Worrying news on banking reform

Today’s FT reports that ‘Treasury officials’ are pushing for a three way deal between the government, the big banks and the independent Vickers Commission on Banking Reform – which is due to report on April 11^th.

As they report:

The move is aimed at forestalling a public confrontation between the banks and the commission, easing any possible tensions between the Conservatives and Liberal Democrats over banking reform, and smoothing the way for the reprivatisation of Lloyds and Royal Bank of Scotland.

This strikes me as big news – the independent commission hasn’t even published its initial findings and already the Treasury is talking about a ‘compromise’.

This isn’t the first time the Treasury has interfered either, as the Evening Standard’s City Commentator Anthony Hilton wrote four agos:

The Government offered to emasculate the Independent Commission on Banking as it tried to strike a deal on bank bonuses a few weeks ago. I am told it backed off only when Sir John Vickers, chairman of the inquiry, and his entire committee, Clare Spottiswoode, Martin Taylor, Bill Winters and Martin Wolf threatened to resign.

The row emerged in the last few days of frenzied negotiations around Project Merlin early in the New Year. A key objective of Merlin from the perspective of the banks taking part was to normalise relations between them and the Government. Thus the impression created by both sides was that the main area of discussion was bonuses and lending to small businesses.

It has now emerged, however, that the chief reason the banks took part was to lift the threat that Vickers’s commission would recommend a major restructuring of the banking industry which would have the potential fundamentally to alter how they do business and where they make their money.

It increasingly looks like the Vickers report will actually deal with some of the big issues around the banking sector. However last month I expressed some worries about how the government would react:

This is the same pattern we saw with Project Merlin, Osborne will do nothing to damage the resale value of the banks. Given a choice between a better functioning, safer system and a larger pre-election war-chest from the sales of RBS and Lloyds, he is taking the second option each and every time.

I’m rapidly losing faith that the UK will see any major banking reform after the Vickers Commission reports in September.

The news today makes me think I was right to lose faith.

Osborne – Maxing out the nation’s credit card

I have post up at False Economy on the outlook for household debt and how it is due to soar. An issue raised in Parliament yesterday by Chuka Umunna.

As I write there:

The household debt-to-income ratio (the best measure of how manageable the debt burden is) fell from 2007 until 2010. It is now forecast to start rising again. Osborne described pre-crisis household debt-to-income ratios as unsustainable – and yet the ratio is forecast to hit a new all-time high in 2015.

More damagingly for Osborne, the OBR forecast for June 2010 (pdf) – before his first budget – predicted that household debt in 2014 would stand at £1,718bn. But following two Osborne budgets that number has now been revised up to £1,963bn – an increase of £245bn. In other words as a result of Osborne’s policies the direct debt burden on UK households is set to increase by nearly a quarter of a trillion pounds in the next three years.

Back in June last year, before Osborne’s policy changes, the OBR forecast (pdf) that public sector net debt (government debt) would be £1,294bn in 2013/14. After two budgets and a spending review they have revised that (pdf) to £1,251bn – a reduction of only £43bn

Here we can clearly see the impact of Osborne’s changes over the next three years: public debt down by £43bn BUT private household debt up by £245bn – five times as much.

The chart below compares the OBR’s household debt to income ratio forecasts pre and post Osborne’s two budgets. As can be vividly seen, it was originally forecast to continue decling – but is now set to soar.

 

This is direct consequence of the decling household income noted by the ONS yesterday.

Households, as Osborne acknowledged yesterday, are in for a very tough few years – high inflation, tax changes such as the VAT hike, benefit changes and low wage growth. The only way they will be able make ends meet is by borrowing.

Osborne likes to talk about paying off the ‘nation’s credit card’ – the chart above suggests he is about to max it out.

Q4 GDP – Falling household incomes, a rising corporate surplus and a decline in confidence

Today we have the third estimate of Q4 growth for 2010, the headline figure is minor upwards revision from -0.6% to -0.5%. But underneath that are three worrying trends.

Disposable income.

“The fall of real household disposable income between 2009 and 2010 marked the first annual fall in real household disposable income levels since 1981”.

This speaks for itself – the first fall in real household disposable income in my lifetime (being a 1982 birth).

