I have a niggling worry about much of Labour’s current talk on the deficit. Whilst all the leadership contenders, and the Party at large, seem to agree that the coalition is cutting the deficit too fast and thereby risking the recovery, there is little agree (currently) on what Labour would propose instead. Debate is polarised between those who believe we should stick to the fiscal plans of the last government and a pledge to “halve the deficit in four years” and those who think any timetable risks constraining fiscal policy in an uncertain world.
There is of course a political element to this debate – many, see for example Hopi, argue that without a credible plan Labour will not be taken seriously by the electorate. As I’ve said before, I’m not in favour of a strict timetable – I’d prefer a more flexible plan to cut the deficit centered on growth, a greater share of taxation and more gradual cuts, as the private sector strengthens.
But my real worry is this – what if we are all actually right on the economy and Labour win in 2015. What sort of economy would Labour inherit? I’ve made my rough predictions of what the coalition’s plans will achieve by 2015, after 5 years of tepid growth unemployment will still be high – around the 8-10% mark, the economy will have suffered from a five year investment drought damaging its long run growth potential and crucially the deficit will still be in the region of 3-5% of GDP and debt levels would still be rising.
Would a Labour Party that has committed itself to tackling the deficit be forced to look at the situation afresh? Clearly there would be case for more government action, especially after the failure of the coalition’s cuts to either solve the problem of the deficit or to get the economy moving again. Surely it would be better to maintain a flexible position of “we’ll cut the deficit as the economy grows” than to have adopted a slogan of “halving the deficit in four years” and then be forced to drop that?
I’d like to suggest that Labour moves the economic debate of the deficit, clearly appears very hard in the short term but as the cuts bite and unemployment remains high it will become easier.
To get this started I’d like to hear the leadership contenders outlining their strategies for growth, their ideas to get investment flowing in the economy again and their notions of how to create jobs. I’d be much happier if Labour spent the next five years articulating their growth plans and vision of the economy then if we spent the next five years haggling over which departments should face the axe.