In 1910, 100 years ago this year, people demanded a basic state pension so that no one had to be terrified of poverty in old age. The Tories said we couldn’t afford a basic state pension. They fought tooth and nail against it.

But our great grandparents disagreed. The people of this country came together, and finally, they beat the Tories.

They forced through the people’s budget, and laid the foundations of the welfare state. They showed that the Tories were wrong.

Hurrah for the Liberals. It’s great to see them back in Government. And that’s a wonderfully moving passage, only mildly hindered by the fact that the state pension was introduced in 1909. But still, kudos for a great Liberal achievement.

In 1945, our grandparents, the great generation, returned from the WW2 and insisted on a fairer Britain. The Tories said we couldn’t afford public services. But our grandparents said that our country could no longer afford to allow people to die from preventable illnesses because they are poor. And so the generation who won the war came home and built the NHS and council housing: They built them for their children, and their children’s children. The Tories said we couldn’t afford basic public services. They were wrong.

And every step of the way, the Tory Party opposed every public service. So when today’s Tories say we can’t afford public services, that’s what they told our grandparents, and that’s what they told our great grandparents. And they were wrong then. And they are wrong now.

History is so obviously not your strong point that it would be unkind to belabour the point. But anyway…

Housing – Conservative Party manifesto 1945
In the first years of peace, the provision of homes will be the greatest domestic task.

An all-out housing policy will not only make a tremendous contribution to family life, but also to steady employment and to national health. All our energy must be thrown into it. Local authorities and private enterprise must both be given the fullest encouragement to get on with the job.

National Health – 1945 manifesto
The health services of the country will be made available to all citizens. Everyone will contribute to the cost, and no one will be denied the attention, the treatment or the appliances he requires because he cannot afford them.

We propose to create a comprehensive health service covering the whole range of medical treatment from the general practitioner to the specialist, and from the hospital to convalescence and rehabilitation; and to introduce legislation for this purpose in the new Parliament.

There was a broad consensus on what the state needed to provide after the war, with the differences being on the best means to accomplish it. Atlee believed that centralisation and nationalisation were the way forward; Churchill believed in a more localised, less central system. The suggestion that Churchill was ‘against’ public services is utterly fatuous. But then, this is an utterly fatuous argument.

Ah yes, the old “Tories eat babes” and “debt doesn’t matter” arguments rolled into one. How original. As far as I can tell though, you don’t really know what you are talking about.

Tell me;

How are those countries which have gone the route of unfettered deficit spending faring at the moment? Try the US and Japan for starters.

How big does growth need to be (annualized) JUST to pay for the increase in interest payments?

What is our real national debt, given that public sector pensions and PFI aren’t included? What is the total public + private debt of the UK? (Hint, we don’t have one of the lowest national debts in the world….)

Why are bond yields low? Couldn’t it be that QE has a massive effect? Will bond yields stay low forever? What does it do to govt financing if they go higher? Besides, low govt bond yields has a flip side – its opened up massive deficits in pension funds, which stores up a problem for the future….

Did Stiglitz/Blanchflower/Krugman actually predict the recession? last I checked, none of them did, and in fact Krugman was one of the main advocates in 2002 for inflating a housing bubble (to allow consumers to borrwo against their houses and thus increase consumption) after the the Nasdaq bubble burst leaving the US in recession. How well did that work out for all of us?

[1] dear, oh dear, quoting from a MANIFESTO.

If history has taught us anything it is that we should not waste time bothering too much with what people say, but instead judge them on what they actually DO.

Tories have always been dragged like a recaltrient child toward social justice be it a matter of health, sexual equality or housing.

The only thing for certain is that those shouting loudest for cuts will NOT be personally affected in the same way as those at the sharp end.

And the 1910 all pulling together bit looks a bit odd too. Only 60% of adult men had the vote and precisely 0% of adult women.

So it wasn’t the “majority” that beat back the Tory baby eaters.

“they are addicted to the cut and thrust of unfettered markets which destroyed our economy.”

Strange, I’d never really thought of the Tory Party as the home of anarcho-capitalism. I’m pretty sure in fact that all Tories argue for fetters on markets….it’s just that the differ with Labour etc on what those fetters ought to be.