Corporate Surplus/Lack of Investment

“[Private non-financial corporations] Net lending was £22.9 billion in 2010 quarter four, following net lending of £15.6 billion in the previous quarter. For the year 2010, private non-financial corporations net lending was £70.9 billion compared with £56.7 billion in 2009.”

In other words the ‘corporate surplus’ of profits over investment rose further in 2010. Businesses are still not investing.

Confidence

“Real household spending and fixed investment growth both fell in quarter four, which may reflect weakness in business and consumer confidence and a moderation in the growth of real household disposable income.”

The sentence above really gets to the root of the problems – falling disposable income and a rising corporate surplus combined with falling confidence at the end of the year led to a fall in both household spending and investment.

Tackling falling incomes and unlocking the corporate surplus are the only way to generate sustainable growth in the medium term. The budget offered little on either front.

I agree with Nick…

… Nick Pearce that is.

The IPPR director has a superb post up at the IPPR blog on real wages and profits since the start of the recovery.

In Germany and the United States, real wages have grown. But in the UK they have fallen. The favourable performance in Germany is largely explained by its strong employment levels, both during the recession and into recovery, compared to high levels of slack in the UK and United States. German policymakers subsidised their employers to keep people in work during the recession, while labour market reforms have improved service sector employment overall. German and US inflation has been lower than in the UK, which also helps to explain the disparity. But as important, perhaps, in explaining the gap between Germany and the UK/US is that the European Central Bank did not have to resort anything like the same levels of quantitative easing (QE) as the Bank of England and the Fed. As BCA points out, the bulk of the cash in QE ended up in profits, rather than wages.
 
With hindsight, should the UK therefore have eschewed fiscal stimulus, loose monetary policy and QE? No – that would simply have deepened the recession and increased unemployment still further. Nor, given the fragile state of the recovery, is there a strong case for jacking up interest rates now.

But there is a strong case for ensuring that the inevitable pain of deficit reduction is more fairly shared and that policymakers spend more time worrying about how to increase real wages in the future. That is one of the biggest intellectual challenges faced by progressives in British politics. (my emphasis).

Regular readers will know that I agree with all of this. The real wage squeeze is become something of a theme for this blog over the past six months, while Nick’s (and BCA’s) views on how QE worked are in line with my own.

The only change I’d make is to say that QE could have been made more effective if it had directly focussed on supporting investment (possibly by capitalising a National Investment Fund).

The extent of the real wage squeeze was vividly demonstrated by James Plunkett over at the Resolution Foundation blog last week.

But the really bad news for living standards yesterday didn’t come from the Chancellor; it came from the OBR. Its revised projections for wages and inflation confirm that the squeeze on living standards is about to get a whole lot worse. As the charts below show, the OBR’s revisions since their November 2010 projections are striking and almost uniformly negative. Wages are set to rise much more slowly than previously thought. Inflation is set to be much higher, all the way through to 2015.

…

These figures put things into stark perspective when you consider that a 1 percent decline in real wages hurts the average worker by around £250. This year, average wage-growth is now forecast to be 2.0 percent and RPI inflation 5.1 percent – in other words, inflation is set to outpace wages by more than 3 percent. As the below chart shows, that’s a much worse scenario for living standards than was envisaged in November.

Nick Pierce is right that a focus on real wages is vital for Progressives in the coming months.

When discussing the wage squeeze it is worth bearing in mind the link between this and Britain’s over major economic problem – the lack of investment. As Chris Dillow has pointed out:

In recent years – before the crisis as well as after – firms invested less than they made in profits. I – P was negative. This tended to depress wages, by creating unemployment.

Policies designed to increase investment, should have the knock on effect of increasing employment and hence wages. Our two major problems – low investment and stagnating wages – are more closlely related than many seem to think.

To re-plug an old post: there is an alternative.

The German Model: Myths & Reality

One facet of the recent economic debate in the UK around policy and rebalancing that I’ve found interesting is the attraction of Germany to both the left and the right.

This is perhaps unsurprising, the ‘German model’ of export and investment led growth is exactly the model that many policy makers seem to be aiming for.

There has always been something of a fascination with ‘Rhineland Capitalism’ on bits of the British left (notably Will Hutton), but recently the right, perhaps thrilled at German attacks on ‘crass Keynesian’, is also showing a great deal of interest.

