Friday, 27 October 2017

How The Wheel Does Turn

The tentacles of austerity have been felt by people all over the country and every public-sector organisation has been affected, which is why a new approach is long overdue. Opposing the need for Labour’s economic policy today has become akin to denying man-made climate change; most experts agree it exists, while only a few fringe voices raise any semblance of doubt. In the last month alone, a chorus of Establishment voices green-lighted Corbynomics.

Beginning on October 10, the Office for Budget Responsibility (OBR) significantly lowered its estimates for the UK’s productivity, highlighting the extent to which Britain has become the sick man of Europe. As every business and investor knows, the impact of low productivity is low growth, as well as an increased trade deficit that eliminate the savings used to justify austerity, and a major cause of low productivity is chronically low business investment. 

Consequently, the OBR’s findings serve as explicit support for Labour’s proposed national investment bank, which would offer long-term patient capital investment to entrepreneurs. In the week following the OBR announcement, we saw the International Monetary Fund (IMF) call for liberalised countries to raise the highest rates of tax. Let’s remember, this is the same IMF whose loan to a Labour government in 1976 set the scene for the Thatcher era. How the wheel does turn.

The IMF report stated that raising the higher rates of tax would help combat inequality — a good in itself, but also a barrier to effective demand — without undermining economic growth. Yet more support for Corbynomics. But it doesn’t stop there.

As if the business establishment had co-ordinated its announcements, the next week saw the Confederation of British Industry (CBI) call on the Chancellor to “grow out of austerity.” The CBI said that increased productivity holds the answer to the crisis in public services and called on the state to play a role in the economy, specifically mentioning investment in research and infrastructure. And, you guessed it, that’s a Labour policy too.

In a final touch to this set piece consensus, the views of the CBI and the findings of the OBR were amplified by the secretary general of the Organisation for Economic Co-operation and Development (OECD), Jose Angel Gurria. In a speech earlier this month, he called for more radical action to tackle structural issues in Britain’s economy. I can only think that he must have Labour’s manifesto in mind. 

It’s certainly fair to say, as Jeremy Corbyn did in his speech to the Labour Party Conference, the centre ground has shifted. But most importantly the momentum is clearly with Labour. Regrettably, the government appears incapable of acting on any of this advice. Indeed, the Chancellor has said that Labour poses an “existential challenge to our economic model.” 

My response to him is you’re damned right we do, because your economic model is utterly discredited and broken. Seven years of austerity, declining real pay, the public-sector pay cap, haemorrhaging productivity and mounting personal debt shows one thing: the Tories are bereft of a plan. Having nailed their colours to the mast of neoliberalism, their ship is beached on the shores of nowhere, leaving decadent MPs to cannibalise themselves over Brexit. 

The centre has certainly shifted and the tide of history is moving in Labour’s favour. I have always said that Corbynomics is plain common sense, but it now seems to be permeating the thinking of the rarefied world of influential national and international business and fiscal institutions who are adopting it as the new economic orthodoxy.

I will be touching on these issues when I speak at the Labour Assembly Against Austerity this Saturday. I will also outline how local authorities can use powers to raise the finance needed to start reversing the impact of Tory cuts even before the country gets a chance to elect a Labour government.

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