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On the economy, Labour has been wrong, wrong and wrong again

    Today’s PMQs will probably be more awkward than usual for Ed Miliband. Last week’s excellent labour market figures combined with yesterday’s good GDP figures have added to the pressure on Miliband to come up with a credible, coherent economic plan. This is increasingly urgent because the reality is that on the key issues of the deficit, growth and the cost of living, Miliband’s Labour party has been proven spectacularly wrong.

    In the first two years of this Parliament, Labour opposed the Government’s deficit reduction programme arguing that it went “too far and too fast”. This phrase, which was seemingly repeated in every Labour press release, neatly summed up the party’s economic policy. Labour has long since abandoned that rhetoric and it is easy to see why given that the Government’s moderate fiscal consolidation has indeed led to a fall in the deficit and the public’s view of the quality of state-provided services has actually improved. Ed Balls now promises to (eventually) run a budget surplus and promised no more borrowing to fund current spending. Although as George Eaton makes clear in the New Statesman, the shadow cabinet clearly has no qualms about redefining what actually constitutes current and capital spending; opening up the opportunity for another deficit spending splurge.

    On growth, the infamous “flatlining” hand gesture from Ed Balls signified the Labour position that the Government’s policies had led to a zero-growth economy. Rather embarrassingly for Labour, this has now been completely debunked with growth of 1.9% throughout 2013 and output in Q4 2013 being 2.8% higher than a year earlier. Even if they couldn’t have predicted the magnitude of the rebound, they should surely have realised that growth would return at some point? Instead of arguing that the Government had destroyed economic growth, they should have outlined a positive agenda to build and sustain the recovery.

    Finally, the cost of living crisis argument which Labour outlined last year did gain some traction. It had been based on the premise of inflation exceeding average nominal wage growth but this argument has now also fallen by the way side. Even those who disagree with the Government’s use of the data from the Annual Survey of Hours and Earnings must surely agree that very soon rising nominal wages will outstrip easing price pressures even without taking into account the income tax cuts. What is baffling is Labour’s reaction to these positive developments. Instead of articulating policies to help increase take-home pay, Labour seems to have been caught napping with nothing substantive to combat the Government.

    Labour was unlikely to win the argument on the deficit partly because of the fiscal crisis the country faced in 2010 and partly because its reputation for economic credibility had been shattered when they were in power. On growth, the party should not have staked so much on claiming that the Government had choked off the recovery and on the cost of living, Labour should have realised that their arguments were more a temporary, diversionary tactic rather than a clear economic strategy.

    That is not to say that the economy has fully recovered; fragilities remain, output is still below the pre-crisis peak and there is more to do to kick-start productivity growth. However on the fundamental economic questions, Ed Miliband’s Labour party has been wrong, wrong and wrong again.

    Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

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    Comments

    Anonymous - About 2189 days ago

    Glad to see that someone else has noticed that Labour economic "policy" has just been a series of gimmicks, sound bites, one-liners and childish hand gestures. @northdevontory

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