Labour’s favourite think tank The Fabian Society has released proposals for a tax-and-spend manifesto from 2016 onwards. A commission set up by the think tank has spent the last year reviewing the country’s economic situation, and has come up with the following recommendations:
* A 1% above inflation rise in public spending from 2016
* Tax rises for high earners, possibly including cut in tax relief on pension contributions
* £5bn of welfare cuts, including curbs on basic state pension and disability benefits
* £20bn a year of higher spending targeted on building projects and skills
* A significant rise in the national minimum wage to bring in further tax receipts.
Although Labour made attempts to distance themselves from the report today, there can be little doubt that this is the sort of plan they would dearly like to enact. During conference season, Miliband gave the party a hefty nudge to the left with reassurances to his party faithful that he intends to ‘bring back socialism’. And Ed Balls, the shadow chancellor, has promised only to follow Coalition spending plans in 2015/16.
With the national debt racing upwards at a dizzying pace minute by minute, the report’s only major success is that it illustrates how out of touch with economic reality the Fabians really are. Can they really not understand that increasing the minimum wage would result in fewer jobs and higher commodity prices – further exacerbating the cost of living crisis? Is it really that difficult a concept to grasp? The whole report is a triumph of hope over experience.
What’s more worrying is that the Labour top brass seem to share in their enthusiasm for kamikaze economic policy, even if they don’t want to admit as much directly. Ed Balls is still refusing to apologise for the last fiscal mess he left behind – there can be little doubt that he’s itching to get into the treasury and start doling out the cash again like it’s going out of fashion.
But the Conservatives are no better. For all Cameron and Osborne’s grand talk of austerity, the deficit (let alone debt) reduction has stalled, with spending on the rise again at £119b in 2012/13; £120b in 2013/14. Beyond that the plan is to eliminate the deficit over the next government, to 2020 – but that was the original plan for this government. Why hasn’t Osborne managed it? Simples: he hasn’t yet gotten around to implementing austerity. Put simply, Osborne plans to cut less from the government budget in eight years (-2.8% between 2010 and 2018), than Dennis Healey managed to cut in one (-3.9% in 1976/77). This is a pity as the public was behind cuts following all the austerity rhetoric; that goodwill is being squandered as people feel the pinch but don’t see the country’s economic outlook improving.
Neither party will acknowledge the damage done to our economy through being members of the EU, both in terms of direct payments, and indirectly through regulation and the extra costs high immigration places on public services. Neither party has any real interest in allowing people to keep more of the money they earn in order to give a real boost to the economy – both would rather take money out of the economy, call it an investment plan, and wonder why their plan isn’t working. Unless UKIP can get enough MPs into Westminster in 2015 to broker a coalition deal, the outlook for Britain over the next decade is very bleak indeed.