Surely later comments in the manifesto suggest that support for public services was conditional upon them still being viable after the introduction of Tory tax policy? So while the Tory party made a manifesto commitment to large aspects of Beveridge’s proposed reforms (how could they not given the domestic climate in the post-war years?) it’s questionable whether this would have been followed through in practice. Perhaps this goes some way to explaining the Labour landslide in spite of the apparent convergence you identify.

Adam’s article might be incorrect but it’s astonishingly naive to assume you can read back opinion and future policy (of ANY party) on the basis of an electoral manifesto.
_______________________________________________________________________
“Our war budget has been rendered possible only by the severest taxation pressing heavily on everybody, by borrowing on a vast scale to meet the passing crisis, by huge Lend-Lease supplies from the United States and by generous gifts from Canada and elsewhere. All this cannot go on …

The State has no resources of its own. It can only spend what it takes from the people in taxes or borrowing. Britain is now a nation of taxpayers. Its record of providing more than half of the national expenditure during the last years of the war from taxation is unsurpassed. The willingness of this generation to bear their fair share of sacrifices must, though we hope for relief, be continued …

It will be our aim and purpose to make an early reduction in taxation in a way that will stimulate energy and permit free individual choice. The Government will re-examine the whole structure of taxation in relation to the level at which expenditure will stand after the war, in order to lighten the burden where it presses most, and simplify the tax system.

“How are those countries which have gone the route of unfettered deficit spending faring at the moment? Try the US and Japan for starters.”

http://www.guardian.co.uk/business/2010/sep/20/oecd-us-double-dip-recession ?

3 – What evidence do you intend to use then, if the reported speeches and the election manifesto of the party at the time are unacceptable? Would the Govt White Paper of 1944 be enough – the one introduced by a Conservative minister of health (an OE at that) and setting out the framework for a fully comprehensive, universal health service free at the point of use? Labour, incidentally, supported Willink’s plan until after they were in Government.

None of this should be remotely controversial to anyone with even a semblance of knowledge about 20th century British politics.

http://www.guardian.co.uk/politics/2010/sep/21/nick-clegg-banks-offensive-bonuses

Ha ha, ha,ha. ………..

2: Uh huh. Nope. That’s not how quoting economists works. Get some substance, or get out.

P.S the welfare state isn’t the cause of the national debt, and literally never has been ever in its history.

I fully agree that “government spending is a good thing” etc. but there is nothing in here about how to reduce the deficit over the medium term, and nothing about what will happen if we do not. i.e. there is no acknowledgment of anything from the other side of story. It’s all very well pointing to a low cost of borrowing today, but what happens over the next decade if we keep accumulating debt?

Many of the world’s top economists advocate more aggressive monetary policy and government spending to create jobs, but these same economists would also talk about the need to cut the deficit over the medium term. Here for example is Paul Krugman discussing the dangers of deficits, whilst advocating stimulus now.

Adam, have you taken the decision to exclude anything that even resembles ceding some ground to “the need to cut” side, on the grounds that strong simple messages are better politics? If so, are you sure that people won’t react badly to a message that sounds unrealistic and overly simplistic?

“So the government can borrow at very cheap rates. ”

As I have a good credit rating, so can I. However that doesn’t mean it would be a good idea to use a credit card for my food shopping or rent, and it wouldn’t be a good idea to spend more on these goods each month than what I earm. On the other hand It would be good idea to use cheap rates to get a mortgage, maybe a reliable car that means I can get to work, or even perhaps to invest (borrowing at 2% to invest in something with a rate of return of 4% is clearly a good thing).

I’ve been rethinking the deficit/cuts debate here, and concluding that this a problem caused by our fundamentally dishonest politics. What I’m getting at here is that debt is something that is useful for some things, but not others. One of the reasons why the conservative cuts are going to be so bad is because you simply cannot cut 25% of the budgets of essential services without killing people to put it bluntly. If these cuts were being made in order to fund tax cuts for the rich then they would be politically non-starters. But they are not, they are being used to cut a deficit. I disagree with the speed and focus of the cuts, but in the long run I think it is undeniable that the structural deficit needs to be addressed – although I’d increase the contribution tax rises should make to this. I also think deficit spending over the course of an economic cycle to fund basic services (as opposed to infrastructural projects) is actually dishonest.

