Interest rates will no longer be used as the main means of controlling inflation under a Green government. That’s just one of the eye-catching proposals in a planned overhaul of the party’s economic policy, to be voted on by members at their conference in October and seen by the New Statesman.
The motion, which gives the most thorough outline yet of how a Green government would manage the British economy, embraces a range of novel ideas and would mark a seismic break with the fiscal and monetary policy approach pursued by chancellors under Conservative and Labour governments of recent years.
The drafters describe it as “a realistic and effective proposal for how we will fund the economic system change required in the UK, without being forced against our democratic mandate by the holders of capital”. It is a key part of the Green Party’s efforts to develop a more robust left-wing programme as it attempts to “replace Labour”.
Motion C05, titled “Fiscal Referees: A New Economic Framework for People and Planet”, is a certified motion which will be heard on the conference floor. It has been developed by the Green Party’s official Economy Policy Working Group. The party has at least 30 working groups made up of party members and accredited by the party leadership to develop plans for government in different policy areas.
Laying out a headline proposal on inflation control, the motion reads: “Interest rates will not be used as the primary tool for managing inflation, and as a result are likely to be significantly lower on average in the long run. Price stability will instead be maintained through the active shaping of markets”.
It then lays out five alternative levers of inflation control to replace interest rates: price controls (“of systematically significant prices”), “buffer stocks of critical commodities”, “strategic taxation to release resources”, credit regulation and strategic public investment.
Members of the policy working group blame “Treasury brain thinking” for Britain’s economic malaise and believe that the Labour government has also fallen prey to this despite a change of prime minister and chancellor earlier this year.
The motion focuses particularly on the party’s approach to fiscal and monetary policy. One figure on the working group said this would radically distinguish the Greens’ economic policy from that of the Labour Party. They told the NS that the purpose of the motion was to provide Green politicians with straightforward answers when they are asked: “how are you going to pay for your plans?” The NS understands that motion C05 is backed by the party leadership.
The motion includes a range of other radical commitments. If passed, it would oblige a Green government to drop Gross Domestic Product (GDP) as a measure of economic policy success because the widely used measure of total monetary value “does not distinguish between socially beneficial production and activity that is environmentally destructive, socially harmful or economically wasteful.”
C05 also recommends “progressively restricting resource use in sectors that generate pollution, ecological degradation or socially harmful outcomes”.
When asked for specific examples of where these resource restrictions might come into effect, a co-drafter said a Green government would prohibit British banks from creating credit for fossil fuel extraction or the potential facilitation of human rights abuses in Israel and Sudan.
The motion would also make official a proposal already floated by leader Zack Polanski to abolish the Office for Budget Responsibility, Britain’s fiscal watchdog, and replace it with an Office of Fiscal Transparency. This proposal was first made by the New Economics Foundation, a think tank.
Instead of fiscal rules, which a leading member of the working group describes as entirely arbitrary and not based in peer-reviewed economic thinking, the party would appoint “fiscal referees” to oversee government spending. “The government will not restrict spending in pursuit of arbitrary fiscal targets,” the motion reads.
The referees would be sit on a new Fiscal Policy Committee (FPC) – a mirror of the Bank Of England’s rate-setting Monetary Policy Committee (MPC) – which would be expected to work towards a Green government’s central economic goals: full employment, a “social foundation” and an economy that stays “within planetary boundaries”.
The Green Party’s economy chapter has not been overhauled since the aftermath of the 2008 financial crisis. An attempt was made last year but it failed to pass. “We were not able to get the feedback that we needed at all different levels,” reflected a Green source who has been involved in the drafting of both proposals. “This time we felt the most necessary change was to our fiscal and monetary policy.”
In light of criticisms raised at last year’s conference some changes have been made, particularly around the terms of trade and imports. A Green source who has worked on the proposals said it was likely to pass “barring an unexpected banana skin”.
The Green Party’s autumn conference is due to commence in Brighton on Friday 2 October.
[Further reading: Zack Polanski faces a fight in Holborn and St Pancras]
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