In the black Labour and the concept of fiscal potentiality
I’ve read the opening salvo of a debate on fiscal conservatism by various authors for Policy Exchange, and it wasn’t as I expected it to be. Firstly it was value-free as far as social policy was concerned, and so was neither one way nor the other on the welfare system or the state stepping in when the markets fail or there is an absence of private sector demand – despite initial criticisms that it was Tony Blair reincarnate.
It is good to remember here that Blairism is a theory that will live a life even if Tony Blair the person was to say tomorrow that he was a born again Communist. Blairism is the word for what in Europe and beyond described third way, which was essentially fiscal conservative, but pursued a balance between state and private sector in a way familiar to orthodox Keynesians. Tony Blair and Gordon Brown, as the all-too-reminded criticism is levelled, spent over and above its means, particularly (with Brown) at the time of the financial crisis.
The authors of the discussion at Policy Exchange, rather than simply shouting cuts like the Tories did, are concerned that those lending money to the UK will want to know how that money is going to be paid back.
One of the arguments – convincing it was, too – against closing the budget deficit so quickly is that only few countries have been free from long term debt and they still operated fine. Remember this from Red Pepper:
Government debt never fell below 100 per cent of GDP between 1920 and 1960. It is only in the past decade or so that it has become normal to think of government debt being stable at around 40 per cent of GDP.
Which is fine, but it is no assessment on whether or not we should be, as a country, servicing our debt.
Strictly speaking the report wants to discuss whether we can achieve a progressive society and service our debt at the same time – and it is a good question to ask ourselves on the left. Because the question is not the relationship between debt and GDP, but spending and tax receipts. Not only does this kind of thinking remind us of how far we can build on good, socially progressive programmes that don’t cost too much (or waste, for which one has to admit there is. For what else is Trident or the Millennium Dome if not waste), but it should make what we lose in tax receipts all the more important.
One thing that seems interesting about fiscal conservatism is that it is necessarily conditional on the pot of money we have to play with. If we can only spend what we can bring by way of income, then things like tax evasion will mean all the world to us.
Tax evasion accounts for more than $3 trillion, or about five percent of, world gross domestic product, and the UK is losing £69.9bn a year to tax evaders. If we are to move into a more fiscal conservative economy, then we shouldn’t simply account this loss as evasion. It should be accounted as fiscal potential. The things which the state spends on, to improve lifestyles, is jeopardised by such evasion, and the campaign, I’m sure, to support country-to-country reporting will grow by leaps and bounds.
Yes, as the authors point out, fiscal conservatism is not right wing – and my clause to this notion is to suggest we look at tax evasion as fiscal potential, lost. It should by now be a political consensus that we gain and spend our potential national incomes.
Good point on tax evasion – and one whose absence from the paper is quite striking.
The other omission is any systematic discussion of the plunder of the public sector by its managers, their pet consultants and private public partnerships.
This costs many more billions and can best be addressed as part of a left austerity package (bring back Sir Stafford Cripps!).
A strict cap on public sector pay at the Prime Minister’s salary level, a single national pension scheme that banned all differentials between different grades of staff and so ended the plundering of pension funds by directors, a ban on bonuses for just doing your job, the closing down of all PFI schemes, an end to outsourcing etc could all be wildly popular and save £tens of billions.
BTW have you seen this?
http://www.newleftproject.org/index.php/site/article_comments/crisis_as_capitalist_opportunity
cheers for that – yah you’re right, the authors would bat it off by saying this was the start of the discussion, but certainly there is room enough here to mention these other important aspects of a fair society. The implication of mentioning the 45 Labour govt is to suggest that there is nothing inherently contradictory about fiscal conservatism and wide-reaching progressive politics. Things have changed, critics will say – and this is true – but one major thing that has changed is ways and means of businesses and individuals of escaping paying their fair share. But the rich pay the most tax, I can hear people say, but a fair tax should be based on rates of pay, not giving in to unpardonable blackmail. Capital flight is a myth and relatively speaking the UK is good to business, so let’s appropriate fair tax policies, clampdown on missing tax receipts, and make fairness and fiscal conservatism a reality.
How does “In The Black” compare with Murphy’s “Courageous State”?
Murphy’s Courageous state has about 100 solid pages of recommendations, “In The Black” has not a single word of recommendations other than spend within the means of our tax receipts. Murphy wins that toss, but then the authors of the latter would argue they are not playing the same game.
OK. But doesn’t Murphy also recommend “fiscal conservatism” (matching spending with revenues) in the long term? Is there anyone who doesn’t?
well precisely – who doesn’t. Though government spending is not spending on a personal credit card, it would great to think we could afford our lovely lefty things within our means. Surely we’d all like to be put paid of the right wing criticism that left wing governments, in order to have a statist paradise, must ideologically forego the fruits of the private sector for the strictness of near-monopolisation and inevitable debt (though, obviously, Murphy can get out of this as a Keynesian he favours varied fruitful, arms length private enterprise). I think the tricky thing would be to find somebody principally in favour of government’s not achieving surpluses. Though, and I don’t know why, possibly they might be in the RCP – where all the stupid ideas are.
RCP?
Revolutionary Communist Party
good piece