A six-point plan

It was a good speech from Ed Balls in the conference hall today. The shadow chancellor easily exposed the paucity of thinking in the coalition on economic policy. While there were some headline-grabbing measures, there were longer-term policies in his speech that are also worth considering.

Labour’s economic policy now contains a new element. Proceeds from the sale of 4G mobile licences, which is expected to raise up to £4bn, will fund, not a reduction in that year’s public sector deficit, but will fund 100,000 new homes for sale and rent and a stamp duty holiday for first-time buyers. These two elements mean Labour now has not a five-point but a six-point plan for immediate action on the economy. The other elements are a bank bonus tax to fund youth employment, bringing forward infrastructure spending, a temporary VAT cut, a one year national insurance break for small firms taking on new workers, and a VAT rate of five per cent for home improvements and repairs. These ideas are centred on Ed Balls’ call for measures to ‘kickstart’ economic growth.

Labour is also committed to financial reform and we heard more about that today. The party appears to have committed to full separation of banks between retail and investment banking, going beyond the Vickers Report of last year, or at least implementing it in full. Full legal separation has become more popular as it is realised that banks cannot reform themselves. This by the way is a point that the Christian Socialist Movement made as far back as 2008 when we supported an early day motion on the subject. At the time many reasons were put forward why it was not a good idea by the then Labour government. It is good that we appear to be seeing sense at last on this subject. There was also a commitment to a British Investment Bank, ‘fully backed by the Treasury’. This is welcome but so far the detail is lacking. There was also a stress on the need for infrastructure investment with welcome moves to encourage cross-party consensus on big spending projects.

Ed Balls also made some important remarks about spending, repeating earlier statements that Labour cannot promise to reverse coalition spending cuts and that Labour itself would have had to cut spending and raise taxes were it in government. He promised new fiscal rules nearer the next general election to guide how deficits would be reduced and announced that Labour would hold a ‘zero budget’ spending review in its first year.

Balls speech could have tackled the spending issue in another way. Many voters still believe Labour will not control spending and that we let it get out of control in our final years in government. We need to hear more about wise stewardship of the public’s money from shadow cabinet members and we need a commitment to an effective spending guarantee, so extra spending is independently verified before it can continue. This needs to be combined with new approaches to public services given we cannot simply increase spending to do the things we need to do to deliver social justice and a fair society.

Finally, the term ‘responsible capitalism’ did not feature in this speech (though policy measures talked about with regard to financial reform fitted very much into that agenda). This presumably is because we need to look to the leader’s speech to see how this theme might be further developed.

This article was first published by Progress on 1 October 2012.