George Osborne prior to an EU Economic and Financial Affairs meeting on 6 May, 2014 at EU headquarters in Brussels. Photograph: Getty Images.
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Why is the alternative to austerity kept such a secret?

An ambitious growth plan could be implemented with no public borrowing at all. 

The Tory attack lines for the next general election are already crystal clear. They run as follows. "Labour left a dreadful economic mess which we had to clear up the way we did.   It’s been painful, but we were all in it together.  We always had a long-term economic plan, and now it’s come good. We have a strong economic recovery, the fastest of any industrial nation. So do you want to give the keys back to the people who caused all the trouble in the first place?" Every one of these claims is untrue, but they have gained momentum because none of them has been contested.

Labour didn’t leave behind an economic mess; the bankers did. In the Labour pre-crash years, the biggest deficit was 3.3 per cent of GDP, whereas the Thatcher and Major governments ratcheted up deficits bigger than that in 10 of their 18 years; and whilst Thatcher-Major produced surpluses in two years, Blair-Brown achieved surpluses in four. We were not all in it together when the burden of the cuts was split 80 per cent on reduced benefits and only 20 per cent on higher taxes, and even the higher taxes were mainly the VAT increase which impacts highly regressively on the poor. Nor is it a fair carve-up of the post-crash cake that average real wages have fallen 7 per cent while the richest 1,000 in the UK population, according to the Sunday Times Rich List, have doubled their wealth over this short period to more than half a trillion pounds.

Osborne’s long-term economic plan was to shrink the public sector so that the private sector could expand to fill the space, but that didn’t happen. Such growth as there has been has come from (dangerously) inflating the housing market though Help to Buy and from easing some of the capital cuts he had unwisely made earlier. And as for the present "recovery", it is far too dependent on rising consumer debt and is not sustainable when wages, productivity, business investment and net exports all remain negative.

But the biggest fib in the Tory attack plan is that they had to clear the huge deficit by prolonged austerity. Alistair Darling’s two stimulatory budgets in 2009-10 brought down the deficit sharply from £157bn in 2009 to £118bn in 2011. Thereafter, Osborne’s austerity budgets have reduced this to a trickle to reach £108bn in 2014. Not much doubt, then, about the quickest and most effective way to cut the deficit.

So how would a growth plan work? Initially it would use public investment, till there is a strong enough recovery to encourage private investment to flow back in, directed in consultation with industrial leaders at energy, transport and IT infrastructure, house-building, and laying the foundations for a low-carbon economy. The obvious objection is: how will it be paid for? The conventional answer is that, with interest rates at 0.5%, a hefty investment package of £30bn could be purchased from the markets at the bargain basement cost of £150m a year.

But if that is still too much for some conservative minds, the same investment could be secured in three other ways with no increase in public borrowing at all. A further £25-30bn tranche of quantitative easing, tiny compared to the £375bn already issued, could be directed not at the banks as before but at agreed industrial projects. The publicly owned banks RBS and Lloyds could be instructed to prioritise their lending on industry, rather than speculation abroad or property. And the very rich 1 per cent who have monopolised 90 per cent of the gains since the crash could be subject to a special super-tax to help contribute to tackling the nation’s debt, which some of them helped to create and from which they have most benefited.

That of course is only the start of generating growth that is really sustainable and redressing Britain’s deep structural problems. The UK manufacturing base has been hollowed out leading to a current deficit on the manufacturing account of over £100bn a year. The economy has only been kept going in its steady decline by ever-higher consumer borrowing. Income growth per head has almost halved in the 30 neoliberal years since 1980 compared with the 30 years before. And the banks not only exploited the deregulated system, but blew it up.

A major expansion of high-tech manufacturing, with jobs and skills that go with it, has therefore to be a central goal of the next government. That will require smaller, more specialist banks as well as much greater public control of the money supply when at present only 8 per cent of the nation’s capital goes into productive investment. A new relationship between state and markets is needed which is neither centralised planning nor deregulated markets, but which tries to learn the lessons of highly successful post-war Asian economies among others. And the excesses of inequality need to be addressed by giving other stakeholders and employees, as well as shareholders, a voice in determining pay.

Michael Meacher is Labour MP for Oldham West and Royton, and was environment minister from 1997-2003.

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The biggest divide in politics is not left against right, but liberals against authoritarians

My week, including a Lib Dem membership rise, The Avalanches, and why I'm putting pressure on Theresa May over child refugees.

It is a boost for us that Nick Clegg has agreed to return to the front line and be our Brexit spokesperson. I hadn’t even had a chance at our meeting to make him the offer when he said: “Before we start, I’ve been thinking about this and want to take on the fight over Europe.”

