Labour’s economic plan

growstuffbut I did read it - such as it is. Thanks MaizieD for your intelligent response. Much welcomed!

MaizieD

^First, that it is through growth and only through growth that we can sustainably resource strong public services, raise living standards, and compete internationally.^

I think that she has got it the wrong way round here. funding (resourcing) public services will promote this 'growth' that she is anxious for, and only then will private investors be interested in putting their money in. When they can see that there is some profit to be made from the domestic economy. Waiting for growth from the promised long term investment will, IMO, take a while to work through into increased domestic spending to stimulate the provision of goods and services, whereas a boost to public services would be more immediate with the need for better wages,and employment in much needed repairs to the infrastructure.

So let me be clear about the rules which will bind the next Labour government. That the current budget must move into balance, so that day-to-day costs are met by revenues. *And that debt must be falling as a share of the economy by the fifth year of the forecast, creating the space to respond to future crises.

By 'revenues' I assume she primarily means taxation, but that's not going to happen if services are still in their current state. There is not a lot of money around to be taxed...

As to the 'debt', (or does she mean deficit, the gap between expenditure and revenue?) that really is irrelevant at this stage, (because no-one who 'owns' the 'debt' actually wants their money back). It can only be narrowed by an increased tax take, which isn't possible unless public services get more money, or taxes are raised, (which gives people even less money to spend), and, dare I say it, reducing interest rates to make it less costly to service.

Government has to spend first, before it can tax, raising taxes first just impoverishes people. That is a key principle of MMT which has empirical evidence on its side...

Let me be candid. We cannot continue with the short-termist approach that disregards the importance of public investment. But we also cannot ignore the pressing need to rebuild the UK’s public finances, to increase our space to respond to future shocks. That is why our fiscal rules differ from the government’s. Their borrowing rule, which targets the overall deficit rather than the current deficit, creates a clear incentive to cut investment that will have long-run benefits for short-term gains. I reject that approach, and that is why our borrowing rule targets day-to-day spending. We will prioritise investment within a framework that would get debt falling as a share of GDP over the medium term.

Sorry, but I see more austerity in the offing...

My understanding of that first statement is we need to grow our economy first before we spend more money on public services as public services are not income generating. She doesn’t seem to explain how this will actually happen. It’s really clear that Labour have to keep defending themselves in terms of the economy because they are constantly vilified for previous spending over a decade ago.

ronib

growstuff well perhaps you would like to explain Reeves’ Mais lecture to us instead? It’s not worth my time since you have downgraded my input so over to you?

Read it for yourself! If you can't be bothered, don't waste our time commenting on something you haven't read.

seadragon

www.theguardian.com/politics/live/2023/oct/09/labour-party-conference-rachel-reeves-planning-building-infrastructure-uk-politics-live ...... endorsed by Mark Carney too....

"workers fights" can we buy tickets??

Obviously the bits in italics are quotes from Reeves' speech.

First, that it is through growth and only through growth that we can sustainably resource strong public services, raise living standards, and compete internationally.

I think that she has got it the wrong way round here. funding (resourcing) public services will promote this 'growth' that she is anxious for, and only then will private investors be interested in putting their money in. When they can see that there is some profit to be made from the domestic economy. Waiting for growth from the promised long term investment will, IMO, take a while to work through into increased domestic spending to stimulate the provision of goods and services, whereas a boost to public services would be more immediate with the need for better wages,and employment in much needed repairs to the infrastructure.

So let me be clear about the rules which will bind the next Labour government. That the current budget must move into balance, so that day-to-day costs are met by revenues. *And that debt must be falling as a share of the economy by the fifth year of the forecast, creating the space to respond to future crises.

By 'revenues' I assume she primarily means taxation, but that's not going to happen if services are still in their current state. There is not a lot of money around to be taxed...

As to the 'debt', (or does she mean deficit, the gap between expenditure and revenue?) that really is irrelevant at this stage, (because no-one who 'owns' the 'debt' actually wants their money back). It can only be narrowed by an increased tax take, which isn't possible unless public services get more money, or taxes are raised, (which gives people even less money to spend), and, dare I say it, reducing interest rates to make it less costly to service.

Government has to spend first, before it can tax, raising taxes first just impoverishes people. That is a key principle of MMT which has empirical evidence on its side...

