A recent report – stemming from compass and the New Political Economy Network – entitled ‘Plan B: A Good Economy for a Good Society’ attempts to outline where the left should be on economic reform – and offers some useful alternatives to the current Conservative government’s programme of public sector cuts etc.
The starting point of ‘plan B’ is that the government’s present ‘Plan A’ is not working to tackle our economic problems – The Tory’s ‘deficit reduction strategy’ is to reduce public spending by £130 billion over five years – which means drastic cuts in public services – There is growing evidence that this isn’t working – the IMF now even predicts that such measures are insufficient to boost our economy – as well as the fact that ‘In every case where governments have pursued austerity measures to stave off the threat of the bond market, the ensuing contraction in their economies has increased market doubts about a default, leading to higher interest rates and therefore a vicious cycle of economic decline.’
Plan B calls for far reaching, yet not especially radical (to my mind at least) reforms of the economic system – stating that ‘The only viable economy of the future is a green economy and one that recognises that gross domestic product (GDP) is not a sufficient measure of economic performance. Just some of the economic proposals put forward include – It includes both short term and long term proposals – here are the short term proposals!
Short Term Emergency Measures to address our current economic problems
- Maintaining present levels of government expenditure rather than cutting – which is seen as necessary to avoid a ‘double dip’ recession.
- Quantitative Easing (this basically means the government increases cash flow through issuing bonds) to create a ‘New Green Deal’ – So far since 2009 the government has released £275bn through ‘quantitative easing’ – but this has gone straight to the banks who have in turn invested most of this in international commodity markets rather than lending to UK businesses and stimulating economic growth. Instead – Plan B argues that governments should be raising money to be invested in the two items below
- Firstly, training a carbon army – to be employed in such things such as making houses more energy efficient – not only will this involve creating more skilled jobs but also have the effect of saving people money on energy bills, which in turn can be ploughed back into the economy.
- Secondly money should be used to Cancel out certain Private Finance Initiatives – £50bn spent now can save £200 bn in the long run – a particular favourite of mine
- Raise the incomes of the poorest – through increasing benefits and tax credits rationale here is that these are the people who will spend money – thus stimulating economic growth
- Taxing financial transactions – to avoid the destabilising effects such transactions can have on national economies – this is pretty much in line with what the Robin Hood Tax guys are saying. The amount that could be raised here is staggering –
Research on the possible revenues from a financial transactions tax published by Tax Research LLP in 2010 suggested that total global yields from a tax of one half of a basis point (one 200th of 1% or 0.005%) on spot and derivative foreign exchange dealing would raise approximately $33 billion annually, while a tax at a similar rate on exchange-traded and over-thecounter bond, gilt, derivative, swap and other trades could yield approximately $118 billion per year.30 Obviously these are global figures, but the large volume of trades taking place in the UK suggests that the UK’s share of this revenue would be substantial.
(On reflection, no. 6 appears to be a longer term goal – along with the idea of combating the £70bn the UK loses through tax dodging….)
I’m not sure how palatable these arguements will be with the general public, some are clearly more sellable than others – the cancelling out PFIs for example – while the raising the income of benefit claimants – I can’t see that winning popular support – but at least this is a starting point for thinking about short term alternatives to the Tory disaster zone.
The rest of plan B – which is 40 pages long in total – details the longer term vision for a fairer economy I’ll include details of the longer term measures later