For too long British Politics has operated on the basis of a dishonest con that has seen politicians and the media deny that there is a link between taxation and the quality and quantity of public services. So we end up in the situation where deficit spending is used to fund basic services, and when the deficit gets addressed these services suffer. If governments were restricted in what they could use borrowing for (i.e finate projects for infrastructure that could be placed on hold and activited when stimulus measures are needed) then it would force them to be honest and not pass the buck to future governments (something arguably unconstitutional anyway). That way we might have to develop a bit more honesty about tax and spending.

Because pretending there isn’t a long term problem here probably won’t win anyone an election.

It’s always the lefties who are most vocal in their socialism as students/youths, that end up being the nastiest bastards when they actually achieve power.

http://en.wikipedia.org/wiki/Charles_Clarke#Early_life

http://en.wikipedia.org/wiki/Jack_Straw_%28politician%29#Early_life

http://en.wikipedia.org/wiki/Phil_Woolas#Early_life

I look forward to Adam Ramsay one day becoming a reactionary Home Secretary in a future Labour government.

Tim,

“What evidence do you intend to use then, if the reported speeches and the election manifesto of the party at the time are unacceptable?”

I’m not saying they’re ‘unacceptable’ – if I was I wouldn’t have quoted from it myself. I’m only claiming that (a) party manifestos are a poor basis upon which to read the state of opinion & policy intentions within any party (b) a public commitment to a given policy direction (e.g. full employment) in a time of almost unprecedented demand for it doesn’t necessarily contradict the claim that the party in question has a history of opposing such policy directions in general.

Firstly because, as we all know, public commitment in politics doesn’t necessarily lead to practical action. Secondly because a situationally necessary accommodation to a commitment (whether ideological or pragmatic – I assume both were true of different segments of the party in this case) doesn’t magically cancel out an otherwise pervasive history of opposition.

In your desire to lecture Adam on post-war history (unduly simplifying a very complex era for British society in the process) you’ve failed to engage substantively with any of the points he’s actually making.

The one I found interesting was: fiscal rectitude has always been an argument leveled against the welfare state and therefore we should take the current invocations of TINA with a pinch of salt i.e. put the current debate about cuts into an historical context.

Luis,

“Adam, have you taken the decision to exclude anything that even resembles ceding some ground to “the need to cut” side, on the grounds that strong simple messages are better politics? If so, are you sure that people won’t react badly to a message that sounds unrealistic and overly simplistic?”

Surely the same point applies in reverse? I’d suggest this has as much to do with the dynamics of political argument in the internet & 24 hour media age as it does with left & right.

…and by ‘historical context’ I don’t just mean economic history but political & social history as well.

NB one of the first things that might happen if we were to keep accumulating debt and abandon plans to cut the deficit, and it starts looking like we will need to print money to finance the deficit, is that inflation expectations will rise (and inflation will rise too). This will make it harder for the BoE to keep interest rates low. Adam, I presume you are worried about jobs etc. what do you think higher interest rates will do to aggregate demand, hence employment, if tracker mortgage rates start climbing?

Mark,

what is the same point in reverse?

13 – Mine was a response to a&e at 3. Your point was a rather different one – that because the Tory manifesto was committed to trying to lower the overall tax burden, this would have meant that it was not certain of introducing a comprehensive health service.

But the point I was making was that a free to all health service was established Conservative policy from before the election. It really is simply unhistorical to paint Churchill’s Conservatives in the post-war period as being against national health and public housing. Both were central tenets of Tory politics of the time – and the Churchill Govt’s achievements on council housing substantially outstripped Atlee’s, Macmillan derived much of his popularity from his time as minister for housing.

There are numerous sticks to throw against the Tories in the early part of the 20th century. Adam has just picked up the wrong end of them by concentrating on two areas where Tory post-war policy was impeccably liberal – far more liberal in fact than the Labour policy of state ownership and state control.

Luis,

That there’s usually a great degree of over-simplification in the position of arch deficit hawks. By ‘reverse’ I meant the opposite ‘side’ to the one you’re positioning Adam on rather than you in particular.

Comparing state borrowing to a personal credit is literally the most idiotic argument ever raised in these discussions.

@ 6 Mark

Shame US GDP keeps getting revised down….market is expecting roughly 1.6% growth for 2010.

