An Unconvincing Labour Party—Editorial 2

It remains a distinct possibility that the Labour Party will form the next government.  It is a position it will win because of the chaos in the Tory party rather than because it has won the hearts and minds of the electorate with brave, radical policies.

Labour are prepared to talk in generalities about creating a society where those who work hard will succeed but when pressed for policy details they become uncomfortable.  A primary preoccupation with Labour is appearing fiscally responsible and being concerned with the size of the national debt.  

This creates a major logical problem for Labour since any policy that they commit to will result in an increase in the size of the national debt.  All government spending automatically increases the size of the national debt.  That debt can only be reduced by taxation.  But Labour does not want to be seen as the party of higher taxes.  And so they are constantly limited in what they will be able to achieve.

The preoccupation with national debt and taxation is symptomatic of a more general problem for Labour on what is the role of the state in modern society.  The Tories are for the most part clear that the size of the state should be minimised.  Jeremy Hunt reiterated this position in his economic update to the House of Commons on Monday 17th October: 

“… the Government are currently committed to cutting the basic rate of income tax to 19% in April of 2023. It is a deeply held Conservative value, a value that I share, that people should keep more of the money they earn, which is why we have continued with the abolition of the health and social care levy. But at a time when markets are asking serious questions about our commitment to sound public finances, we cannot afford a permanent discretionary increase in borrowing worth £6 billion a year.”

Labour had signed up to this cut in the personal tax rate when Sunak first floated it.  Indeed, Rachel Reeves stated in an interview in December 2021 that she would like to cut the rate by 2p to 18%.  The Adam Smith Institute were ecstatic.  Reeves did not have the courage to say that what is needed today is a larger state committed to reversing much of the outsourcing to the private sector that has created such unimpressive results in areas like health, house building, education, transport, energy and social care.  Now the Tories have cancelled the proposed 1% cut and Labour have had to sheepishly fall into line.  

When, as seems likely, Labour form the next government in 2024 or earlier, it will remain pre-occupied with appearing as a low tax party.  At the same time it will wish to be seen as the party that reduced the size of the national debt as a  percentage of GDP.  Such concerns will effectively tie its hands and render it incapable of making significant change.

A Labour party committed to low national debt and low tax is a Labour party that has let the Tories decide the framework in which the society’s problems can be solved.

Labour must make the case that increases in the national debt via borrowing from the Bank of England can often have a very good effect on society.  Particularly when there are unemployed workers looking for work.  The Tories increased national debt by some £300 billion to deal with Covid.  Is anyone suggesting that was a bad thing?

Equally Labour should make the case that an increase in taxation is a good thing if taxation is the only way that the society can free up the resources required to implement projects that the society has deemed useful.

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