Labour’s campaign on the cost-of-living-crisis has clearly struck a chord. People know that – whatever the Treasury may claim – it has been getting harder to cover all their costs as prices rise and wages fall. Raising living standards for the long-term will be a huge challenge, particularly at a time when getting the deficit down means that there is very little money around. But with the right mix of policies I believe that we can do it.
Paying down the deficit is a necessary part of that mix. The Tories’ failure to balance the books in this Parliament, as they had promised, means that a Labour government will have to finish the job. Ed Balls’ commitment that Labour will get the current budget into surplus as soon as possible, and get the nation’s debt falling in the next Parliament, gives a firm foundation for the long-term reform we need.
And that deficit reduction must be done in a fair way. At a time when the incomes of ordinary families are falling, the priority should not be tax cuts for the highest earners, but help for those on middle and low incomes. The Tories were wrong to cut taxes for the top one per cent and we now know that over the three years that the 50p tax rate was in place, those with incomes of £150,000 and above paid nearly £10bn more in tax than thought when George Osborne chose to cut it. Restoring the 50p rate will ensure that everyone is making a fair contribution to paying down the deficit.
But while getting down the deficit is necessary, it is not sufficient. We also need to take some long-term – and difficult – decisions to change the way our economy works. Only then will we raise productivity and living standards. This is at the heart of my review into how we sustainably grow the economy. My work has taken me up and down the country and I’ve been struck by the creative energy which can drive our economy if only we can tap into it.
How can we do that? Devolving the right economic powers to our cities and regions will be key. They are best placed to make long-term decisions based on the potential of their area. Providing the right funding networks for small but growing businesses is also vital. This is partly about reforming our banking system so that it is competitive and focused on the needs of the businesses they serve, and it is also about finding innovative ways of linking those with the money to those with the ideas. Underpinning it all we need an infrastructure system which is modern and focused on long-term growth.
None of this is easy. Getting the deficit down will be tough. Devolving decision making and investing in infrastructure will at times be unpopular. But I believe that with a fair deficit reduction plan and long-term economic reforms we can raise living standards for all.
Andrew Adonis is shadow infrastructure minister and is leading Labour’s growth review