From the left, Adam Lent wrote an excellent article for the New Statesmen last year writing that:

George Osborne has a secret desire – to turn the UK into Germany. Look back at his speeches and statements before the election, and he makes it clear, with admirable clarity, that he wants to turn the UK into an economic mirror image of itself. His long-term vision is of an economy where exports outstrip imports, where the popular inclination is to save rather than indulge in debt-fuelled spending, where investment in the real economy is flourishing, and where, of course, the public finances are incontrovertibly sound.

Before noting:

Naturally, the Germans always had a healthy respect for free markets and competition. But one cannot overlook the central role that the publicly owned KFW investment bank plays in maintaining high levels of long-term investment. Nor should we ignore the role that genuinely bold skills policies and works councils play in ensuring competitiveness in export markets. Nor the role that a huge research body such as the Fraunhofer Institute plays in constant business innovation. No policies on an equivalent scale are likely to emerge soon from a government that seems pathologically averse to anything that might be judged interventionist or might carry a cost.

From the right, Tim Montgomerie has recently argued that:

If I had to summarise the philosophy of Osborne I’d say it was almost German. He’s fiscally conservative rather than a tax revolutionary. He’s suspicious of casino banking. He places a heavy emphasis on economic fundamentals like skills, high-end manufacturing, science investment and regionalism.

 

It’s strange how the left can look at Germany and note the interventionist approach, the skills policy, the state owned development bank whilst the right looks at the same country and sees an austere, fiscally conservative, export-powerhouse.

 Of course both are, to an extent, correct. The right chooses to ignore the extent of the German stimulus in 2008-2010:

Despite strong reluctance to boost spending and ambivalence about state intervention, Germany adopted the largest fiscal stimulus of all major European countries and the fifth largest in the G-20. In 2009, Germany’s total stimulus amounted to about $130.4 billion, which was almost six times as large as ostensibly statist France’s ($20.5 billion) in monetary terms and nearly five times as large as a percentage of GDP. This German strategy of “Keynesianism by stealth” prioritized tax cuts, subsidies to firms, and other masked measures that did not attract public criticism of public profligacy.

The left meanwhile is usually reluctant to acknowledge that much of Germany’s export competitiveness comes not from the active intervention, the fostering of SMEs and its extensive skills policy but from two decades of stagnating real wages.

Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany-never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels.

I’m not sure the British right are ready to sign up for wide spread fiscal activism and I’m reasonably convinced that the left wouldn’t support a two decade wage freeze.

There is certainly a lot to learn from Germany but, as ever, things are more nuanced than they seem.

(If anyone is particularly interested in Germany, I’d highly recommend the ‘Germany Seminar’ series on Crooked Timber  and the classic ‘Varieties of Capitalism’ book (which contains a chapter from Lord Stewart Wood) – first chapter available for free here).

Worrying News for Osborne from Moodys and Fitch

Whilst the media seem focussed on the welcome news of WPP’s return to the UK, the credit ratings agency Moodys has this morning fired a warning shot across Osborne’s bows.

Reacting to the news that growth has been revised down and debt revised up the agency has stated that: 

we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with a AAA rating

No imminent chance of a downgrade yet but certainly worrying news. Moodys’ own forecast for UK GDP growth in 2011 is 1.6%, marginally below that of the OBR.

Ratings agency Fitch has also warned on the UK’s outlook:

David Riley, head of sovereign ratings at Fitch, said yesterday’s Budget measures were fiscally neutral, after chancellor George Osborne re-affirmed the government’s previous deficit reduction plans.

He said: “If the economic recovery proves weaker than projected, future Budgets may require additional measures to ensure that the government meets it ambitious fiscal targets.”

Back in May 2009, when S&P (the third major agency) warned that Britain could potentially lose its AAA rating Osborne commented that is was “now clear that Britain’s economic reputation is on the line”.

It looks like our reputation is ‘on the line’ again.

Three Budget Thoughts

I’ve got some Budget reaction going up at False Economy today.

Three other points, which didn’t seem right for there:

- I claimed on Monday that ‘the wrong sort of inflation’ couldn’t explain ‘significantly’ higher borrowing. I’m pleased to say the OBR agrees. Table 4.18 tells us that higher inflation is adding £5bn to social security bills over the period, table 4.19 reveals that it will add £1.8bn to tax credits, 4.20 gives a figure of £1.6bn on public sector pensions and 4.21 shows £3.3bn on debt interest payments – for a ‘wrong sort of inflation’ figure of £11.7bn. Against borrowing revised higher by nearly £45bn.