With Labour apparently willing to give the Tories a free pass to take us out of Europe, the Liberal Democrats are the only UK-wide party that will go into the next election campaigning to maintain our membership of the EU. The stage is remarkably clear for us to remind Theresa May precisely what she would be risking if we abandon free trade, free movement, environmental protection, workers’ rights and cross-border security co-operation. More than a month on from the referendum, all we have heard from the Tories is that “Brexit means Brexit” – but they have given us no clue that they understand what that means.

 

Premature obituaries

Not long ago, the received wisdom was that all political parties were dying – but lately the supposed corpses have twitched into life. True, many who have joined Labour’s ranks are so hard left that they don’t see winning elections as a primary (or even a desirable) purpose of a party, and opening up Labour to those with a very different agenda could ultimately destroy it.

Our experience has been happier: 20,000 people joined the Liberal Democrat fightback in the wake of the 2015 general election result, and 17,000 more have joined since the referendum. We now have more members than at any time this century.

 

Breaking up is hard to do

Journalists have been asking repeatedly if I want to see the break-up of the Labour Party, with moderates defecting to the Liberal Democrats. I have been clear that I am not a home-wrecker and it is for Labour to determine its own future, just as I focus on advancing the Liberal Democrat cause. Yet I have also been clear that I am happy for my party to be a home for liberals of whatever hue. I enjoyed campaigning in the referendum with a variety of progressive figures, just as moderates from different parties shared platforms in 1975. It struck me that far more unites us than divides us.

That said, not all “moderate” Labour figures could be described as “liberal”, as John Reid demonstrated as Labour home secretary. The modern political divide is less left v right than authoritarian v liberal. Both left and right are looking increasingly authoritarian and outright nasty, with fewer voices prepared to stand up for liberal values.

 

What I did on my holidays

Time off has been virtually non-existent, but I am reading A Wilderness of Mirrors by Mark Meynell (about loss of trust in politics, the media and just about everything). I’m also obsessively listening to Wildflower by the Avalanches, their second album, 16 years after their first. It’s outstanding – almost 60 minutes of intelligently crafted dialogue, samples and epic production.

During the political maelstrom, I have been thinking back to the idyllic few days I spent over half-term on the Scottish island of Colonsay: swimming in the sea with the kids (very cold but strangely exhilarating ­after a decent jog), running and walking. An added bonus is that Colonsay is the smallest island in the world to have its own brewery. I can now heartily recommend it.

 

Preparing for the next fight

The odds are weirdly long on an early general election, but I refuse to be complacent – and not merely because the bookies were so wrong about Brexit. If we have learned one truth about Theresa May as Prime Minister so far, it is that she is utterly ruthless. After her savage cabinet sackings, this is, in effect, a new government. She has refused to go to the country, even though she lectured Gordon Brown on the need to gain the endorsement of the electorate when he replaced Tony Blair. Perhaps she doesn’t care much about legitimacy, but she cares about power.

You can be sure that she will be keeping half an eye on Labour’s leadership election. With Jeremy Corbyn potentially reconfirmed as leader in September against the wishes of three-quarters of his MPs, Mrs May might conclude that she will never have a better chance to increase her narrow majority. Throw in the possibility that the economy worsens next year as Brexit starts to bite, and I rule nothing out.

So, we are already selecting candidates. It is vital that they dig in early. As we are the only party prepared to make the positive case for Europe, such an election would present us with an amazing opportunity.

 

Sitting Priti

David Cameron pledged to take an unspecified number of unaccompanied children from camps across the Continent. I am putting pressure on Theresa May to turn that vague commitment into a proper plan. Having visited such camps, I have been fighting for Britain to give sanctuary to a minimum of 3,000 unaccompanied children, who are currently open to the worst kinds of exploitation. We have heard nothing but silence from the government, with underfunded councils reporting that they are not receiving the help they need from Whitehall.

Meanwhile, it remains government policy to send refugees to Turkey – whose increasingly authoritarian government has just suspended human rights protection.

As if all of this were not grim enough, we have a new Secretary of State for International Development, Priti Patel, who has said that she thinks aid should be used largely to promote trade. As someone who wants our country to be respected around the world, I find this plain embarrassing. Actually, it’s worse. It’s shaming. As with Europe, so with the world: the ­Conservative government is hauling up the drawbridge just when we need more than ever to engage with people beyond our shores.

Tim Farron is the leader of the Liberal Democrats. To join the party, visit: libdems.org.uk/join

Tim Farron is leader of the Liberal Democrats.

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue