Labour’s macroeconomics

Labour’s macroeconomics

I was in Liverpool for Labour’s Conference this year, with a balcony credential i.e.  I could enter the conference, fringe rooms and exhibition hall. As I was not a delegate, I spent a bit more time in the fringe and the bars, and much less time in the hall. Last year I was able to report on nearly every debate, I cannot do that this year, but I observed both Reeves (video | text) and Starmer’s (video | text) speeches and the platform’s control-freakery, some of which I reported earlier.

Interesting highlights include Reeves’ promise that she will chase the beneficiaries of the covid procurements (and other corruptions in the government procurement chain). I am concerned about the promise to reduce consultancy fees, because while some consultancy projects are wasteful and of questionable value, many are caused by the fact that the Civil Service and local government won’t pay the going rate for scarce skills.

Reeves continues to play her, “I am an economist card”, but there are those of us who feel that it means she is tied to one and only one theory of macro-economic management. This fear was reinforced by a video of Mark Carney, the previous Bank of England Governor, who wished her well.

Both of these speeches if anything was slightly to the left of speeches made previously, or at least since Reeves’ secureonomics speech in NYC; I thought I had commented on the latter speech but it seems not. I did make some notes, in which I quote, Prof. Simon Wren Lewis, as saying,

 “What is arbitrary is having a target for debt to be falling regardless of whether that debt arises from current spending or investment”

which I believe sums up his argument well. I also quote Richard Murphy on independence of the Bank of England, and James Meadway who argues that taxes must be raised and that conceding to debt fetishism traps Labour’s policy freedoms. He argues for clarity on tax, clarity on the financial rules and detail on the investment plan. It’s possible, that conceding the need to reduce debt will enable attacks on the policy not defend it. I have some sympathy with Murphy, and have come to agree with Meadway.

Starmer announced the increase in housing new starts target by proposing changes to the planning permission process to make Nimbyism harder.

This line from the speech is excellent, “ [his] party would, in 2024, have to emulate its achievements in 1997 – “to rebuild a crumbling public realm” – 1964 – modernise an economy “left behind by the pace of technology” – and in 1945 – “to build a new Britain out of the trauma of collective sacrifice”.

He argues that the next Labour Government will need to do all three.

But I wonder if waste and brown field sites are enough to do what’s needed. Certainly, the corruption in the government supply chain if cleaned up should create some space in terms of fiscal management, but whether it’s enough is highly questionable. Admittedly they are hoping to replace the most profligate government in history and so eliminating waste may yield some benefits, but whether it can be recovered without a reduction in service levels will be more difficult to predict.

The economist, in an article entitled, “Britain’s Labour Party embraces supply-side social democracy” is happy, but with the acceptance of QMT they would be. In many ways, I sort of think that the headline sums up the macroeconomics of the current Labour Party; it’s a new supply side regime which is fine, but if they ignore demand, including export demand, then a mixed economy’s growth driven by the private sector will choke. There’s no point in pump priming investment if the new plant’s output can’t be sold (or otherwise used).

One tool to increase demand, would be to tax the rich and give to the poor, whether, through increasing the minimum wage and public sector wages or through increasing benefits since the poor spend more of any incremental income than the rich.

Rachel Wearmouth in her review, highlights Reeves increased credibility within Starmer’s team, notes the increased weight and support of business opinion;  the article is subtitled with the prediction that the succession will be between Reeves and Streeting; the latter seems to have chosen the hard route, Labour always elects the most left wing person they think will win.

Ultimately while they have the goal to deliver high growth, and growth is the best, maybe the only way to rectify the public finances, how this can be done without reversing Brexit and inflating aggregate demand is a question to be answered. They choose to be restricted to supply side measures only and even funding these supply side measures will remain difficult while they maintain the harshest aspects of their fiscal responsibility rules and their promises on tax i.e. no increases in VAT, income tax and no new wealth taxes.

The Growth target is a worthy goal but lacks the means of achieving them. This could easily be corrected even if you think that fiscal rules are necessary.

Between the two speeches, conference debated and carried a motion entitled critical infrastructure which called on the next Labour Government to renationalise energy and the railways. Of course, the shadow cabinet immediately repudiated this policy. It’s fortunate for them they were able to keep the anti-privatisation in the NHS motion off the order paper. It’s highly likely that if the SHA motion had been debated, like the nationalisations, it would have been carried. I say fortunate, they had to break the rules in order to keep it off the order paper.

