Will Hutton and Mariana Mazzucato 

Labour’s manifesto: economic experts’ verdict on its radical vision

Economic experts on the pros and cons of the party’s ambitious policy programme
  
  

Jeremy Corbyn launching the Labour party manifesto last week.
Jeremy Corbyn launching the Labour party manifesto last week. Photograph: Christopher Furlong/Getty Images

Mariana Mazzucato, professor and director of the UCL Institute for Innovation and Public Purpose:

The British economy faces a multitude of challenges regarding inequality, productivity and financialisation – all homegrown. Most of the financial sector (close to 80%) fuels finance, insurance and real estate rather than the productive capacity of the economy. And overall, the economy is not growing through investment, but private debt-fuelled consumption, putting the ratio of private debt to disposable income back at the level it was before the crisis. And that, not public debt, caused it.

This means we need to shift gear if we are to avoid another crisis, and fuel the economy through investment. Interest rates are low, but rather than investing in easy “shovel-ready projects”, there is an opportunity to use the array of policy tools to transform the economy towards investment and innovation with a green direction.

In this respect, the Labour party should be applauded for talking about a “green industrial revolution”. But a real green new deal, one that moves the economy from being extractive to one that is productive with a green direction, cannot be half-hearted. The initial plans for net-zero emissions by 2030 were disappointingly watered down.

But the 10-year green transformation fund is a good start and will cost £25bn a year. The problem is not one of short-run cost but whether its structure will create long-term growth and profit opportunities, upgrading energy, transport and other networks. The ambition must be to create a green trajectory in all sectors and this is best done not necessarily via nationalisations but by getting symbiotic (versus parasitic) “deals”. An example of this saw the German steel industry lower its material content through conditions that the government set. So, here too, there should be fewer backroom deals, fewer handouts and more transformation with a public purpose.

Labour is also planning to spend £30bn a year in a social transformation fund to put back into the NHS, schools and social services the money that was siphoned out from 10 years of austerity. The levels of homelessness and teenage knife crime are an embarrassment to the pretence of being a civilised country. Beyond the cost to human lives it also makes poor long-run economic sense as it costs more to imprison someone than to educate them

Between now and the election, the debate should be less about the “money tree” accusation and more about the detail of the plans. Policies should be lined up towards concrete societal goals, and increasing the expectations of future growth opportunities by business is key to getting the economy on track.

Business must also pay its fair share of tax, but the narrative must move from a punitive one to one that is really win-win: invest in people so they can all create value, invest in communities so they flourish, invest in innovation to stimulate productivity and give it all a green direction. This will bring back growth, opportunities, competitiveness and … civilisation.

Will Hutton, principal of Hertford College, Oxford, and co-chair of the Purposeful Company:

Labour’s manifesto is less aimed at winning an election in an unforgiving electoral system with a ferociously rightwing press, more at creating the talismanic document for the leadership contest that will follow what is almost certain defeat.

Jeremy Corbyn’s successor will have to stand by it to have any chance of winning the leadership, given the preponderance of Momentum and activist voters, so sealing the left’s control of the party. Social democracy is to be expunged from Labour’s ruling bodies – and an amalgam of green statism, top-down socialism and social democratic remnants is to take its place.

Big objectives – confronting the environmental emergency, the vital need to lift investment, the passion to lower inequality, the extension of universal free broadband and at last a commitment to a second referendum – must be wholeheartedly endorsed, along with the party’s willingness to spend, tax and borrow to achieve those ends. But the party’s aim must also be to win, and do so with a feasible policy framework. On those grounds it is hard to be upbeat about the manifesto.

What was required was a careful development of Labour’s 2017 manifesto, prioritising the need to raise investment on targeted programmes with feasible tax and borrowing increases, along with a more forensic approach to the reshaping of capitalism and an unambiguous commitment to Remain. The 2019 manifesto, notwithstanding the virtue of its ambition, stretches even the kindest observer’s credulity to the limit.

The doubling of 2017’s already ambitious borrowing and taxation targets to fulfil a faux “every wish granted” radicalism means that suddenly one of Johnson’s “lies” – that Labour will lift corporation tax to extravagant levels – turns out to be uncomfortably near the mark.

There is a programme of nationalisation more far-reaching than even Attlee’s. Other ideas have been not been considered – for instance, the social democratic proposition to take privileged £1 shares in every privatised utility to create a network of public benefit companies, constitutionally obliged to produce only for the public good, for a total outlay of a mere £100.

As a result the party has unnecessarily gifted its enemies the juiciest of ammunition. The Institute of Fiscal Studies has an endemic suspicion of spending, taxing and borrowing – but don’t hand it the chance to trash your plans. Nor are the CBI and Financial Times ever going to be active allies: but don’t hand them the chance to say you are going to break the economy. Reform the private sector, certainly, but it is nonsense electorally and in terms of economic fact to characterise so much of it, and those who run it, as the enemy of the people. With the party stagnating at 30% in the polls, it is thus driven back to its heartlands.

The last hope is that the country no more wants a Johnson government – and swing voters, knowing a Corbyn majority government is now close to an impossibility, will be readier to vote tactically to create a hung parliament and the bringing back of Labour’s laudable aims to reality. If not, Britain will leave the EU in January and the future of progressive, social democratic politics for the next decade is dire.

 

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