Which won’t be enough to pay for the increase in interest on debt. So whislt GDP may be growing, the debt/GDP ratio (or the more important ability to pay tax/debt interest ration) is simply exploding.

On that note, it is slightly jarring to praise the Liberal Govt of 1906-16 to the skies for its liberalism, and condemn the Tories of 1940-51 for their brutish opposition to social progress, when the same man was among the prime movers of policy for both parties.

It was, after all, Churchill as President of the Board of Trade who introduced the first minimum wage and the first unemployment pension provisions.

Tim,

Apologies, I completely misread that – I thought that you were replying to the OP hence my sense you were missing Adam’s point.

I think what you’re arguing is true but, again, it raises the question of to what extent this was a begrudging accommodation and to what extent it was an ideological commitment. If predominately the former I still think it’s perfectly consistent to talk of a tendency for the Tory party to oppose the welfare state on the grounds that it’s not financially viable.

But given that your point wasn’t actually addressed to Adam’s post, it’s something of a needless tangent so I’ll get back to work and stop procrastinating.

“the Churchill Govt’s achievements on council housing substantially outstripped Atlee’s, Macmillan derived much of his popularity from his time as minister for housing.”

I think Bevan was right about this. He argued for good quality council homes, rather than just building as many as possible as quickly as possible. I’m rather surprised, given what we know now about council housing, to see that you are on the side of building as many as possible, irrespective of quality (though I agree Mac’s approach was popular at the time).

Seventy years on, most of the homes built while Bevan was in charge are highly desirable and good quality, whereas many of those built in the 50s have had to be demolished as part of regeneration schemes.

As Bevan said: “We must not only build quickly, we must build well. In the next year or so we will be judged by the number of houses we have put up. But in ten years we will be judged by the quality of those homes.”

I think what you’re arguing is true but, again, it raises the question of to what extent this was a begrudging accommodation and to what extent it was an ideological commitment.

Well, that’s always going to be a tough one to argue isn’t it? Obviously there were elements in the Tory party at the time that would have been opposed to ‘this sort of thing’ because it smacked of Socialism (boo!). Just as there were elements in the Labour party that wanted to nationalise all industry in Britain and ally with the Soviet Union. Neither branch were properly representative of their party, though each probably had a degree of resonance with the views of members.

But what I think you are missing is what the driving force of the Tory party was in the post-war period. Look at the personnel – Churchill, Eden, Macmillan – these are the epitome of the paternalist Tory. All of them fought in the trenches in the first world war – and the latter two often referred to it as formative in their political views. Macmillan and Churchill in particular were characterised by a profoundly liberal outlook on social issues. None can be dismissed as a crusty reactionary.

It is a characteristic flaw of both sides in the political debate to dismiss their opponents’ motives as generally malign. It’s very rarely a useful or insightful approach.

Luis as usual raises the key problem (leaving aside the question of Labour’s last budget…!!)

Of course economists will differ over the short run, but as has been pointed out even Krugman recognises that consolidation will be required soon-ish.

Two recent reports:

“Advanced economies must take steps soon to address high and growing government debt and deficits even as many have to maintain stimulus programs for the next year or so to deal with lingering effects of the recent global recession, a panel of leading economists agreed at an IMF-sponsored forum.”

http://www.imf.org/external/pubs/ft/survey/so/2010/new042910b.htm

And very scarily on a 20 year view:

“Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future. A number of countries face the prospect of large and rising future costs related to the ageing of their populations. In this paper, we examine what current fiscal policy and expected future age-related spending imply for the path of debt/GDP ratios over the next several decades. Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability.”

http://bis.org/publ/work300.pdf?noframes=1

Also framing the debate as “Tories will destroy” is difficult to sustain when you look at the ACTUAL NUMBERS, which will take govt spending to around 40% of GDP, which is its (ex-crisis) average since 1990, and above where it was throughout Labour’s first term.

Seventy years on, most of the homes built while Bevan was in charge are highly desirable and good quality, whereas many of those built in the 50s have had to be demolished as part of regeneration schemes

Bevan’s problem was the same as Macmillan’s – demand for housing was so high (thanks largely to bomb damage and the extemely high cost of materials) that what was required was volume. Bevan met this by a mix of high quality, low volume housing and quick and cheap prefabs – which formed the bulk of early housing units produced under Labour. Macmillan lowered quality standards to concentrate on building more houses – 100,000 a year more.