- I rather suspect that the macro impact of yesterday’s Portuguese Budget, which was defeated driving Portugal closer to an EU ‘bail out’ will be somewhat larger than the UK Budget.

-  Finally, given that the OBR says the corporation tax cut will have ‘minimal impact’, I’m rather annoyed at the media giving a free ride to business leaders welcoming the tax cut and saying what a good thing it is.

If Osborne wanted to spend £1bn to increase growth there are much better ways to do this (higher public investment for a start) – of course this wouldn’t have gotten him the heads of the CBI, IoD and BCC praising him anywhere near as much today. A political rather than an economic policy.

Borrowing to be revised up & Osborne’s excuses don’t add up

Big news on the public finances in today’s FT. It would seem that the Chancellor’s Office has had their first look at the OBR forecasts and they don’t like what they see.

In an attempt to get their excuses in first, we have a front page story in the FT. A story which doesn’t seem to entirely stack up.

Ignore the ephemera about a ‘Learjet levy’ on private planes and the entirely expected news that the OBR is going to downgrade growth – the big news is that borrowing forecasts are being revised up.

Apparently this is because of the ‘wrong kind of inflation’. 

Normally one would expect inflation to help close the deficit  as incomes, and hence tax revenues, rose. But as the labour market is stagnant, wages aren’t rising whilst inflation linked benefit charges are.  

As the FT reports –“The combination will leave borrowing significantly higher than the OBR forecast from 2012 onward, even though tax revenues have exceeded expectations in 2010-11.”

So – growth down, borrowing up, but apparently this is due to the ‘wrong sort of inflataion’. I have three problems with this line of defence.

First – the fact that inflation is risising, earnings are stagnating and real wages are falling is not ‘new news’. It’s been obvious for sometime. Meryvn King made a major speech on this very topic two months ago. It seems odd that the OBR would haved just grasped this fact.

Second – as Mervyn King has noted one the major factors behind higher inflation in 2011 has been the impact of January’s rise in VAT. Osborne can hardly blame ‘the wrong sort of inflation’, when his own policy is helping to stir that inflation.

Finally – and we’ll know more tomorrow when we get the OBR numbers, but I’m not sure that higher inflation really can explain missing the borrowing forecasts.

Back in November the OBR forecast that CPI inflation in Q4 2011 would be  2.8%. The Bank of England’s latest median forecast is for it to be 4.2% in Q4 2011. So let’s assume that the OBR raises it’s CPI forecast by 1.4%. Is this really enough to explain a ‘significantly higher’ borrowing forecast? It seems unlikely.

Especially as this is just a one year effect, in later years the Bank predicts CPI falling back to 2%, something the OBR is unlikely to disagree with (to do so would be a major challenge to the Bank).

Can one year of 1.4% higher inflation make a ‘signifigant impact’ on the public finances?

To get some sense of the numbers involved, it’s worth looking back to the June budget when Osborne switched the indexation of benefits, tax credits and public service pensions from RPI to CPI, which was then about one percentage point or so lower. This saved £1.2bn in 2011/12, rising to £2.2bn in 2012/13, £3.9bn in 2013/14 and finally peaking at £5.8bn in 2014/15.

Presumably temporarily higher than forecast CPI will only really have a major impact on 2011/12 and 2012/13. Even if it cost 50% more than the CPI switch saved we’d still only be taking extra borrowing of £1.8bn next year and £3.3bn the next. This is hardly ‘a signifigant’ increase in borrowing.

Today’s Treasury briefing just doesn’t seem to stack up. What seems far more likely is that the OBR has concluded that the benefit bill is going to increase primarily because of higher unemployment and slightly because of higher inflation. The Treasury is, naturally, focussing on only the second part of this and getting its excuses in first.

We’ll know more tomorrow, but this strikes me as desperate stuff.

The Politics of Three Budget Scenarios

There’s an excellent article (paywall) in the FT today on how the OBR forecasts might change at the Budget.

