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Economic competence: does Labour have a credibility deficit?

My account of the economy workshop at the 2011 Progress annual conference

This year's Progress annual conference was encouraging in that together we got closer to outlining the kind of agenda we need as we think ahead to the next election. A particular theme throughout the day was a debate about how we should restore economic credibility with the electorate.

It was referred to in question and answer sessions and in a dedicated seminar in the morning. Coming out of that, it was clear that more thinking needs to be done.

Angela Eagle emphasised that the financial and economic crisis was not due to profligate spending by Labour; it was due to international events and a neoliberal ideology. Meanwhile with their austerity measures the Tories appear to have snuffed out growth. She suggested that there were two areas where Labour got it wrong. We were too light on bank regulation and failed to appreciate the dangers of shadow banking, along with others. We also could have done more to fight the widening inequalities between those at the top and bottom of the income scale; we did a lot but we were running up a down escalator.

Roger Liddle emphasised that he did not think Labour spent too much. The high deficit means we are ill prepared for another financial crisis so it must be dealt with. We should look again at the tax base and find new and soundly based sources of revenue (not the same thing necessarily as raising tax over the cycle). We did this in 2002 when we raised national insurance to pay for extra health spending.

Ben Shimshon presented on the polling results; while approximately 40 per cent say they will vote Labour, only around 30 per cent believe Labour is best placed to manage the economy. Apart from a brief dip before the election, Labour was always ahead on the economy in the run-up to the 1997 poll. Most people believe cuts are necessary and believe Labour is against the cuts.

Michael Stephenson argued Labour never really tackled the line that it inherited a golden legacy from the Tories. We should now take the debate down to the micro level, to the experience of individual people. For the first time in a long while, people are questioning the value of the institutions which got us to this place. We should look at remutualising Northern Rock, developing credit unions further, calling for a financial inclusion act, and support growth in employee ownership of companies.

There is still work to be done so that we are clear and straightforward about what we got right on the economy and what, before the crisis, we got wrong. Alongside some wearing of sackcloth and ashes we do need to reframe the economic problems we have in terms of what actually happened. Angela Eagle is right to highlight the causes of the financial crisis. Looking to the future, we need to be clear what a new economy might look like, or whether we are really just after a return to the pre-crisis situation with a bit more redistribution and a bit more bank regulation. And out there, dare we say it, there is potentially a wider debate to have about sustainable finances. Can we commit to minimal or no change to the tax paid by most people while also reforming the tax base? We can only have these discussions if we are clear how we are applying our values to economic policy and if we have recovered some economic credibility.

This article was first published on the Progress website, on 23 May 2011.
Progress, 23 May 2011, 23/05/2011

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