With Plan B, we can have a good economy for a good society

One year on from the Emergency Budget and the Spending Review, it is becoming abundantly clear the coalition government’s austerity plan - Plan A - isn’t working.

Memo to Gideon: It’s the Plan B, stupid

One year on from the Emergency Budget and the Spending Review, it is becoming abundantly clear the coalition government’s austerity plan – Plan A – isn’t working.

Economic growth has been negligible for most of the past year, and it is likely that new GDP data released this week will show the economy slipping back into recession after the weakest recovery on record.

Unemployment is rising sharply, with catastrophic implications for young people in particular.

The UK is now crying out for an alternative to Plan A – and the Plan B report (co-edited by Neal Lawson and myself; pdf), launched by Compass today, with contributions from a wide range of left-leaning academics and policy experts, aims to provide the first steps towards a viable alternative political economy.

Plan B has two main purposes. The first is to expose Plan A as a recipe for economic disaster for the UK, based on a false set of economic assumptions that the Conservatives, and their allies in the Liberal Democrats, are using to deceive the British public in several ways – for example by the entirely false assertion that the UK is “bankrupt” and has “maxed out its credit card”.

This rhetoric is being used as cover for sweeping cuts in public spending which – as we show using recent research from expert bodies such as the IMF and NIESR – are likely to fail to reduce the deficit by anywhere near as much as the government hopes, and could even increase it.

After demonstrating why Plan A is likely to fail, the report goes on to outline the alternative – Plan B.

In the short run Plan B focuses on measures to stimulate economic recovery and stave off a double-dip recession including using quantitative easing to fund a “green New Deal” of investments in energy efficiency, and increasing benefits and tax credits for the poorest groups who are most likely to spend the extra cash (an approach which would have the beneficial spin-off of also reducing poverty).

In the longer run, a wider range of policies is needed to ensure the UK does not simply return to the unsustainable economic approach of letting the City rip and inflating economic activity with household debt bubbles that characterised our economy prior to the crash of 2008. Instead, we need to accept the systemic challenges of climate change, peak oil and a broken financial system, and bring about a fundamental transformation of our economy.

Plan B makes detailed recommendations on a number of areas of economic policy which are fundamental to the UK’s future economic and social development.

For example, on financial reform Plan B argues future stability requires better regulation of the banks and encouragement for them to invest in the real economy.

For this to happen we need a number of reforms including:

• The full separation of utility and investment banking;

Measures to tackle excessive pay and bonuses in banking that lead to excessive risk taking;

• New institutions, like a Post Bank, to pluralise and localise banking services;

• Increased competition in the sector and much higher customer standards; and

• A financial transactions tax to reduce dangerous volatile capital flows and raise income for public investment.

Other economic policy areas covered in Plan B include:

• A fairer tax system in the long run, closing the £70 billion ‘tax gap’ with a range of measures that include the introduction of a general anti-avoidance principle to tax law and a tax on unearned land value increases;

• A new investment programme for British industry based around measures to encourage innovation, and a British Investment Bank to invest in key sectors such as transport and renewable energy;

• Using public spending on social security, education and health to prevent problems down the line rather than just treating symptoms – for example relatively small investments in policy for transport and diet could save money, increase well-being and reduce carbon emissions;

• Moving to an economic approach based on a shorter paid working week which allows the ‘core economy’ of the human resources that support caring for each other, social networks and civil society to flourish and grow;

Policies to increase the wages of lower and middle-paid workers relative to top earnings and to encourage companies to give their staff increased voice and influence in the workplace harness their ingenuity and commitment.

Plan B is just a first step and there is much more to do to scope out the details of an alternative vision for the British economy.

But this report certainly shows there is an alternative – not just to cuts, austerity and stagnation, but to a return to business as usual and all that means for growing inequality, climate change and people’s well-being.

Plan B shows we can have a good economy for a good society.