Perhaps the key line is that “despite disappointing growth, tax revenues are stronger than expected, leaving 2010-11 borrowing likely to be closer to £140bn than the £148.5bn predicted in November.”

Growth is looking to be weaker than expected, but tax revenues are stronger than expected.

The two key calls from the OBR are going to be –

(i) Does it conclude that the recent weakness in growth is temporary or does it downgrade growth estimates for 2011, 2012 and 2013?

And

(ii) How much of the increased strength in revenues does it forecast to continue?

So we have three possible scenarios:

(1) As the FT notes the best case for Osborne would be for the OBR to conclude that the weakness in growth won’t last, but that the improved flow of tax receipts will. In that case the borrowing forecasts would suddenly look a lot lower, giving Osborne room for manoeuvre with tax cuts and other giveaways in 2013 and 2014.

(2) If, on the other hand, the OBR concluded that growth was going to be weaker and that the increase in revenues was temporary – then Osborne would be in trouble, suddenly his deficit reduction plans would require a great deal more tightening to achieve.

(3) So maybe what we should expect is the compromise option – the OBR could conclude that the weakness in growth will last, but that tax receipts will be stronger than expected – so we get lower growth but the deficit reduction plan is largely unaffected.

It’s worth thinking for a moment about the politics of these three outcomes.

Obviously the first would be a boon for Osborne and real problem for Labour – the OBR would both be vindicating his current approach and offering the chance for pre-election giveaways. The one upshot for Labour would be that if the OBR radically revised down borrowing forecasts there would be a stronger case for arguing that the pace of reduction was a political choice and a firm case for arguing for slowing the pace of spending cuts.

The second scenario would be a disaster for Osborne, and indeed the economy. Lashed to the mast of deficit reduction by his own rhetoric, he would presumably react by announcing further tightening.

The third scenario, possibly the most likely, is also the most interesting. Osborne would claim that his plans were intact despite ‘difficult world conditions’ (Libya, Oil, Japan, Eurocrisis) and seek to focus on the question of the deficit alone.

Labour would presumably respond that his growth forecast (and hence his employment forecast) had been cut and to talk mainly of ‘growth and jobs’.

In effect the two parties would both be claiming a victory and talking at cross purposes – Labour on the state of the real economy, Osborne on the structural deficit.

In the medium term it would come down to a question of what the public found more convincing and relevant to their lives – Labour’s message that Osborne has cut growth and increased unemployment or the Government’s line that they had dealt with a budget mess ‘inherited from Labour’.

Of course underlying all of this deabte is a fact that risks getting missed entirely from the public debate – tax receipts are outperforming despite weaker than expected growth. Surely this suggests that Labour’s plans (which rely more on tax than spending cuts) are more likely to succeed in closing the deficit than Osborne’s?

Some thoughts on the British Promise and the Politics of Productivity

In his speech to Resolution Foundation on the ‘Cost of Living Crisis’ two weeks ago Ed Miliband spoke of ‘the British Promise’:

Squeezed wages, squeezed prospects, squeezed aspirations.

That is why the British Promise, that the next generation would always do better than the last, is now under threat like never before

The phrase came up again at his press conference with Ed Balls and was mentioned in John Denham’s comments on the launch of Labour’s Business and Enterprise review:

“We need to build a different sort of economy; a high quality economy with quality jobs and a better quality of life. This means good jobs with good wages for middle and lower income families – and the British Promise – that we need to ensure the next generation is able to do better than the last.”

I suspect that like ‘squeezed middle’ it’s a phrase we’ll be hearing rather a lot in the coming months and indeed years. Which means it’s worth considering in more detail exactly what it might mean.

How can Labour aim to guarantee  a promise that each generation will be better of than the next will actually be met?

The answer no doubt lies in productivity. Re-reading the Miliband speech it’s notable that ‘productivity’ appears no fewer than six times.

Of course raising productivity alone doesn’t mean that the British Promise will be met, as Miliband himself acknowledges and as Stewart Lansley has demonstrated. As Lansley has written:

One of the principal consequences of this change in the power balance has been a rising gap between pay and productivity. While economic capacity has been rising at 1.9% a year over this 30-year period, wages have been rising by only 1.6%, a gap which has been getting even wider over the last decade. Between 2000 and 2007, productivity increased at almost twice the rate of real wages. It was this trend that has been the main cause of stagnant real earnings.

