Stephen Beer > Economy > Getting a grip - why Labour's own growth plans must be radical

Getting a grip - why Labour's own growth plans must be radical

B getting a grip

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.

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The scope for government economic policy has narrowed, but something has to change.

Government, gilts and growth: the Bank of England's dilemma

Government needs to say will reverse or postpone tax cuts if OBR says not sustainable. Bank of England should improve its communications.

Chaos and credibility

Why the Bank had to restore order.

What will be the impact of the price cap on the economy?

What matters most is our economy's productive potential. We don't usually get something for nothing.

Inflation and UK economic policy: some (obvious?) things to expect

A sketch of where we are following recent data. Some investment and ESG questions.

Inflation, the Bank, and the government

The Bank of England's outlook in its August Monetary Policy Report was one of doom and gloom. It should ensure it is not captured by dated orthodoxy but ultimately government should act on cost of living crisis.

Inflation and interest rates: can we curb the cost of living without a recession?

Not an easy task given uncertainties, especially if energy and commodity prices do fall later in the year. Ultimately, radical economic reform required.

The shock of war: inflation and central banks

Central banks are struggling to head off general inflation while dealing with price shocks that will be negative for growth. They waited too long, which has made their tasks more difficult.