As the FT has reported this morning:
Britain's Labour party is planning to more than double the amount it would borrow for capital spending in its first term if elected, the shadow chancellor will announce on Thursday as he lays out the opposition party's financial plans.
John McDonnell's pledge to increase the party's previous borrowing commitment from £25bn a year to £55bn sets up a spending battle with the Conservative party after Boris Johnson officially launched Britain's general election campaign on Wednesday.
Labour's 2017 promise to borrow £250bn over 10 years for a new national transformation fund will now expand by adding £150bn over the first five years – taking the fund up to at least £400bn after a decade with much of the spending front-loaded.
It adds:
Labour would increase net capital investment from £47bn this financial year to more than £100bn a year, using the extra borrowing to invest in transport, energy, housing, education and the NHS in what would be the biggest boost in public sector investment since the 1970s.
Several thoughts.
First, it's not enough to pay for a Green New Deal: that will cost £100 billion a year by itself.
Second, it's good news nonetheless: this is a step in the right direction.
Third, this is entirely fundable using existing personal savings and without any significant tax cost.
Fourth, given the massive underemployment in our economy I think there is the capacity to spend this sum, but I do not doubt the training issue is significant.
Fifth, this means Labour has to abandon its fiscal rule. I simply say that I always thought it would, and am delighted it has. It was always bad politics and bad economics.
This is a good start by Labour. But it is only a start.
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[…] handsome dividends throughout much of this period. My point is that Sajid Javid says that labour should not borrow £100 billion a year now. But allow for inflation and that's what the Tories have done whilst in office. And their attempts […]
This amount of money happens to be very similar to the £435 bn in QE generated to deal with the financial crisis in even less time. Labour could spin this as “If we can find £435bn to save a broken economic system for the good of a few, we can find that much to transform it for the good of everyone.”
Your proposal of harnessing pension funds deserves more attention, but needs to be communicated carefully. I am sure the Tories and assorted media outlets will try to malign it by blurring the line between spending and investment: “Labour wants to raid your savings for their green projects!!”
It is ‘Labour wants to help you save for the planet’
I’d really like to see Index-Linked Savings Certificates come back. If they did that and ring-fenced the money for Green New Deal projects, would that work?
This is so much more effective and simpler
“This is a good start by Labour. But it is only a start”. A journey of a thousand miles starts with a single step. Unfortunately the false narrative of “Junk Economics” as promoted by the Tories, together with their bought and paid for “think tanks” still dominate the airways and the MSM. But when Labour assume office the grass roots (as evidenced by Mr P A Javis on a separate thread) will push for a more radical reappraisal. Present economic theory just promotes the case for the rich getting and keeping all their money. Labour’s economic theory is moving in the opposite direction. This is what petrifies the Tories and their fellow travelers and explains the virulent campaign against Jeremy Corbyn.
borrow for capital spending, borrow £250bn over 10 years, increase net capital investment from £47bn this financial year to more than £100bn a year, Green New Deal: that will cost £100 billion a year by itself.
The above are phrases that I pulled from the the blog. All renewable investment in the Uk has a positive IRR. Investment in health & eduction has an economic multiplier effect and in any case, the investment is always recovered through tax – thus the “spending”, “the costs” the “investments” all have a return in one way or another. One has to see both sides of the equation & I worry that the public is only made aware of one side.
The above is not intended as a criticism – but as an observation.
Agreed Mike
The emphasis is too much about the fact that the expenditure is debt (i.e. ‘a bad thing’) even though it is actually investment that will improve services, infrastructure and create jobs (good things).
Portraying investment as debt – and not explaining how actually it is not debt in a household sense which opens the door to talking about multiplier effects and how the ‘returns’ come back to society’ and not the private banks via tax may very well knock it dead in the water as an election tool.
Only time will tell. This issue of explaining fiscal policy to those spoon fed on the ‘nation as a household’ bullshit is like pushing a dead horse up a hill.
This labour party broadcast was around on facebook and twitter in the run-up to the May council elections this year. It kept reappearing on my facebook page so must have had a fair sized audience. Understanding of how the economy works is beginning to break through among (us) ordinary people. We just need to hear the arguments presented with clarity, as in this little gem of a film. https://labourlist.org/2019/04/ordinary-people-vs-billionaires-labours-party-political-broadcast