Conference and it was good to see it becoming a talking point with people stopping me to talk about it. Labour did take further steps towards greater economic credibility this week - a subject of another blog post - and there is more of this to do.

Stephen Beer, 29/09/2011

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Ed Balls' speech to Labour Conference

Ed Balls spoke today about the need for credibility in economic policy and a plan for growth.  The speech represented another step in the right direction for Labour - another step on a long journey.

Balls referred to the current economic and financial crisis hitting eurozone countries.  He talked about the need for growth.  He talked too about the need to control spending - and while in opposition, spending pledges.

I think we should go further, and have an Effective Spending Guarantee, with independent assessment of spending pledges to ensure they can only be sustained if they actually work and are value for money.

Balls made a welcome commitment to look into the case for a national investment bank for small businesses.  We should get on and work up proposals for this. The issues are how it would work and how can we make any proposal bold enough?

There were some welcome points on financial reform too, including tackling short termism.  I think we should go beyond the current conventional wisdom about bank reform and advocate separating banking activities.  Labour has more thinking to do on financial reform - it needs to get into the position of relearning to love the City - but a reformed City.

There is still more for Labour to do on the economy.  We need to understand what went wrong. We need to understand how values and priorities got distorted in the years running up to the financial crisis.  We can however start now to think about what a credible, radical, and progressive economic policy should be.  My new Fabian pamphlet, launched today, does just that.  It can be downloaded this week from the Fabian website at:

Stephen Beer, 26/09/2011

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Credibility Deficit

How to restore Labour's economic reputation

In this Fabian Ideas pamphlet, Stephen Beer argues that Labour’s economic credibility gap is wide but it can be closed.

The party entered the 2010 General Election campaign unable to explain its approach to the economy. It lost credibility on fiscal policy with financial markets and it lost credibility with the electorate because it did not answer the concerns of people faced with declining living standards and little decline in inequality.

To restore credibility, Labour should revisit its values: everyone should be able to participate in our economic life and inequality works against this. Applying these values will require Labour to take some tough decisions.

In 'The Credibility Deficit', Beer argues that Labour also needs to understand economic realities, including the power of the bond markets. Stimulus measures should focus on investment to raise the productive potential of the economy and, at the heart of what we are about, on employment. Labour must support – and learn to love – a reformed City with a refreshed reputation and understanding of the common good.

During Labour Conference week, you can download a copy of the PDF of this pamphlet here.


Stephen Beer, 25/09/2011

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Do we really know what the economy is doing?

Not long until GDP data is revised

I was reminded today that it's not long until GDP data is revised.  The Blue Book is published by the Office for National Statistics next month.  It will change the index used for the GDP deflator to CPI from RPI.  That might see some revisions to past estimates, as may any new data the ONS incorporates.  As others have pointed out, we may learn a bit more about how the economy has been recovering and may see some of our current assumptions questioned.

With markets driven often by each day's data release, we sometimes forget that it takes a while to know what's really going on.  That doesn't help policy-makers of course.

Stephen Beer, 22/09/2011

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Desperate times?

Central banks consider unusual measures - while credibility erodes from governments

The Federal Reserve announced today that it would operate a 'twist'.  It will sell short dated Treasury bonds and buy back long dated Treasury bonds.  This is in an attempt to flatten the US yield curve.  At the moment, the interest rates (or yields) on bonds of only a few years life are very low compared to longer dated bonds.  That means the yield curve, plotting yields against bond maturity dates, is steep.  The hope is that this operation, worth $400bn, will lower longer term interest rates and help kick start the economy eg through business investment.

It may be successful. It is certainly ususual. Much depends on overall confidence levels in the economy. You can have a situation where interest rates are very low but still businesses don't increase investment (driving growth).  That's the situation we have now. Demand levels in many economies are low.

In the UK, the minutes of the last MPC meeting published by the Bank of England today, indicate that the MPC believes further Quantitative Easing (creating money and buying assets eg bonds) is inevitable on top of the £200bn in the first round. That is, if conditions remain the same or worsen.

The impact of the eurozone and US debt crises over the summer is beginning to be felt in the economy it seems, with some indications that businesses are holding back on orders. Meanwhile, governments (and oppositions) around the world are facing their own credibility crises as increasingly investors doubt their resolve on debt and growth, and voters doubt their ability or willingness to act to improve their future prospects and living standards. In the UK, the austerity measures are increasingly under strain; pain with no gain is not a credible strategy. In such circumstances, political leaders worldwide need to take stock and see their way through the present turmoil by excercising political and market leadership.

Stephen Beer, 21/09/2011

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