What is Labour's Economic Policy?

Moby

BACKFRMTHEEDGE wrote: »

Labour had to spend money because the Tories left the country's infastructure in such a mess that they had no choice....crumbling infastructure is no way to get an economy to grow. Lack of infastructure will drag down GDP growth.

But you know that....

Tories have short memories probably because alzheimers tends to kick in as you get older

Moby

LauraW10 wrote: »

Labour did spend a lot of money on infastructure.

But lets look at what really happened.

Conservatives believe Gordon Brown should not have run a spending deficit before the crash of 2008. He should have ‘fixed the roof while the sun was shining,’ as the Conservatives like to say. But this theory ignores the reality.

From around 2001, British businesses had started hoarding their cash rather than investing it domestically. The UK wasn’t alone in this, even Ben Bernanke said that:“many advanced economies… face an apparent dearth of domestic investment opportunities”. Labour ministers worried that the economy was heading for a ‘soft landing’ or maybe worse. Given that the UK’s debt level was at historic lows, a decision was made to invest money in public services to make up for the drop in business investment, and increase the UK’s long-term growth potential (investing in schools).


If Labour hadn’t spent that money, unemployment would have edged up and tax revenues down – so they would have faced a deficit anyway. Had Labour tried to be ‘fiscally responsible’ then, by cutting spending, unemployment would have inched higher anyway.


In fact, Adam Lent himself argued last year that the UK had been in good shape before the crash hit. So what would you conservative have done instead?


Here’s the other obvious point: even if Gordon Brown hadn’t spent that money from 2002, the impact would have been minimal. Debt as a % of GDP went from 29% to 36% or so, but was still well below western average.
The impact of the crash and credit crunch was unprecedented: unemployment shot up and tax revenues collapsed and debt levels shot up. There is very little any government could have done to prevent that.


Nevertheless, it’s clear that Osborne’s narrative (even though Conservatives planned to match Labour spending until 2009) prevailed with the public, thanks to a compliant media. The Lib Dems also developed collective amnesia about their deficit reduction plans (much closer to Labour than Conservative plans) and started castigating Brown after they signed the Coalition agreement.


I will say this Labour did not spend all its money wisely and made plenty of costly mistakes (IT projects, PFI projects).


So come on what would you do differently?

Excellent post...a bit too perceptive for some of the plonkers on here though:)

LauraW10

Generali wrote: »

Right but that wasn't where Labour spent money. They spent it on a massive scheme of redistribution of income via the tax credits system and on large pay increases for public sector employees.

Is it the redistribution of income that you have problem with or the tax credit system?

If it's the redistrbuton of income that you have a problem with, I find this quite strange, since most economists seem to believe redistributing wealth benefits an economy by enabling more people to be consumers. For example, A 2011 report by the International Monetary Fund by Andrew G. Berg and Jonathan D. Ostry found a strong association between lower levels of inequality and sustained periods of economic growth.

If it's the tax credit system - what exactly is your problem with it?

As someone else said Labour had to increase salaries in the public sector to attract labour in a market when there was full employment. Nevertheless, do you have a problem with someone in the public sector receiving a "good" salary?

LauraW10

Generali wrote: »

Not gone to war in Iraq and Afganistan. (total cost > £20,000,000,000 link).

The Tory MPs voted to go to war in Iraq and Afganistan too. Let's recall what actually happened.

The Labour and Conservative parties – the two largest parties – were both committed to approving the invasion, although a quarter of the Labour party rebelled and voted against the invasion. The Liberal Democrats, who had one in twelve of the MPs in parliament, also opposed the invasion.

139 Labour Rebels and 15 Conservative - there were 166 Tory MPs at the time.

Devon_Sailor

LauraW10 wrote: »

Is it the redistribution of income that you have problem with or the tax credit system?

If it's the redistrbuton of income that you have a problem with, I find this quite strange, since most economists seem to believe redistributing wealth benefits an economy by enabling more people to be consumers. For example, A 2011 report by the International Monetary Fund by Andrew G. Berg and Jonathan D. Ostry found a strong association between lower levels of inequality and sustained periods of economic growth.

If it's the tax credit system - what exactly is your problem with it?

As someone else said Labour had to increase salaries in the public sector to attract labour in a market when there was full employment. Nevertheless, do you have a problem with someone in the public sector receiving a "good" salary?

Laura,

At NO point in the last 20 years have we been at "full employment" so to say that the massive above inflation pay rises were to attract staff, as opposed to a politically motivated attempt to increase the size of state dependent workers (who were therefore statistically much more likely to vote Labour and keep them in office) is both baffling and disingenuous. That's even before you start throwing in the Unions and their political opportunism.