See also:

Nine economists tell George Osborne how to fix the countryAlex Hern, October 13th 2011

Osborne’s economic policy is to stick his head in the sandEmily Thomas, October 12th 2011

Will quantitative easing work this time?George Irvin, October 9th 2011

Barroso joins the international push for Plan BAlex Hern, September 28th 2011

The Lib Dems shouldn’t listen to Osborne’s dribble, they should switch to Plan B nowMatthew Pitt, September 20th 2011

28 Responses to “With Plan B, we can have a good economy for a good society”

  1. manishta sunnia

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  2. Alan Mackie

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  3. Political Planet

    With Plan B, we can have a good economy for a good society: One year on from the Emergency Budget and the Spendi… http://t.co/3QCyvLxh

  4. Alex Braithwaite

    RT @leftfootfwd: With Plan B, we can have a good economy for a good society http://t.co/yb0tZ5mX

  5. Duncan Keeling

    With Plan B, we can have a good economy for a good society http://t.co/tDBVjo6t #austerity #UKuncut

  6. Daniel Elton

    .@Jesse_Norman asked the Left 'where are you on the economy?' This is what the Left said: http://t.co/keesmziz #Dudewheresmygrowth?

  7. Helen Goodman

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  8. Stuart White

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  9. Unprecedented growth of 1.3 per cent needed for OBR to meet its projection | Left Foot Forward

    […] also: • With Plan B, we can have a good economy for a good society – Howard Reed, October 31st […]

  10. Anisah

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  11. Simon McCartney

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  12. Noxi

    RT @leftfootfwd: This is what a Plan B for a good economy looks like: http://t.co/skBby9vf writes @HowardRReed @CompassOffice #PlanB

  13. Tiffany Allgood

    With Plan B, we can have a good economy for a good society: Economic growth has been negligible for most of the … http://t.co/LsfuQZfk

  14. Angel Hearting

    With Plan B, we can have a good economy for a good society: Economic growth has been negligible for most of the … http://t.co/rO1uOME9

  15. DBTS

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  16. Compass

    RT @leftfootfwd: This is what a Plan B for a good economy looks like: http://t.co/skBby9vf writes @HowardRReed @CompassOffice #PlanB

  17. Compass

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  18. WarringtonGreenParty

    This is what a Plan B for a good economy looks like: http://t.co/XPARHIoo writes @HowardRReed @CompassOffice #PlanB

  19. Daniel Tinker

    Plan A unlikey to "reduce the deficit by anywhere near as much as the government hopes & could even increase it" http://t.co/LsOl2V8n #PlanB

  20. Robin Wilson

    RT @leftfootfwd: With Plan B, we can have a good economy for a good society http://t.co/PHeKLVMX

  21. Steve Preston

    RT @leftfootfwd: With Plan B, we can have a good economy for a good society http://t.co/Tmc4WeP8

  22. Leon Wolfson

    The time for plan B was a year ago. We’re onto needing plan E for “emergency” now…and we’ll be onto plan M for “we need more morgues” this time next year if plan A is sustained.

  23. Dave Citizen

    Well said Leon.

    We’ll all have to watch out for the old ‘divide and rule’ trick though. A genuine crisis may be just what the rich elites will want to push us towards so we start fighting with each other while they have to stay put as “the only realistic way to maintain order”. Sound familiar?!

  24. Fast spending cuts push UK economy from fastest growth for a decade towards zero | Left Foot Forward

    […] With Plan B, we can have a good economy for a good society – Howard Reed, October 31st […]

  25. Leon Wolfson

    Very. And they’re about to spark off new disorder they’ll need “new powers to contain” by slashing benefits with a “freeze” for that matter. Never mind the people they’ll indirectly and directly kill in the process.

  26. Alan Cowan

    With Plan B, we can have a good economy for a good society | Left Foot Forward http://t.co/sr05TPZI

  27. New report dubs Osborne’s economic strategy a “myth” | Left Foot Forward

    […] With Plan B, we can have a good economy for a good society – Howard Reed, October 31st […]

  28. Guest

    Oh yeah this isn’t biased at all.. it uses the IMF as a source that seems to disagree with ‘Plan A’ when infact it agrees with it entirely and warns against the loosening of fiscal policy..

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