A radical economic approach for Labour

http://www.theguardian.com/politics/2015/jan/28/radical-economic-approach-for-labour

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The Syriza victory (Radical Greeks vow to see off age of austerity, 27 January) has lessons not only for the eurozone, but for the EU as a whole. The real question for all 28 countries now is: is austerity working? It is dragging the eurozone towards deflation and even in Germany annual growth is now falling below 1%. In the UK all three main parties, tragically, agree that deep spending cuts must continue to be made until the structural budget deficit is wiped out in 2019-20, even though wages have already fallen 8% in real terms, business investment has still not recovered, unemployment is still around 2 million, the trade deficit in manufactured goods at £110bn this year is now the largest in modern history, and household debt is now over £2 trillion and rising. This is not recovery, it’s semi-permanent stagnation.

It’s not even as though the deficit is being reduced by these savage cuts. Because shrinking incomes have now significantly cut government tax revenues, the UK deficit, which is still nearly £100bn, is likely to rise, not fall, in 2014-15 and in future years. Since cutting the deficit has been made the centrepiece of economic policy, why carry on with policies that are manifestly failing to deliver this objective, while wreaking havoc in the lives of a third of the population?

There is an alternative. At 0.5% interest rates a £30bn investment package can be funded for just £150m a year, enough to create more than a million real jobs with good wages within two to three years. Even better, fund public investment to kickstart sustainable growth either through the two banks already in public ownership or through quantitative easing (as the European Central Bank is now doing) or through a special levy on the ultra-rich, whose wealth has grown substantially since the crash six years ago.Michael Meacher MPLabour, Oldham West and Royton

• Polly Toynbee points out (Cameron’s latest tax-cut conjuring is a trick too far, 27 January), drawing on work by Ruth Lupton and John Hills, that coalition policies have done relatively little to reduce the deficit. Instead, the government has doled out the gravy to higher earners, mainly through tax cuts, and financed this largely through cuts in benefits and services for those on low incomes. We need also to bear in mind the 2010 increase in VAT from 17.5% to 20%. For the first time in a generation indirect taxes are raising more than income and capital taxes put together – and indirect taxes hit the poor harder than the rich. Corporation tax has been cut from 28% to 21%, its lowest rate ever, making the problem of getting in enough money to run state services even tougher.

Coalition policies have shown that it is impossible to address the deficit and cut taxes, but increases in personal taxation are always unpopular. Something could be done to increase taxes on the corporate sector and on capital, but it has always proved hard to extract the money from people who can hire top accountants and who are globally mobile. Is it time to think about a move to social insurance for many of our public services, on the grounds that people might be willing to pay the money necessary to keep them going if they believed they were buying rights to something they valued in return?Peter Taylor-GoobyProfessor of social policy, University of Kent

• I am hoping, increasingly against hope, that Labour does not need more than one term in opposition to learn the mistakes of its past embrace with neoliberalism. Polly Toynbee and David Walker clearly set out why the radicalism of Cameron and co needs an equal and opposite radical response from Labour (Cameron’s coup: Has he finished what she started?, 28 January). But this will not emerge as long as Labour only halfheartedly accepts that its love of the City, privatisation and so-called “free” markets was a big mistake; that its tax credit subsidies to low-wage employers was the flip side of the minimum wage; that its policy of “governments can’t pick winners” was palpably false; that its fear of supporting such common goods as council housing was irrational.

What impels me to write is the mention in the article of the Tories’ sell-off of the RAF air and sea rescue service. Who started this? Labour. And when I protested in a parliamentary Labour party meeting against this astonishing but indicative privatisation, the then secretary of state responded with little more than a nod and a shrug. So, if air sea rescue, why not ambulances? If not ambulances, why not hospitals? If not hospitals, well, what’s left? With less than 100 days to go, and now with much attention on the general election, Labour has to work hard to show that it has shed the delusions about the market which once gripped its leadership. But before it can do that, it actually has to recognise they were indeed delusions – and that’s where the evidence is weak, despite an energy price freeze or two.Colin ChallenLabour MP, Morley and Rothwell 2001-10

• As part of my PhD research into education and the free market, I noted and made reference to Margaret Thatcher’s intention to reduce public services to a point where it would be too expensive for any future Labour government to reintroduce or reignite them. In that respect I think that we can say that, yes, Cameron is finishing what she started.Dr M WakelinAlsager, Cheshire