I have no problem with wealth distribution, despite being one of the "hated Tory's". I am also a public sector worker. However, where we differ is the mode of implementation.

I cannot see the logic in taxing everyone to their eyeballs, in order to create a vast (and it is monumental!) empire of State bureacracy in Govt Depts, just to essentially shuffle the money around a bit, deduct a big chunk for salaries and pensions, and then spit it out what remains at the other end in the form of "benevolent" handouts (aka tax credits).

I personally think the economy as a whole would have been much better served by using the money spent (wasted?) on all that extra staffing and admin and cut the tax rates for the poorest in society. It is quite obscene to think that rather than be used to drag those on the lowest incomes (say under £12-14000) out of tax altogether, it is being used to shore up and massage employment figures. If they all had extra money in their pockets, they would buy more, use more services and generally help create productive jobs in the wider economy.

Perversely, all those extra productive jobs and companies would probably lead to more company and business owners, who in turn are likely to pay more tax in the higher tax bands. Therefore the Left would get their pound of flesh from the "rich" still.

And no, I dont have a problem with Public Sector workers receiving a "good" salary (one day I may even be lucky enough to get one myself :rotfl:).

Regards,

D_S

LauraW10

Devon_Sailor wrote: »

At NO point in the last 20 years have we been at "full employment"

Economists define "Full Employment" as somewhat less than 100% - something lke 3-4% - because some people are just unemployable. So during the boom economists would argue that the UK was at or near full employment.

Devon_Sailor

LauraW10 wrote: »

Economists define "Full Employment" as somewhat less than 100% - something lke 3-4% - because some people are just unemployable. So during the boom economists would argue that the UK was at or near full employment.

By your own definition then it hasn't - lowest rate was 4.6% back in 2005.

D_S

LauraW10

Devon_Sailor wrote: »

I cannot see the logic in taxing everyone to their eyeballs, in order to create a vast (and it is monumental!) empire of State bureacracy in Govt Depts, just to essentially shuffle the money around a bit, deduct a big chunk for salaries and pensions, and then spit it out what remains at the other end in the form of "benevolent" handouts (aka tax credits).

I personally think the economy as a whole would have been much better served by using the money spent (wasted?) on all that extra staffing and admin and cut the tax rates for the poorest in society. It is quite obscene to think that rather than be used to drag those on the lowest incomes (say under £12-14000) out of tax altogether, it is being used to shore up and massage employment figures. If they all had extra money in their pockets, they would buy more, use more services and generally help create productive jobs in the wider economy.

Perversely, all those extra productive jobs and companies would probably lead to more company and business owners, who in turn are likely to pay more tax in the higher tax bands. Therefore the Left would get their pound of flesh from the "rich" still.

I accept that you make valid points above - I reckon any incoming Labouer Government is going to say the same about cutting departmental costs.

I still don't understand your problem with tax credts?

Generali

LauraW10 wrote: »

The Tory MPs voted to go to war in Iraq and Afganistan too. Let's recall what actually happened.



139 Labour Rebels and 15 Conservative - there were 166 Tory MPs at the time.

You asked me what I would have done differently and I said.

Some of those things are different to what the Tories did because I am not a slavish party ideologue, I can think freely.

It's why it's pointless discussing stuff with ideologues such as yourself as you treat political parties like football teams. Labour yay Tories boo. It's boring and doesn't get us anywhere.

I'm not a Tory. You are a blind Labourite or at least that's what you posts show you as.

Devon_Sailor

LauraW10 wrote: »

I accept that you make valid points above - I reckon any incoming Labouer Government is going to say the same about cutting departmental costs.

I still don't understand your problem with tax credts?

Firstly, I very much doubt any Labour Govt will end up doing things differently in future. They have been inextricably linked to the idea of a large all-consuming State since they were founded; they also continue to be enthralled to the Unions.

Secondly, it wasn't me who you initially engaged about Tax Credits. However, my point is, and I tried to make that clear in my earlier post, that we shoud amend the taxation system so that eventually there will be no NEED for Tax Credits. Drag the lowest earners out of tax altogether by dismantling the wasteful and unsustainable adminisitrative empire created soley for the purpose of spitting out less money than got put in.

Basically, if you earn below a certain level you dont pay tax. If you earn above that, you do not get any tax credits (however you would be eligible to receive non-means tested benefits such as Child Benefit - again, up to a certain income).

How can anyone defend a system whereby, for example, an individual/couple pay £100 in via tax, it gets mucked around by unnecessary pen pushers and then they are meant to be grateful to their benevolent political leaders for deigning to give them £30 back as tax credits to top up their income.

Why not let them keep the full £100 in the first place?!

D_S