So really the challenge for Labour’s Enterprise and Business Review specifically, and for Social Democratic economic policymakers more generally, is two-stage. First, how can the government increase productivity and second how can it ensure that the gains from increased productivity are equally shared?

New Labour did focus on the first of these issues and achieved some success. As the LSE’s Centre for Economic Policy notes (pdf):

Raising UK productivity has been one of the main policy targets pursued by the Chancellor over the last ten years. There have been improvements in labour productivity both in terms of output per worker and output per hour worked, but a large gap remains. Overall growth of gross domestic product (GDP) growth has been mainly driven by increases in total employment and capital rather than large growths in efficiency (total factor productivity – TFP).

The CEP also suggests some answers to the first challenge – how to raise productivity: 

Recent evidence suggests that the factors behind the UK productivity gap include deficits in innovation, skills and management practices, as well as regulatory constraints in the retail sector.

Tackling these problems together is likely to remain a challenge.

However there has been relatively little attention paid to the second question – how to ensure that the gains from increased productivity are equally shared. It’s important that Labour’s policy review pays just as much attention to this issue as to the first – a failing of Brown’s time in office was too much focus on simply raising productivity and not enough on wages.

The ‘Politics of Productivity’ are a complex business and have generated quite an extensive academic literature focussed on the 1940s and 50s in particular. Charles Maier has written that:

The years immediately after World War II provided American policy makers with a unique opportunity to help shape the international economic order for a generation to come. United States objectives are usually described in terms of enlightened idealism or capitalist expansionism. But much of the way policy makers envisaged international economic reconstruction derived from the ambivalent way in which domestic economic conflict had been resolved before and during the New Deal. In the inconclusive struggle between business champions and the spokesmen for reform, Americans achieved consensus by celebrating a supposedly impartial efficiency and productivity and by condemning allegedly wasteful monopoly. Looking outward during and after World War II, United States representatives condemned Fascism as a form of monopoly power, then later sought to isolate Communist parties and labor unions as adversaries of their priorities of production. American blueprints for international monetary order, policy toward trade unions, and the intervention of occupation authorities in West Germany and Japan sought to transform political issues into problems of output, to adjourn class conflict for a consensus on growth. The American approach was successful because for almost two decades high rates of growth made the politics of productivity apparently pay off. Whether an alternative approach could have achieved more equality remains an important but separate inquiry. (My emphasis).

This is an important point to bear in mind – much of the origins of a championing of productivity emerge from an historical comprise between labour and capital: better to work together for growth in order to raise living standards than to fight over the proceeds of a stagnant economy.

I have a lot of sympathy with that position, but we should always remember that it is premised on the gains from productivity increases being adequately reflected in rising wages – which hasn’t been the case in the UK since the 1970s.

Historically the ‘Politics of Productivity’ in Britain have never survived serious economic problems: 

Thus, a pattern is emerging. Depressions in twentieth-century Britain have typically appeared at the end of an extended period of sustained expansion. The economic pressures are perceived first in the City which reacts by calling for cuts in public spending and other measures to restore confidence in sterling.
Industry is also faced with the need to respond to market forces. The experience of this century suggests that British industry will also press for retrenchment by government even if the cost is the loss of some measure of State support for industry and the weakening of the corporatist structures in which business leaders had a considerable stake. Thus, by the time that depression begins to  hit employment (and changes in unemployment always follow changes in the  national income), there is a considerable climate of opinion which blames the  level of government spending and the level of wages (maintained in part by the  closeness of the unions to the centre of government) for many of the economic  problems. These opinions are exposed to an electorate which had become accustomed to annual rises in real living standards. The frustrated expectations among the mass of the population, which in other circumstances can be a pre-condition to revolution, are channelled in the British case towards economic liberalism and orthodox finance. During the three depressions of this century, organized labour has been in no position to offer a challenge to this movement. In the British context, therefore, ‘orthodoxy’ or ‘monetarism’ are the natural policies of depression.

Booth, A (1982) ‘Corporatism, capitalism and depression in twentieth-century
Britain’, The British Journal of Sociology 33 (2)

Finding a way to credibly honour the ‘British Promise’ is crucial to Labour’s message in 2015, it won’t be easy.