Tag Archives: stimulate

What lurks within the brain of the Bolsover Beast?

Dennis Skinner - Parliamentary straight-talker.

Dennis Skinner – Parliamentary straight-talker.

Here’s an interesting criticism that was made following VP‘s article on the Charter for Budget Responsibility.

According to its author, this blog’s observations – that Labour was perfectly able to support the Charter as it was presented to Parliament, because nothing in it was opposed to Labour’s plans – were inaccurate because Dennis Skinner voted against it.

It seems clear that this person was suggesting that Mr Skinner, paragon of Labour values that he is, was voting against the line taken by the party’s leaders because it disagreed with his own – traditional – Labour principles.

This writer would not wish to presume knowledge of the mind of the Bolsover Beast. However, a simpler explanation does present itself.

Labour supported the Charter for Budget Responsibility because it is worded in such a way as to seek a balanced budget by the third year of a five-year period, without suggesting when this period would start or end. The Charter does not attempt to restrict any UK government on its methods of achieving this, so Ed Balls made it perfectly clear that Labour was happy to support what was being suggested.

The Conservative Party would have won the vote, with or without Labour’s support, thanks to the slavish help of its Liberal Democrat thralls. It has been avid to put forward the impression that the goal can only be achieved by imposing £30 billion of spending cuts on the poorest people in the nation, with no other measures being used. That is what will happen if a Conservative government is elected in May – and it seems there are those on the social media who want you to think Labour has subscribed to this.

Those people clearly did not listen to the Parliamentary debate, haven’t read the record of it in Hansard, haven’t read the Charter itself or haven’t seen the Vox Political articles (this last is excusable as VP is a very modest blog).

As was explained at length in the debate (and also on this blog), Labour plans to reduce the national deficit by reversing the tax cuts conferred on our richest citizens by the Conservatives and Liberal Democrats, and imposing a progressive taxation system to ensure that those best able to pay will do so; Labour does plan some spending cuts, but it also plans to do something that doesn’t seem to have occurred to the Conservatives: Stimulate economic growth.

There was, therefore, no reason for Labour not to support the Charter!

In fact, doing so was a way of mocking the Conservatives; rubbing Tory faces in the fact that they had tried to set a fiscal trap for Labour but had done so in such a poor way that it didn’t matter.

This is where, in this writer’s opinion, the Labour leadership and Mr Skinner diverged.

To a no-nonsense man like Dennis Skinner, this kind of game-playing is unnecessary – frivolous, perhaps. He may even see it as unduly making light of a situation that, for the electorate, is deadly serious. People are struggling because the Tories squeezed the economy; many have died.

He also knows that no Parliament can bind its successor; if Labour is elected in May, it can ignore the vote on the Charter for Budget Responsibility completely.

So it would be entirely reasonable for him to see this debate, and the vote that followed it, as nothing more than party political game-playing, and not for him.

It isn’t that most of the Labour Party supports continued economic austerity – that was disproved in the debate. It certainly isn’t that Labour will follow the Conservative plan of £30 billion in cuts – that was also disproved in the debate, and in the fact that a future Labour Parliament can ignore the decision in any case.

It seems far more likely that he simply didn’t want to play the Tories’ silly game.

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Labour’s spending plan could humiliate the Tories

"There is an alternative" - and it doesn't have to cost more than we're spending now.

“There is an alternative” – and it doesn’t have to cost more than we’re spending now.

It seems some people are upset that Labour has announced it does not intend to increase public spending, if elected into office after next year’s general election.

This is a perfectly reasonable reaction, depending on the amount of information available to the person holding that opinion.

In other words, if you don’t know why Labour has made this decision, it is perfectly reasonable to assume that the former Party of The Left has turned Tory-lite.

That’s why we’re hearing that Labour will simply continue Tory policies; that the main three parties are “all in it together” (to overuse a hackneyed and devalued phrase).

But evidence is available to suggest that this is a big mistake.

To finance extra spending, Labour would have to borrow more money – but this would push up interest rates and create a potential disaster for people with mortgages and loans to pay off.

According to Modern Monetary Theory – an economic method that seems to have earned credence with all the main parties – government borrowing is not undertaken to finance its spending, but to maintain a target interest rate.

In times of recession, businesses borrow more and households find it hard to save money for a rainy day (as the saying goes). We have spent most of the last decade either in recession or in the slowest recovery in British history and the private sector simply doesn’t have the spare cash to pay higher interest demanded on loans in the wake of higher government borrowing.

Labour wants to safeguard those businesses; Labour wants to safeguard your homes.

The alternative would cost any government much more in the long run.

It’s as simple as that.

So Labour has set a spending target that is the same as the Conservatives’, ensuring that interest rates can be kept under control.

This doesn’t mean it will continue with Conservative-led spending plans. That would be a betrayal of Labour’s core voters.

Instead, it seems more likely that Labour will seek to stimulate the economy by taking funding away from wasteful areas – this blog would certainly wish to see less public money given to private contractors who pocket half of it as profit – and investing it in economic growth.

With more money flowing through the system and coming back to the Treasury in taxation, it will then become easier to relax restrictions on interest rates, which will help the government with its debt issue (this has to do with the way governments borrow money, issuing bonds at fixed rates of interest, and is a story for another day).

If Labour’s plan works, it will mean humiliation for the Conservatives and the Liberal Democrats, as Labour will have spent exactly the same amount doing it as those other parties have been spending for the previous five years – to little effect.

Do not misunderstand; it is perfectly possible that Labour’s spending plans could be entirely wrong-headed! Labour spent most of the last 20 years experimenting disastrously with neoliberal thinking that, continued and concentrated by the Coalition government, has led us to the current pretty pass.

In this case, it seems the Devil really is in the detail.

But the overarching strategy is sound and Labour should not be criticised for it.

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