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What is Labour’s economic policy?

As I’ve noted, no one at all in the mainstream media or blog commentariat , left or right, seems to have any idea what Labour’s emerging economic policy actually is.  This is largely, I suspect, because there are two types of media commentator or blogger – those who do specific policy, and those who do politics.  The fact that Labour’s economics lies somewhere in between makes it very tricky for them.  Even academics seem to struggle with this level of complexity.  This is, perhaps, unsurprising, because I’m not sure even those who are actively in charge of developing Labour’s overall programme properly understand what’s going on.  And that includes Miliband.*

So as I try to keep up both with Labour policy development and with how it presents it politicially, I’ll try to help, putting it as simply as I can.

1.  The Labour hierarchy accept that they cannot argue for additional spending on an overtly Keynesian basis, even though some of them (especially Balls, I suspect) would like to.  They accept that they cannot simply talk about spending our way to recovery, because they then become too easy “same old Labour” target.

2.  Around eighteen months ago, the emergence of seemingly respectable body of thought, principally in the form of In the Black Labour, seemed to offer the Labour leadership a way forward.  Although it was  was painfully thin on detail about how social justice and fiscal conservatism might actually be melded in practice, it sounded good in theory, and the leadership stated to talk up ‘hard choices’ and the like.  Austerity-lite was born.

3.  But as the more serous work about what social policy under Labour might actually look like, it quickly became clear that  a fiscal conservatism in which every investment had to be matched by a saving somewhere else simply didn’t wash.   The pretty obvious reality – that it costs money to improve things – started to hit home.  so, for example, IPPR’s report on childcare started out as an attempt to work out how European levels and standard of childcare could be delivered by juggling current budgets, and ended up acknowledging that an additional investment of £5-7bn per year will be needed.

6.  Thus started the shift from an exercise in balanced budgeting – essentially the same as the Conservatives’ process bar the odd redistribution tweak –  to the emergence of investment-based budgeting, In which deficit spending (though it must never be called that) is justified on policy initiatives as long as there is evidence of payback in the longer term;  capital projects are still preferred, because they are easier to sell as investments, but revenue is ok if it can be justified in these terms.   So, for example, Twigg is now all for a big school refurbishment programme when Labour come to power, but there are also hints of additional revenue spending.

7.  By early 2015, this budgeting exercise will be done, department by department.  Spending promises will be made in ye olde Labour style, but always with the evidence rebuttal ready to hand when the Tories demand to know how we’ll pay for it.  “Because it will save us money on such in such in so and so many years, will be the ready-to-roll answer.”

Am I happy with this approach?  No, not excactly., but not principally because it fails to confront the Tories and the media on the one basic economic falsehood – that there’s a danger of bankruptcy if we spend too much.  That argument was lost by Labour – largely because it didn’t turn yup for the fight – some time ago, and winning the rematch would be much harder.

I’m not even that concerned by the lack of space within this piece-by-policy-pieced budgeting process to address simple economic facts around the need to drive up wages as a key to cementing recovery, and that the way to push that through fastest is via the public and third sector initially – there is still time for that to be resolved (at least in the second year of government).

What concerns me more are the unintended consequences of a budgeting process which takes, as its principal criterion for whether something is funded, the question of whether it will produce a saving to the public purse in the long run.  For here lie the seeds of a rampant managerialism which will put even New Labour’s target mania in the shade**.  Here, whole groups of people – the unemployed, teenagers, the elderly, those who live in Dpncaster, those who don’t have a train station – are defined by the extent to which they are a burden on the state, rather than on what obligations the state has to them.  And when you’re defined by the state’s experts as part of the problem, it’s not likely to end well.**

There are big problems with Labour’s economic policy, but lack of it isn’t one of them.  And it’s still better than the Tories’.

* Sunny’s re-headlining of my earlier piece for cross-posting was misleading in this respect.  I did not suggest that Miliband had a completely thought through plan; I was merely saying that he has managied the messy process fairly adeptly so far.

** Behind this unintended managerialism lies Labour’s greatest organisational failure; the failure to grasp the importance of policy implementation over and above policy making, and to recognise that what is implemented is always and necessarily at variance with policy as set from above.  I explored this at length some years ago, In a well-received essay.  And behind this failure, of course, lies the control of policymaking power by a narrow section of the party which has no understanding of the real dynamcis of labour – a problem for which the only real solution is the radical democratisation of the labour movement, which the leadership can either assist, or be subjected to.  Their choice.

*** You could be forgiven for forgetting, in this brave new world, that Amartya Sen and his focus on capabilities was all the rage just three years ago.

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