It’s all very well for Ed Balls to announce that the next Labour government will be ‘ruthless and disciplined’ over public spending and will carry through a zero-based spending review to justify every pound spent. Of course that’s right since nobody in their right mind can believe that the Tory spending cuts can be reversed just like that in an economy still being dragged down by prolonged recession. But that’s not the real point. The real question is, if Labour inherits a budget deficit as large as or even larger than today’s (which is quite likely), how would a new Labour government deal with it? Would it make further cuts a’ la Osborne, or would it adopt a wholly different strategy? If the latter, a major jobs and growth strategy as I hope, it needs to be proclaimed out loud, not whispered furtively behind cupped hands. Nothing would do more for Labour’s popularity than to promote loud and clear that the cuts strategy, including cut less far less fast, had ignominiously failed and would be unequivocally replaced by a growth strategy.
So why is Labour so equally feeble on banking reform? Even the IMF is asserting that virtually nothing has changed since the 2008 crash to prevent another full-scale global banking crisis, so why is Labour silent on remedial action? Vickers’ proposal that investment banks should be separated from retail banks by ‘Chinese walls’ is a fudge, and supporting it as an adequate response as Labour does is a cop-out which no-one in the City believes will work. Nothing has been done about banks that are ‘too big to fail’ and would therefore require another bail-out a second time round. Nothing has been done about derivatives that were at the heart of the global breakdown in 2008-9. Nothing has been done about the banks’ predilection for property (rather than industrial investment), offshore speculation and industrial-scale tax avoidance which are currently bleeding Britain dry. Why is Labour silent?
Then there’s the whole question of re-balancing the economy and Osborne’s ‘march of the makers’ which would be comic is it wasn’t so disastrous. Today it was announced that Britain has just suffered its worst ever current account deficit in the second quarter of this year, and is on target this year for the biggest deficit in traded goods ever which is likely to exceed £120bn, or 8.3% of GDP. This makes a mockery of Tory industrial policy (it doesn’t have any), and shows that financial services can now cover less than half of the deficit in goods. It makes crystal clear that Britain has no sustainable future except via a massive revival of UK manufacturing industry. Why isn’t Labour shouting this from the roof-tops?