By 2015, for 13 years in a row the British state will have spent more than it raised in taxes. The interest we pay on that debt will have risen to ?60bn a year ? twice the size of the tax credits budget ? and will continue to rise unless that government takes determined action. 2.9 million children, up from 2.5 million in 2010, will have entered relative poverty according to the Institute for Fiscal Studies.
Some decisions in economics are easy. Would you like the economy to grow? Would you like higher wages and lower prices? Should we reduce unemployment? The answer is the same whether you are Labour, Tory or a Liberal Democrat. Once you have made the decision, getting that growth or reducing that unemployment is then very complicated: requiring abstract theories and hard-to- interpret data.
But there are also choices that are difficult, not because they are complicated, but because they mean weighing different risks and choosing between different people.? One choice is whether you take risks in the hope of higher growth.? More bank lending will tend to be riskier but better for growth.? Reduce public debt and you make the economy more resilient because you increase our capacity for short term spending to create jobs when times are tough ? but is the associated pain, as the public spending squeeze continued into the next parliament, a price we would be willing to pay in the short term?? Targeted tax cuts or government backed loans can help support industries at a crucial moment in their development while spending on infrastructure can raise growth rates overall.? But growth is not guaranteed: sometimes these risks will not pay off and money which could have been spent on reducing poverty has been wasted.
Even harder are the choices where we have to ask people we like to work harder or longer or to live in a community that is changing in a way they do not like.?? Such demands ? whether for higher taxes, more housebuilding, more airport capacity or more immigration ? might be necessary to achieve levels of growth or social goods like a reduction in child poverty.? But, unless you dislike an awful lot of people, it is very unlikely that such demands can be confined only to people you do not like and still be enough to meet all of Britain?s economic challenges.? Similarly, we might want to reshape the economy in some way, but what price ? in terms of lower growth or new powers being sometimes misused ? are we ready to pay?
As a political movement, there is not a huge amount we can do right now to improve the quality of the technical advice the next Labour chancellor receives. What we can do is decide where we stand on the tougher, riskier decisions. Build a consensus for a decision, and the next Labour chancellor might be able to take it and survive the inevitable political pain of that choice?s downsides. Leave the argument until you arrive in government and they ? and we ? might not.? You do not need a qualification in economics to answer these questions, but trying to answer them is a minimum qualification for those who aspire to change a country.
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Steve Van Riel is a political consultant at Centreground and was Labour?s director of policy at the 2010 UK general election. His Purple Paper, The economics questions that no economist can answer for you, can be downloaded here
economy, growth, infrastructure, real choices
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