The leadership will be very happy with the conference, at least they did not say go back to your constituencies and prepare for government.

For various reasons this took several days to write and post, I have backdated it to the day of Rachel Wearmouth’s article i.e. 13th October. Six days later Labour won two crushing by-election victories in middle England, bookending the Conference which had opened shortly after Labour won the Rutherglen and Hamilton West by-election in Scotland. ; the leadership will argue with good evidence they are doing something right. …

Tony Blair on today’s politics

Tony Blair on today’s politics

Tony Blair hosted an interview at a “Tony Blair institute” event with Keir Starmer. Some have announced this as his anointment of Sir Keir. Of much interest, has been the companion interview, published (£)  in the New Statesman, in which Tony Blair talks of the UK rejoining EU. The Independent reflect on this article and are joined by several youtubers, and John Crace, again in the Guardian.

In the New Statesman article, which is signed by Andrew Marr, it says, ‘Does he see any realistic prospect of going back into the EU, or even the customs union or single market? “Well, I believe at some point a future generation will take Britain back into Europe, and, you know, you just have to look at what’s happened.”’

To me, a future generation is 20 years away, optimistically, from 2016, and I wonder if the UK’s democracy and economy can wait that long. The conference and interview coincided with the first time polls report that a majority of the UK want to rejoin the EU and not just its single market. This point is made in the Independent article. The reason is two fold, some communities that believed the lies of the Leave campaigns, such as fishing and farming, have now experienced the impact of those lies in less jobs and higher prices and weaker export markets. The second reason is that as young people grow older and get the vote and older mainly leave voters die, again the majority opinion changes.

Of course, the usual Brexit cheerleaders interpret Blair’s comments as in contradiction to Starmer’s but the clue is in the phrase, a future generation.  

Labour’s leadership claim that it’s settled, I say, it’s not. Starmer’s terms for “Fixing Brexit” are a variation of cakeism, he only proposes what he thinks benefits the UK: student exchange, creative workers tours and professional services.  To them it remains solely about money, a continuation of our reputation as a nation of shop keepers.  It’s not good enough!

In later articles, Blair suggests that the UK can trade non-competent issue co-operation for part membership of the single market. I doubt this will fly, no co-operation on the criminal justice system without the Charter of Fundamental Rights and the Court. …

LOTO speaks to GMB23

The Congress Political Speaker this year, was Sir Kier Starmer. The text of his speech is available from the Labour Press Office; like Corbyn he is not a great orator but that skill is exceptionally rare in today’s parliament. I feel the speech was tuned for a GMB audience, but no harm in that, provided the commitments offered are genuine, and not part of “I’ll say what it takes to win” strategy, although you’d have look very hard to find any new promises.

The video of his speech starts here, on YouTube. After the speech, GMB Congress asked each region to pose a question to Sir Kier. This year questions were posed on, the new deal for workers, the minimum wage specifically in social care industry, plans for energy industry infrastructure manufacture, plans for in-sourcing, public procurement and anti union firms, the blocking of new offshore mining licences, and finally, the regulation off hire & fire especially by firms in dispute with their union, but interestingly, despite a CEC special report on pubic sector pay, nothing on public sector pay nor on the public sector disputes,

The issue of the politics of energy supply and the GMB was fore-shadowed in an article in the Guardian, where Gary Smith, the GS, strongly criticised Labour’s plans to ban new North Sea drilling licences, in what might be called a “shot across the bows”.

Smith is quoted in the article as saying,

“We are critical friends of the Labour party and I think this is just a lack of intellectual rigour and thinking about where they have got to on oil and gas,” he said on Sophie Ridge On Sunday on Sky News. “They are focusing on what they think is popular rather than doing the proper thinking to understand what is right for the country.”

Below/overleaf I have posted the video of the Q&A session, and written a précis of the session. … …

Starmer speaks

Starmer speaks

This is available on youtube and as text, it is to my mind one of the best he’s given; he’s clearly more comfortable with the role than previously. The last 11 months of a polling lead which was to leap the following day will have helped, but I hope they don’t believe their propaganda that the May 22 elections were a validation of Starmer’s Labour, there were victories and also losses.