Both approaches have merits, and both have drawbacks – it’s all very well knowing that council houses are solid and pretty, but it’s a touch academic if you can’t have one. It would be extremely unfair, however, to suggest that building more council houses than ever before or since meant that the Tory party was opposed to social housing.

*AND* people who hark back to the Atlee administration as proof that we don’t need to worry about Government debt all somehow fail to point out that it ran budget surpluses for virtually the whole of its period in Government.

I agree that we do need to worry about the timing and steepness of public spending cuts to avoid depressing the economy unduly but a current budget deficit amounting to 11% of GDP isn’t sustainable indefinitely and it’s plain silly to suppose that it is.

What matters is how quickly net exports, business investment and consumer spending rise to fill the hole in aggregate demand from the cuts in public spending.

The public finances weren’t on a sustainable footing even before the onset of the recent financial crisis in 2007. Besides that, there are good reasons for reconsidering whether we really need to spend billions on armaments appropriate for the cold war but hardly suited to dealing with terrorism or cyberwarfare. The Trident missile submarines were of no use whatsoever in preventing the 7/7 attacks on the London Tube in 2005.

IMO Martin Wolf takes a sensible position in his piece last Friday: The risks of premature tightening
http://www.ft.com/cms/s/0/ab7cb19e-c1c6-11df-9d90-00144feab49a.html

Adam, I think you’re missing a bit of history here. As others have identified, your analysis of the 1910 and 1945 expansions in the welfare state are simplistic at best.

But what concerns me more is your reference to our great-grandparents and grandparents with no reference to our parents’ generation. And isn’t that where the seeds of our current situation were sown?

To adopt your style, we might as well say:

“In 1997, Labour said that we could have low levels of income and other taxes, while funding consistent investment and expansion of the public sector. They told us that boom and bust was dead. They allowed the city of London to run riot and house-price inflation to run out of control, so that they could reap the tax windfalls which resulted. And people believed their nonsense because it would make their lives better.”

As a result of our parents believing the big lie (perpetuated by all parties I might add) that low tax and good public services are possible, my generation are screwed. We’re left with the choice between a life with ever higher levels of taxation or irredeemably poorer public services, not to mention student debts our grant-reliant parents avoided, no access to the housing market because our parents priced us out and a state and private pensions sector which will before we reach old age while our parents use their influence at the ballot box to secure ever more benefits for the elderly.

While our great-grandparents and grandparents bequeathed a legacy of a better world, our parents took us for everything they could get and left us to clear up the mess.

LDvoter,

I’m not that old, and I voted in 1997, so I doubt that we can entirely blame our parents (Adam’s, and perhaps yours, OK).

Anyway, my concerns about being old and to blame for all this aside, I think Adam’s article is flawed by what is seemingly its central concept (never mind its lack of historical knowledge): “Because the welfare state isn’t money down the drain, but an investment in the civilisation on which our economy is built.”

Leaving aside that definitions of civilisation are very much value judgements, and in this case Adam has clearly decided that welfare equals civilisation, I am confused by the fact he regards this as an investment. The point of welfare is not speculation (which is what investment is) but rather to be a safety net against possible ill-effects of speculation. That was clearly the point behind the major developments in 1909 and 1945-6. Adam then goes on to somehow compare state spending to drug addiction (which is not the analogy he really wants to push I suggest), kind of ignoring that Mr Williams has at least got money is his account to spend. It is possible that Adam believes we should spend whatever we can on welfare at all costs, but otherwise I get no picture of a sustained and reasoned argument about what we do with welfare and why; rather we get the knee-jerk reactions of an angry young man (that is a compliment incidentally) who has not set out his philosophy in order to justify his case.

All the rhetoric about grandparents and not passing debt on to our children ignors the consideration that early steep cuts in public spending risks sending the economy back into recession – which would mean GDP lost forever.

What matters is how soon net exports, business investment and consumption rise to fill the gap left in aggregate demand from the cuts in public spending.

This news report was in early September:

“Economists fear the dangers of a double-dip recession are ‘growing alarmingly’ after the release of the latest ‘grim’ survey of business confidence in the service sector, and evidence of collapsing order books in the construction industry.”
http://www.independent.co.uk/news/business/news/economy-suffers-slowdown-as-double-dip-looms-2070141.html

Rhetoric aside – the article’s point could be better stated as “of course we can afford it, we just have to choose to!” which is pretty unequivically true.

