Big State or economic growth? Both Labor and the Conservatives must decide
Just as the Conservative leadership race sparked a debate over the future direction of government, Labor is taking the opportunity to rethink its own policies. Sir Keir Starmer, the leader of the party, yesterday presented a new economic approach aimed at breaking with Jeremy Corbyn’s recent leftist strategy which cost Labor dearly in the 2019 general election.
Much of that year’s manifesto was scrapped, including promises to renationalise water and electricity, although socialist red meats like imposing VAT on independent tuition fees remained for l instant. The quasi-Marxist, highly taxed and centralized state that was envisioned at the time was replaced by a more careful and cautious strategy. Sir Keir said there would be no more magic money trees, no more unfunded spending commitments and a relentless focus on investment and growth.
Those of a skeptical nature may scoff given Labour’s past debauchery, but this appears to be a serious attempt to reposition the party on the center ground on which Tony Blair won three elections. The new economic plan follows Sir Keir’s recent statement that Labor would not seek to return to the EU or the single market in any form. As they wage war on their own file and against each other, conservatives need to beware.
In truth, however, there was nothing particularly radical about Sir Keir’s speech. His big announcement was to establish an industrial strategy council on a statutory basis as another talk shop directing business would be more successful than its predecessors like the National Economic Development Council in the 1960s.
Her assessment that the biggest problems are lack of growth and low productivity is that of Liz Truss. His solution is to reduce taxes, borrow to finance expenses, but also to establish real business zones in the freeport zones to encourage the “race to the top”. Sir Keir wants to ‘restart’ the economy without defining the specific mechanisms to do so.
What both sides avoid is acknowledging why there is no growth – because the state takes away too much productive capital from the country. Ms Truss is set to do so, but she wants social spending to stay roughly where it is now and place the burden of paying it on future generations. Labor and the Conservatives now have to choose: they cannot have a big, all-encompassing state and decent economic growth.