Ed Balls has made a shrewd move, but Labour must go further

Ed Balls’ latest Guardian article is an interesting one.

Ed Balls’ latest Guardian article is an interesting one. Announcing that he will launch a Trans-Atlantic Commission on inclusive prosperity with Bill Clinton’s former treasury secretary Larry Summers (also Balls’ former tutor at Harvard), the shadow chancellor denounces Osborne in the usual manner on lack of growth and an inability to deliver for anyone but those at the top.

In many ways, the article is a re-articulation of the merits of stimulus.

There is little wrong with that, and Balls is right to highlight the paucity of the government’s approach to infrastructure investment which is bad for jobs now, and will be bad for growth over the medium term.

In many ways, as I have argued recently, our current politics is a repetition of British politics in the late 1920s and early 1930s: bold schemes dismissed as unworkable – as with Lloyd George/Keynes in 1929 – giving way to an austerian-monetarist combination which produces precisely the results you’d expect, stagnant growth and regional inequalities.

So yes, the government is wrong. But the commission (or, rather, Labour) will also need to answer three basic questions: do you borrow to deliver this infrastructure investment? Where are the shovel-ready projects to make it happen? And, if housing is be at the cornerstone of this (and it should be), how do you get around the usual planning/NIMBY-ite concerns, and actually get them built?

The trap Labour clearly doesn’t intend to fall into is to give the government a series of specific policies they can put significant research budgets into attacking. And at the moment – given Grant Shapps and other ministers could do little better on the mansion tax than attack the alleged need for ‘government snoopers’ – this is going reasonably well.

But answers will be needed relatively soon – the can has been kicked down the road so many times it’s beginning to look a little battered. Answers presumably won’t come for a few months at the very least, but what are the broad-brush strokes?

On borrowing, it is reasonable to be up-front about its role in delivering growth. Businesses borrow money every day, local authorities are looking for powers to do more of it, and the coalition’s Credit Card metaphor looks even less convincing than it did in 2010.

The vast majority of governments in post-1945 Britain (even, heaven forefend, Mrs Thatcher) have run budget deficits. There is a major case for new forms of taxation to limit the need for borrowing – perhaps replacing the ineffectual bank levy with a broad based financial transaction tax, thus keeping some ‘cover’ but actually raising some money – but some will obviously be needed.

Fine – now the government will be running a substantial deficit into 2015/16 this is no longer as big a stick to beat Labour with as it once was.

Shovel-ready projects are tougher in the sense that Labour doesn’t want to the present the government with a list of areas it can nab, but presumably (hopefully) such work is going on behind the scenes. Housing must be a part of this picture, however – build a council house, charge average council rent for 20 years, and the up-front construction costs will be met, leaving aside any subsequent sale.

But communities often object to new houses – not only because of a default opposition to change, but because they do not benefit from their construction. Houses are not built and purchased by locals as they were fifty or sixty years ago. The value flees the locality whilst the community grows one family bigger, with all the stretching of resources that brings.

An idea might be to mandate a community equity stake in all new builds. Entrusting, say, 5 per cent of the value of a new house to local residents would likely grease the wheels somewhat – and a further percentage could be allocated to those residents who take a part in the local plan to encourage an active, engaged localism.

And most importantly, at some point ‘generating high wage jobs’ will require some form of redistribution. Pre-distributing through legislating for a living wage and funding tax breaks for small business through levies on de-stabilising financial activity or lowering the inheritance tax threshold (down from £325,000 to perhaps £270,000 – the average house price plus 10 per cent) and upping the rate to 49 per cent might be a way to go.

That would be a pretty neat combination of policies advocated by Harold Macmillan, Tony Crosland and Keynes at the very least.

In his article Ed Balls uses the metaphor that nobody would proclaim the Australian performance in the Ashes a success if, having lost the first two tests, they go on to draw the third.

That is no doubt correct. But it is incomplete – what happens if they draw the third and scrape home in the last two? So it is with the government. Austerity has proved an error. But the economy is resilient, and to some degree self-corrective. Modest growth in 2013/14 and 2014/15 may be spun effectively in May 2015.

Labour needs to show not only how it can deliver growth, but, crucially, deliver the right kind of growth – one which benefits the majority (and where they perceive it as doing so).

This week’s pick-up is not unlike a doctor proclaiming the success of a placebo. But Labour needs to go further, showing not only how it can nurse the patient back to health, but ensure a relapse does not occur. Hopefully the new commission is a step in that direction.

Richard Carr is a Research Fellow in History at Anglia Ruskin University and author of ‘One Nation Britain: History, the progressive tradition, and practical ideas for today’s politicians.’

3 Responses to “Ed Balls has made a shrewd move, but Labour must go further”

  1. Selohesra

    The trouble for Balls is that he is so closely associated with the mess Labour created when they last held the levers of power that no-one actually takes him seriously anymore

  2. GK

    Has Ed Balls (and LFF for that matter) not noticed that the Gini index of income inequality is at its lowest figure since 1986 – a matter of rejoicing I would have thought?

  3. dominic

    Asking larry summers for advice does not inspire me with confidence. Summers is a wall st insider who led the charge for financial deregulation , sounds like business as usual. How are we to be convinced that labour has anything better to offer?

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