Let me be candid. We cannot continue with the short-termist approach that disregards the importance of public investment. But we also cannot ignore the pressing need to rebuild the UK’s public finances, to increase our space to respond to future shocks. That is why our fiscal rules differ from the government’s. Their borrowing rule, which targets the overall deficit rather than the current deficit, creates a clear incentive to cut investment that will have long-run benefits for short-term gains. I reject that approach, and that is why our borrowing rule targets day-to-day spending. We will prioritise investment within a framework that would get debt falling as a share of GDP over the medium term.

Sorry, but I see more austerity in the offing...

growstuff well perhaps you would like to explain Reeves’ Mais lecture to us instead? It’s not worth my time since you have downgraded my input so over to you?

ronib

*growstuff*. Economic theory is a vague imprecise pseudoscience. I don’t think it’s my business to tell anyone how to think but trying to get to grips with basic proposals is a good start. Of course none of what is being suggested by Ms Reeves /Mark Carney might see the light of day. That’s a separate issue.

I wouldn't take any notice of you, if you did try to tell me how to think, so I'm glad you recognise that.

However, you've mentioned "basic proposals" and "first principles" and it would be useful to know what you mean. I'd also like to know which data you're talking about.

PS. I've read Reeves' Mais lecture, which doesn't seem too wordy to me, but maybe you prefer red top headlines. Maybe a reasoned critical comment would be in order.

growstuff. Economic theory is a vague imprecise pseudoscience. I don’t think it’s my business to tell anyone how to think but trying to get to grips with basic proposals is a good start. Of course none of what is being suggested by Ms Reeves /Mark Carney might see the light of day. That’s a separate issue.

ronib

cossy well my net worth is….,how does that qualify me as the great economist?

I would respectfully suggest that as an Economist with many years experience of positions which require high financial acumen and understanding, I would give his opinions some degree of thought.

Each to their own.

I agree data is important!

ronib

*cossy*I definitely don’t value anyone else’s endorsement- why should I? I have a working brain some days and why would I choose not to make my own appraisal? Celebrity endorsement of politicians is not good for a functioning democracy. Look at the facts if you can find them amongst the hype.

Which facts and data do you suggest I look for?

What on earth is bad about looking at the data?

But it’s not just about Carney’s view is it, there are economists from right across the spectrum commenting on her report ronib, and although there are flaws identified as you’d expect, I have yet to see any view which is as damning as yours (or your husband’s?)

ronib

I am serious too. My husband has always worked from first principles. He has encouraged me over the years to look at the data. This hero worship between Carney and Reeves is not going to work for this country.

Why?

I am serious too. My husband has always worked from first principles. He has encouraged me over the years to look at the data. This hero worship between Carney and Reeves is not going to work for this country.

I was being entirely serious ronib. The opinions of economists, from all perspectives, are not to be negated, and to dismiss the opinion of Carney, one of the most senior, whether you agree with him or not is incomprehensible.

casdon let’s be serious for a moment and consider how effective Carney was in the Bank of England. I know that he has swallowed net zero hook line and sinker …. My thoughts are equally valid. Please don’t negate me in this way.

Well, if you’ve been governor of the Bank of England too people may consider your opinion equally valid ronib?

cossy well my net worth is….,how does that qualify me as the great economist?

ronib

*cossy*I definitely don’t value anyone else’s endorsement- why should I? I have a working brain some days and why would I choose not to make my own appraisal? Celebrity endorsement of politicians is not good for a functioning democracy. Look at the facts if you can find them amongst the hype.

Mark Carney is an Economist with a net worth of $5 million. He was born in 1965 and has held several prominent positions in the financial and economic world, including Governor of the Bank of Canada and the Bank of England. He also served in the Canadian Department of Finance from 2004-2007.

He is hardly a celebrity!

I would very much value his opinion on any economic policies irrespective of party politics.

I am working my way through it.

cossyI definitely don’t value anyone else’s endorsement- why should I? I have a working brain some days and why would I choose not to make my own appraisal? Celebrity endorsement of politicians is not good for a functioning democracy. Look at the facts if you can find them amongst the hype.

ronib

I expect that there will be a synopsis for you to cut through and give you the main points.

I have begun to look at what I found interesting.

ronib

Well I tried to read the Mais speech but concise communication is not one of Reeves’ strengths.
Reeves said a lot and I am not convinced that any of it makes much sense. At one point she is clearly into housewife budget economics. A lot of rhetoric and little substance. Why am I not surprised?

So I take it you don’t value Carney’s endorsement of many of her points then?

Kier Starmer is on the Jeremy Vine show, at the moment, and taking questions from those that phone in.