I welcome the promise of a sovereign wealth find, made by Rachel Reeves earlier in the week, and on the surface the promise of GB Energy seemed to be a significant step towards state participation in the energy market and would explain, but not excuse, why the delegates supporting the ‘Green New Deal’ were excluded from the composite meeting; it would have been embarrassing if conference had called for the wholesale nationalisation of the energy industry while the Leader announced a half-way house, or as later commentators note suggests a waypoint. Starmer repeated Louise Haigh’s promise made yesterday to nationalise the railways again.

Back carbon capture. Commit to green steel production. New renewable ports. New gigafactories. And insulate 19 million homes.

Sir Kier Starmer – lab22

I am disappointed at the absence of sensible position on the EU and Trade Friction, interestingly, Cooper was allowed to grandstand on cancelling the Rwanda programme, but left it to Kier to announce that Labour would introduce a points based immigration system. Neither mentioned repealing the hostile environment.

In the 80s we had a point system for people coming to the UK for work. you got one point for speaking English, one point if you had a job offer, one point if that job offer was competitively paid, one point if the job was highly skilled and one point if there was no local labour to do the job. if you had five points you could enter the country. The Tories have replaced highly skilled with highly paid, and the inconvenient truth is that British labour shortages or not restricted to highly skilled, highly paid work. The economy needs hospitality workers, agricultural workers,  and care and health service workers. The UK’s exclusion from Horizon Europe is another policy failure that limits UK science’s access to highly skilled research scientists. Any point system will need to ensure that workers across the full range vacancies can enter the country. Any other system will be a barrier to growth. It is clear that many skilled workers originally from Europe have returned to the home countries because they feel unwelcome after the Brexit vote and harassed by the hostile environment which seeks to turn landlords and banks and the NHS into border guards. It needs to go!

I annotated the text speech on diigo and made a copy of those notes on my wiki; I attempted to extract the specific policy promises from the anti-tory and feel-good rhetoric. …

Kier in conversation with Gary Neville, of the Couch

Lucy Powell interviewed Gary Neville who is it seems an important footballer and manager, and Kier Starmer who is an aspirant prime minister and Arsenal Fan. The video is here, and here are some noted I made,

“In a football team, we need to align personal goals with those of the team and it’s the same in politics” It’s a shame that the PLP four years ago weren’t able to operate according to that dictum.

My notes say, that Banker’s bonuses were capped at 100% of salary unless approved by shareholders in which case 200% bonus can be paid, taking most of them into the disputed supertax bracket. What I find astonishing is that banks would want to pay more than 200% of salary as a bonus. As others have said, it encourages risk not business building investment.

Starmer says we are the party of fiscal responsibility and aspiration; the Tories don’t talk of aspiration. One thing I would say about Starmer, is that he is one of the few British politicians that understand the anger felt by people who work hard and yet still can’t pay their way. Strangely the only other one I have heard attempt this is Rebecca Long Bailey and neither do anger well. It’s important that that anger and sense of justice is articulated. Starmer’s right, the Tories have walked away from this; it’s something that Thatcher had, but Rees-Mogg’s Party can’t. …

Labour’s macro-economics, “Back to the Future”

Labour’s macro-economics, “Back to the Future”

Starmer made another speech on economics on Monday 25th July. It is reported in the Guardian.

Starmer has been trying to pitch Labour as the party of fiscal prudence and will say: “With me and with Rachel Reeves [the shadow chancellor], you will always get sound finances; careful spending; strong, secure and fair growth. There will be no magic-money-tree economics with us.”

From the Guardian,

This article looks at growth and debt, Starmer and Reeves flirtation with Osbornomics and Reeves' rejection of nationalisation on the grounds of cost, I note countervailing views from Murray and Long Bailey and note that Reeves places herself in the sad queue of shadow chancellors undermining Labour's election chances by 'telling the truth'. There's more overleaf ...

A noble individual

A noble individual

Over the last 24 hours, possibly longer after I actually publish this piece, Sean Jones QC, has published two longish twitter threads on Labour and Brexit. He was inspired or provoked by an interview on Cambell & Stewart’s “The Rest is Politics” of Kier Starmer.

Jones’s 1st thread asks how ‘leaning into’ the Tories Hard Brexit can possibly be a policy success when it’s clear that it’s failed and asks how it can be an electoral success given that so many Remainers have not changed their mind. There are few, if any words wasted in the thread, so have a look yourself, but I am particularly taken with this tweet,

The 2nd thread, addresses the pro-Starmer argument that this is a long game. Jones argues that Starmer’s Brexit line is a foolish thing to say because it fails to differentiate him and Labour from the Tories, Starmer’s assuming that remainers/rejoiners who seem to be growing in number will put up with it. Starmer’s policy needs to be effective politically before the election and the basis for effective policy after. The first proposition is questionable, and the second wrong.

