The Shadow Chancellor and the government’s debt interest payments
The following is a statement in response to recent media comment on the public finances, signed by 37 economists as at 30th November 2017.
It can be downloaded here as a pdf.
Andrew Neil of the BBC Politics programme recently challenged the Shadow Chancellor, John McDonnell, on the likely cost in interest payments of additional public borrowing. Mr Neil suggested that current debt interest payments are estimated at £49 billion, and rising. His use of £49 billion was misleading, as it included £9 billion owed by the Treasury to the Bank of England (BoE).
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At the mercy of the profit motive?
Anwar Shaikh has argued that a condition for the success of macroeconomic stimulus is the maintenance of an adequate rate of profit. My first comment is merely to second his argument.
But I need to comment on Shaikh’s apparent pessimism. On reaching the end of his epic Capitalism, it is hard not to be slightly disappointed that the only prospect he offers us is the better management of this system, whereby the over-riding imperative is to ensure the adequate repression of the wage share. There are alternatives - promising paths to follow even within the context of today’s mixed economies, and not only “after the revolution”.
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The Rate of Profit and its Impact on Investment and Growth
A central tenet of classical (and neoclassical) economics is the profit-led character of capitalistic economies. This means that, in these views, the presence of a high rate of profit is held essential for promoting investment and growth.
However, this commentary argues that the supposed necessity “to restore the rate of profit” in order to ensure investment and growth is unrealistic, and dangerous for the building of a progressive economy.
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Labour’s Vision & the Presentation of Policy
For a Labour government to make a substantial improvement in society in which we live – reducing inequality, discrimination, deprivation and creating more equal opportunities for children – it will need to win not just one, but a series of elections. Even to reduce Britain’s income differences to the level of the Scandinavian countries is a long-term task. It requires cutting in half the ratio of the richest to the poorest 20 percent of household incomes.
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Comments on Labour’s 2017 Manifesto
It would be helpful for the next Manifesto to distinguish between current and capital budgets. This is done in UK budgets, as well as being a common business accounting practice. It might make Labour more recognizable to the corporate bean counters and their wannabes. It should be clear that the Manifesto seeks to balance the operating budget but incur debt for capital projects that generate a long-term public return (education, health, infrastructure, R&D, and so on).
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Labour's fiscal choices
Let us assume that the next election will be within the year. The Labour Manifesto for the June 2017 election attracted enormous interest because far from being an extreme Left one, it was in line with the Labour tradition. We pledged to spend more on public services and benefits to correct years of austerity. But we also explicitly showed where the extra revenue would come from to finance the deficit.
In the Manifesto this mixture of higher spending and higher taxation should be maintained. We should reject austerity but not fiscal responsibility.
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Tackling inequality: policy framework for a Labour Government
The Equality Trust would like to see an explicit commitment to inequality reduction anchored in:
- an inspiring and explicitly branded, and relentlessly communicated, theme of renewing the UK by making it materially more equal and fairer, and
- a comprehensive, long-term Inequality Reduction Strategy to which the following policies could contribute. This would require inequality reduction to be “baked in” to the UK so that it could not be easily reversed.
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Welcome to our new Progressive Economics website
First, a warm welcome to our new Progressive Economics Group (PEG) website – and we hope that readers will find the site good to use, and find proposals and discussions on the site to be stimulating. The aim is twofold.
First, to provide a forum for the offering and discussion of policy solutions to economic-related problems and issues, based on social democratic principles - the "policy brief" section.
Second, to offer a place for you to put forward comments, critiques or ideas for further development in relation to policy briefs that have been posted - this "Commentary" section.
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