So what needs to be asked if given that we can afford it,

1 – why say we can’t?
2 – why cut?

The answer to 1 is simple.

Tell the public there is no choice and hopefully they won’t later vote for an alternative choice.

The answer to 2 is less simple.

This is a clash of ideology. Simplified – The Tories and Lib Dems believe that growth comes from cutting taxes, wages and so on so that companies have lower costs and can compete internationally. Labour thinks growth comes from high skills and infrastructure and that this makes them competitive. That tends to require higher taxes.

So Labour think that cutting spending will undermine long term capacity for growth, and thus make the deficit worse in the long run – where as the Tories and lib dems think that cutting spending will reduce the deficit in the short run, and open the way to much reduced taxes in future and so greater growth in the long run.

And that is the game being played out. Labour bought forward capital investment and used government funds to support projects so that people stayed in work and so kept their skills. The Tories and Lib Dems are now undoing that to cut spending so they can in future cut taxes. (Indeed they are cutting tax even as they do it – or at least cutting the tax they care most about, ie corporation tax)

Both believe their version of events will strengthen growth in the long term.

What British politics needs now is to start debating those two positions – not wasting energy on a fake war about whether cuts are inevitable. Because in reality there is a balance between the two outlooks that is somewhere between the extremes of Ed Balls’ “cuts not needed” and Cameron-Clegg “massive cuts the only option” stances.

margin4error,

I think you miss a key point in the Conservative/Liberal Democrat belief in growth through lowering taxes, which is that this will allow more money to be spent on growth through skills and infrastructure (along with other things I suspect).

You are in effect contrasting not a low skill/high skill economy (to paraphrase your point to the edge of unrecognisability), but an economy with a low degree of state planning as against one with a higher degree of state planning. Both views accept there is a need for infrastructure and growth, but one believes it is best provided by the market whilst the other believes the state has a much more important role.

You are right there is a debate that should be had (although it was present in the last election when the Conservatives certainly suggested that government was not the best placed agency to effectively direct money (hence the Big Society)), but I disagree with the terms of debate you suggest, because I think you have left out the logical underpinning of the argument you do not favour.

Mark – oh I see, yes definitely the opposing “we must cut at all costs” position is similarly one-sided, too simplistic, and likely to be badly received.

“our grandparents, the great generation”

Don’t you mean ‘those racists, sexists and homophobes’ ?

Just a mo’. The business lobby is saying that public spending on some projects is essential for supporting economic growth – the policy argument is over how to fund the spending:

“George Osborne is being urged by the main business lobby group to bite deeper into welfare and other public spending areas in order to focus scarce resources
on projects that will foster the economy’s ability to grow.

“The CBI, in its submission to the Treasury ahead of next month’s spending review, says infrastructure projects such as road and rail, research and development and education and skills should be treated as priorities for investment.”
http://www.ft.com/cms/s/0/5e7967fa-c41b-11df-b827-00144feab49a.html

It remains true that unless net exports, business investment and consumption rise sufficiently to fill the gap left in aggregate demand by the spending cuts the economy will stagnate.

“Like Robbie with his crack, they are addicted to the cut and thrust of unfettered markets which destroyed our economy. ”

Wow. The market is the economy. The only question is how much damage we want the government to do, in return for government services.

Like Robbie with his crack, they are addicted to the cut and thrust of unfettered markets which destroyed our economy.

http://idlepenpusher.blogspot.com/2010/09/economic-growth-government.html

Watchman

As I said, it was a somewhat simplified outline of the real debate that needs to be had.

You’re right that the Tories and Lib Dems might argue (somewhat implausibly) that lower taxes will to lead to just as good infrastructure and education levels as Labour’s state intervention approach. But education and infrastructure are not just cases of market failure, They are the classically taught cases in every economic lesson anywhere. Market price for education leads to under-utilisation because individuals face prohibitive costs and providers know the benefits may go to rivals. – And likewise for infrastructure because of impracticalities involved in charging. (I think you probably know this stuff, I’ve seen your comments before and you have a good grasp of economics)

obviously Labour could also slightly bizarrely take the reverse journey and logically argue that if their intervention boosts growth, then that would see more market willingness to invest in capital, and greater market rewards and so incentives for greater education levels – which would then afford them the option of cutting taxes. (An option they would, of course, not take because of their view that greater rewards lay in investment)

Hence my leaving out what you label to be ideological underpinnings of both cases – since they aren’t underpinnings. They are weak attempts to say it all works out without any trade off in the end – which is just not true.