I’ll finish with a quote from Rory Stewart from the podcast, they were talking about the loss of trust that people have with politicians, and Stewart argues, that it’s not about virtue.

Overleaf, I include some quotes from the thread and the show and examine Starmer's record as such a man of virtue.

Can ‘boring’ win elections and deliver good policy?

Can ‘boring’ win elections and deliver good policy?

I am provoked by Chris Grey’s article, “Making Brexit Boring”; it’s long and covers a number of dimensions of the consequences of Starmer’s speech on Labour’s new approach to the EU. Much of his Brexit blog I agree with and find informative, but I have a couple of things to say on this article.

He writes,

Yet that answer [i.e. Labour’s differences with the Government]  is a disappointing one, and in some key respects an ambiguous one. It could hardly have given less to erstwhile remainers without being indistinguishable from the government’s policy. It offered the bare minimum of an alternative, and no one could call it an inspiring vision for Britain’s future. But it wasn’t altogether empty, and its critics should be careful not to fall into the age-old political trap of ‘making the perfect the enemy of the good’.

Chris Grey – Brexit & Beyond

This I feel summarises what Grey thinks of Labour’s position but I hope I don’t fall into the trap he identifies. He also disagrees with those who describe Starmer’s position as cakeism,

It’s also misguided to suggest, as some claimed following the speech, that Starmer’s proposals are ‘cakeist’ (i.e. calling for the benefits of EU membership without belonging).

Chris Grey – Brexit & Beyond

I had not realised that Peston had described the trade barrier proposals as cakeism and I comment on his article below. I believe that arguing for enhanced business visas, mutual recognition of professional qualifications while rejecting free movement of presumably unqualified labour is ‘cakeist’ , unlikely to be agreed by the EU and fails to recognise the UK economy’s labour shortage crisis. It’s pandering to the racism inherent in the objection to free movement and the only way to put this right is to agree to the EU’s freedom of labour and reverse the hostile environment. Many of those who’ve left the UK have done so because they feel unwelcome due to the racism enabled and encouraged by the referendum result.

While Grey welcomes Starmer’s embrace of a Security deal, both he and Stramer fail to recognise that this will entail agreeing to CJEU supervision/jurisdiction of wide areas of our administration of justice. While I have no problem with this, if he is prepared to have the CJEU rule on civil liberties, what’s the problem with having them adjudicate trade issues. Starmer’s line on security co-operation is thus also arguably ‘cakeist’, although the number of people on top of this seems very limited. Although yesterday, the government published its plans for the Data Reform Bill which ORG describes as gutting the GDPR and if so may jeopardise the UK’s ‘adequacy agreement which was another point in Starmer’s plan to retain regulatory alignment with he EU on data and financial services.

Peston in his article also accuses Starmer of cakeism, albeit before I did. His article focuses on the trade aspects of Starmer’s five point plan, I take the alleviation of trade friction as a given in any policy, although I am less sanguine that easing trade friction between NI and Great Britain will have any benefit in calming the political friction in Northern Ireland and Starmer’s plan focuses on that specific trade flow and not cross-channel trade.

Peston avoids looking at how Labour’s remainers/rejoiners will react to the brutal policy outlined by Starmer and Lammy. As I note elsewhere, the tide is flowing against them. …

Another fine hole!

Another fine hole!

So it appears that Sir Keir Starmer is going to return to his comfort zone on immigration. Ruling out that a Labour Government, led by him, will agree a freedom of movement of workers with the EU, except of course, Eire, Malta and Cyprus, although given some of his comments in the Union, he may well be willing to sacrifice the UK/Eire Common Travel Area.

I don’t know how many times I and others need to say this. We need foreigners, particularly young foreigners to come to this country to work and pay taxes. If they don’t come, the work doesn’t get done, which is one reason there’s a labour shortage. The search for a ‘fair immigration’ policy that restricts incoming workers is like looking for a chimera. We now have an earnings limit that means that teachers and nurses cannot enter the country to work. It’s an economic act of self harm and panders to racism.

Starmer isn’t very good at economics and this is trolling his base. He assumes they have nowhere else to go; the last people to think this were wrong and he is too. …