What’s going on with Labour’s policy making? We are waiting for an NPF meeting, but that doesn’t seem to inhibit the front bench? This is a note on Reeves, her rules and macroeconomics.
This page was made in June 2023. I added to it since then, possibly moving away from the economics, in particular with respect to immigration. I have tracked her and Starmer’s speeches and today, 21/3/2024, I made some notes on her delivery of the Mais Lecture,
I found an article from the times which I find lightweight and rude; some may find it funny. Also an article by Richard Murphy,
where he argues that all supply side reforms are bad; I am not sure that Reeves plans the sort of deregulatory reforms that Murphy fears.
Meadway posts a twitter thread, which argues that times have changed and that she retains room (although not much because of the fiscal rules) to co-fund investment. He nods towards modern supply side, which I am not certain is a choherent macro-economic theory.
- https://davelevy.info/labours-macroeconomics/, an article reporting on #lab23
- http://davelevy.info/?s=rachel
- https://davelevy.info/?s=yellen
Leftie Stats
Leftie Stats posts this,
In the last 30 days, Labour has ditched these pledges:
— Stats for Lefties 🏳️⚧️ (@LeftieStats) June 26, 2023
❌ Block new oil fields
❌ Fund childcare for all
❌ End indefinite detention of asylum seekers
❌ Abolish tuition fees
❌ Invest £28bn in green economy from day one
❌ Raise Digital Services Tax to 10%
All dumped.
I had noticed the Tuition Fees back slide, and the undermining of the green new deal money was quite noisy and contested.
The UK’s first green chancellor, looks like we’ll have to wait, her last stand up performance was the Securonomics speech, delivered in the USA and boosted in the UK by Labour Together and reported in the FT. Most of the commentators I follow, felt that this could be lived with and that it was a return to Labour’s social democratic roots; this cannot be so if monetarist rules and a hand dealt by the Bank of England and the bond markets are allowed to push the need for public expenditure off the railtracks.
Here are some links,
- The FT writes “Five times Keir Starmer has changed tack on policy” and they cover Reeves’s”securonomics” speech also from May 2023
- Rachel Reeves waters down Labour £28bn green projects pledge by the BBC.
- And in 2022, “Labour to pledge ‘ironclad discipline’ with public finances” in the Guardian
- The Campaign Against Labour Borrowing To Invest by Simon Wren Lewis. He justifies the need for rules to distinguish between investment and consumption but thinks that Reeves’s rules which include a debt reduction goal are an overreach. He also argues that the bond markets were spooked by fears of interest rate changes, not borrowing targets. (This fear was exacerbated by Kwartung/Truss’s plan to reduce taxes.) Also, Wren Lewis again, “What is arbitrary is having a target for debt to be falling regardless of whether that debt arises from current spending or investment” on twitter. Probably sums his argument well.
- Richard Murphy on the independence of the Bank of England, he thinks its time is past and he mirrors Colin Hines’ letter to the Guardian, “How to fund labours 28 billion spending plan and more”, Hines proposes directing the pension funds to invest, a fairer taxation system, and if necessary, it will be, restart QE and borrow.
- Meadway in Labour List argues that the packaged position, will cost votes, and that taxes must be raised. He also argues 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 this is the most important part of the argument, that conceding the need to reduce debt will enable attacks on the policy not defend it.
- Labour faces left and right backlash as £28bn green plan survives but delayed by Neame & Belger quotes Reeves ’21 conference speech, and shows the plan is/was £28bn p.a., otherwise, this article is a review of the balance of [anonymous] class forces arguing for and against the backtrack.
- The IfG comments, praising the process reform arounf the OBR in Labour’s planned budget regime. (I mean we lived for two hundred years without one.) This is more of the outsourcing of decisions to technocrats.
- 9 questions for Rachel Reeves and Keir Starmer from a blog called Urban Ramblings, more detailed and raises the question of tax raising on the energy companies
- https://www.newstatesman.com/spotlight/climate-energy-nature/2023/06/how-labour-should-spend-28bn-a-year-on-the-green-economy India Bourke on the impact on climate change. She raises taht “Starmer may soon propose a ban on new North Sea oil and gas licences – something the International Energy Agency has advised to meet net zero goals” He did and then he didn’t.
- Prior to these Top economists pile pressure on Keir Starmer to reverse Tory cuts | The Independent was posted, documenting an open letter signed by 70 economists. The article also points at Scrap ‘petty and arbitrary’ fiscal rules and invest, Rachel Reeves’ economic advisor says | The Independent, quoting Lord Jim O’Neil
- Rachel Reeves-speech: Labour-is-rehashing-corbynite-policies-without-explaining how it would pay for them, Meadway in Novara Media.
- I wrote a note on Growth & Brexit.
What are the rules?
This Why has Labour U-turned on its green investment pledge? from the BBC gives us a clue, here’s what I think the rule is,
- To reduce the deficit (excluding investment) as a proportion of GDP; I remain unclear if this is a per annum rule (Miliband/Balls), or per parliament (Osborn & McDonnell) or a per trade cycle (Brown)?
