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The Economy in 2020

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The Economy in 2020


22nd July 2015

Wealth creation is a good thing: we all want greater prosperity.

But let us have a serious debate about how wealth is created.

If you believe the Conservative myth then wealth creation is solely due to the dynamic

risk-taking of private equity funds, entrepreneurs or billionaires bringing their investment

to UK shores.

So if we follow the Conservative’s tale then it is logical to cut taxes for the rich and big

business, not to bother to invest in the workforce, and be intensely relaxed about the

running down of public services.

But in reality wealth creation is a collective process between workers, public

investment and services, and, yes, often innovative and creative individuals.

Understanding this means getting to grips with the key choice in the leadership

election and indeed the key choice facing Britain:

Whether to accept austerity or whether to break free of this straitjacket and strike out

for a modern, rebalanced economy based on growth and high quality jobs.

Labour must create a balanced economy that ensures workers and government share

fairly in the wealth creation process

• that encourages and supports innovation in every sector of the economy; and

• that invests in skills and infrastructure to build an economy that is more

sustainable and more equal.

The purpose of this document is to set out some of the key parts of that vision.

That includes not only the overall approach we must take to the economy as a whole,

but some specific key changes on taxation.

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George Osborne’s post-election Budget speech was praised as a slick piece of

political manoeuvring.

His political trick on the minimum wage was exposed within hours, but it was an

attempt to outflank the too-modest-by-far plan that Labour had for £8 per hour by


Some of us had been pushing for a genuine living wage. The TUC calls for £10 per


But look deeper and Osborne’s Budget and a familiar story emerges: tax cuts at the

top. This time for the 4% who currently pay inheritance tax, and then for corporations


And who bears the brunt?

Once again it’s low income families, disabled people, young people, public sector

workers, and our public services.

So we see that austerity is about political choices, not economic necessities.

There is money available:

The inheritance tax changes will lose the government over £2.5 billion in revenue

between now and 2020.

What responsible government committed to closing the deficit would give a tax break

to the richest 4% of households?

The Conservatives are giving away to the very rich twice as much as reducing the

benefit cap will raise by further impoverishing the poorest.

Another choice was to cut corporation tax - already the lowest in the G7 at 20%.

Lower too than the 25% in China, and half the 40% rate in the United States.

That political choice will see our revenue intake from big business fall by £2.5 billion

in 2020. That’s nearly twice the amount saved by cutting child tax credits beyond two


So closing the deficit and austerity are just the cover for the same old Conservative

policies: run down public services, slash the welfare state, sell-off public assets and

give tax cuts to the wealthiest.

This is why I stood in this race:

Because Labour shouldn’t be swallowing the story that austerity is anything other than

a new facade for the same Tory plans.