Labour’s economic path to power
The Politics of National Recovery
After three years of stagnation, the British economy is showing tentative signs of recovery. Growth may be unbalanced and anaemic, but the threat of a ‘triple dip’ recession has been averted. More voters agree that the British economy is on the road to recovery, a change of mood that is altering the terms of political argument in British politics.
This publication draws on quantitative research conducted for Policy Network by Ipsos MORI to examine how the politics of economic recovery might play out in the run up to the 2015 UK election. While the recovery might potentially reinforce the Conservatives’ argument that by taking tough decisions Britain is now on the path to sustainable prosperity, our research demonstrates that the recovery could actually strengthen Labour’s appeal to the electorate:
- First, voters believe that the recovery is likely to favour the wealthy few rather than ‘families like them’, as the cost of living crisis remains pre-eminent.
- Second, in the wake of the financial crisis, the British electorate favours a tax system where those on high incomes make a greater contribution to fiscal consolidation.
- Third, faced with a choice between tax cuts and investment in public services, voters tend towards protecting key services like health and education.
If Labour is to define the politics of recovery on its own terms, however, it has to address two potentially crippling strategic weaknesses.
- The first is that Labour is generally not trusted to manage the economy, so there is a danger that its wider arguments are not heard by voters. Labour is regarded by voters as a party of fair distribution, not of production and economic growth – yet its entire governing prospectus is predicated on the party’s capacity to return the British economy to expansion.
- The second vulnerability is that voters believe that the Conservatives rather than Labour are somewhat more likely to ensure that Britain is a place ‘where those who work hard can do well’. This is particularly pronounced among the ‘affluent workers’ of southern England who generally favour the Conservatives to advance their living standards.
Based on this polling, Patrick Diamond, vice-chair of Policy Network sets out what Labour should do to win on the economy:
Policy extracts include:
- Rather than squandering the proceeds of a fire-sale of the Royal Bank of Scotland and Lloyds Bank on indiscriminate tax cuts targeted at the wealthy, as the Conservatives are currently proposing, Labour should commit that half of the proceeds of sale will be used immediately to pay down the national debt.
- The other half of the revenues of sale from the banks should be invested in a National Growth Fund designed to support improvements in Britain’s economic potential.
- The growth fund should be boosted by further measures to tax the conspicuous consumption of the London-based super-rich, generating additional revenues that can be invested in the UK’s industrial base especially in northern England, ‘rebalancing’ the British economy. This is the politics of rebalancing not the politics of envy.
– Raise the stamp duty rate on luxury homes worth more than £2 million, generating additional revenuesof £300 million per annum by 2016-17 on current forecasts.
– Raise vehicle excise duty on luxury cars – vehicle exercise duty already raises more than £5.5 billion per annum.
– Commit in the long-term to the imposition of a Land Value Tax (LVT).
- Labour should renew its commitment not to raise the basic rate of income tax. This should go alongside the Shadow Chancellor’s pledge to re-introduce the 10p starting-rate of income tax, funded by the imposition of a mansion tax on properties valued at more than £2 million.
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