I say the inverse is the key, the only way to reduce the deficit is to grow the economy, and that requires public expenditure, in investment, in current account services, and in public sector pay, so that public servants can afford to buy the new goods that the investment creates.
I am also concerned that throughout the education expenditure debate, no-one is arguing that education is an investment and that if one has a golden rule that permits borrowing to invest, then education should be considered part of this investment. This also shows the strange permeability of the distinction between investment and consumption. For instance, seed potatoes are an investment, a poke of chips is not.
Barry Gardiner writes on the rules in Labour List.
I reflect on Mish Raman’s understanding of the rules, in this article on the 2023 NPF on this wiki.
Feb 2024 – Energy and Keynesianism
And finally the £28bn p.a. on Climate Justice and Investment is buried. The Guardian reports “Labour announced the £28bn spending plan in 2021, as Reeves promised to be the UK’s “first green chancellor”. She said at the time the money would be spent on battery manufacturing, hydrogen power, offshore wind, tree planting, flood defences and home insulation.” but will now cut this to £14.7bn, with the bulk of the cuts being in the home insulation programme, that which most immediately impacts the poorest and their energy bills. Ed Miliband remains on board,
Following today’s announcements, Labour have confirmed we will fight the election with a world-leading climate agenda:
— Ed Miliband (@Ed_Miliband) February 8, 2024
Great British Energy 🇬🇧
National Wealth Fund 🏗️
Warm Homes Plan 🏠
British Jobs Bonus 👩🏼🔧
Local Power Plan 🔋
No new oil & gas licenses 🛢️
2030 clean power ☀️ https://t.co/KvnMAeZ1IZ
I comment, “It’s a retreat from Keynesianism, Climate Justice is just collateral damage. And deficit funded expenditure is funded by the private sector, through their bond purchases.” If you read the political background in the Guardian article, you can see the fear in Labour HQ’s hearts that even borrowing to invest is politically toxic. Another point I would make, and have made before, is that if our hopes are in giga-batteries, and windmills then they’ve already gone and the opportunity to invest in clean steel has also probably gone down the toilet.
And renters?
The day after posting these notes, I came across this,
Over the next week, Starmer says that his government will not settle the dispute with the public sector workers, nor repeal the two child cap on benefits. FFS. 😠 This backtracking observed on Politico.eu by EMILIO CASALICCHIO who catalogs the front benchers cowardly supporting the Starmer/Reeves line. Starmer repeats the pledge, or is it an unpledge, at the Tony Blair institute summit, by saying that Labour will need to make hard choices; I like and agree with the Meadway point, the choice is between starving children and taxing the better off.
More intellectually, Richard Murphy critiques/destroys the ONS/OBR analysis of public debt. (I need to read with more care what he says about the BoE assets, but this is pretty spot-on.
Robert Shrimsley, of all people examines the politics of triangulation in the FT (£|(-)), amongst many good points, he says,
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https://www.ft.com/content/c70a0522-aa06-4c47-81ee-95d01ab332f7
Starmer has clamped down on spending promises, recently refusing to guarantee to roll back a welfare cut he once called a “vast social injustice”. He says existing tax levels are too high and, like the Tories, talks up public service reforms to fund improvements.
Shrimsley, FT.
More from twitter
And now we have the benefits/sanctions row
Hunt's monstrous Budget proposal 4 sanctions on DISABLED unemployed!
— Donnachadh McCarthy (@DonnachadhMc) November 25, 2023
FREEZE: them by removing heating support
IMPRISON: them by removing buspass
KILL: them by removing free NHS medicine
WHY is there no outcry against this Murdochian/Daily Mail billionaire medieval fascism?! https://t.co/WI0rb7gD45
As we count down to the election, I collect some notes from Richard Murphy, who has just published a report called Taxing Wealth 2024, I have note three articles from his blog,
- On Public Debt, he says, it is a response to the drivel being put out by the Tories on wrong-footing Labour on the national debt, which neither party seems to understand.
- Wealth Tax, where he argues that there’s more to be raised by tuning a bunch of taxes rather than inventing a new one, including reforming pension investment tax relief which would raise £35bn.
- Student Loans, it’s an inequitable graduate tax, and should go
From Taxing Wealth front page, he says,
This project has turned out to be a much bigger one than I expected when I started on it last summer. It makes substantially larger suggestions as to tax revenues that might be raised than I ever expected even whilst sticking strictly within the self-imposed remit that all reforms proposed should be adjustments to existing taxes that make them fair in the sense that horizontal and vertical tax equity are enhanced. The glossary explains both these terms.
Richard Murphy – Taxing Wealth … an update
I have commented on Labour’s u-turn on the £28bn p.a. Green Investment plan.
I wrote a note on Growth and Brexit and made an xref to it here.