Oh, and I should add it isn’t a highskill / low skill choice. Infrastructure spending can boost relatively low skill jobs in regards to manufacturing. Likewise tax cuts for big software firms can generate CG design jobs.

And hence my desire to see a debate not based on a lack of choice – or based on the “false choice” case that pretends there is no trade off. What we need is a debate on what works and which future we want. (Granted the result of which would be a balance somewhere between the extremes of either Balls or Cameron and Clegg)

margin4error,

You’re right that the Tories and Lib Dems might argue (somewhat implausibly) that lower taxes will to lead to just as good infrastructure and education levels as Labour’s state intervention approach.

I would have put that differently – that Labour might argue (somewhat implausibly) that state intervention will lead to just as good infrastructure and education levels as market-led approaches. This is not to deny that state should provide funding for education, roads etc (this is not the argument), but merely to say that beyond certain minima where the state is (currently) the only realistic provider/director of funding, the debate about state spending is wide open, and whilst it is always a trade-off, for the debate to work properly it would need to have clear difference between parties at the election. At least, in the current political climate, that appears quite possible in a few years time.

The problem as I see it with using statements like ‘ The Cuts won’t work, and why we have to fight them ‘ is ‘ won’t work ‘ is not defined. What do you consider by success and failure? The coalition are aiming for a ‘ cyclically adjusted current balance by the end of the rolling five-year forecast period ‘ (2015-16) If they achieve that is this how we should judge them?

The coalition plan to achieve cyclically adjusted balance is based on growth in business investment and an improving British trade balance with the ROW. Therefore, a continuing loose monetary policy is essential. Rather than fighting the last war what you should be asking is there a plan B? What if growth disappoints are they still going to try and balance the budget in the forecast period?

http://blogs.ft.com/gavyndavies/2010/09/17/is-the-uks-fiscal-plan-contingent-on-economic-recovery/

Definitions do matter. Unless you define the definitions of success and failure we are just in the barren landscape of political rhetoric.

The entire debate is misconstrued. The whole idea that there is some financial limit on debt for a currency issuer like the UK is based on a complete misapprehension of how a floating exchange rate fiat monetary system works. For such a system, the only relevant limits are those of infaltion caused by too much demand ion the system. The only purpose of taxes for a currency issuer is to reduce that demand – not to “finance” state expenditure, which is done by the direct creation of money every time the state spends.

The frustrating thing is that even the people who are correct about the suicidal nature of the cuts don’t have a good enough grasp of how things work to reject the basic outlook of the cutters, and thus are left with a meally-mouthed “We need to do this in the short term, then raise taxes in the long term” approach. Look: you will know when taxes need to be raised when unemployment is virtually zero and people have enough money in their pockets to start bidding up prices. Until that happens, there is literally no need for more tax collections, regardless of how much the state is spending or how bug the deficit is.

For a better overview of this, check out this document from Warren Mosler, a financier who as spent most of his life in the banking business and understands it and the monetary system much better than most economists:

http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/

@36

Speak for yourself, perhaps. Mine fought fascism.

42…what level of inflation is acceptable to you? The fact that there seems to be spare capacity in them economy and yet inflation keeps edging upwards surely should ring some alarm bells.

I would imagine that Jim Baird would say any level of inflation is acceptable where full employment is achieved. Current inflation and inflationary expectations are less than half the levels of inflation during the 1980s, which is claimed to be a time of an economic miracle. Therefore, we should not worry about inflation. When it is unexpected it is only a redistributive transfer where one person loses and another gains. We don’t want to get into the field of moralising why we should favour one over the other. Therefore, we should favour policy where the economy is growing at trend growth. If inflation is rising real interest rates are falling which is kinda the point.

45 that’s the line of thinking that says that the USSR was the world’s strongest economy

Have now read everything on this thread. It’s a good article mostly followed by erudite, passionate and convincing comments.

As someone who grew up in a strong Socialist background, I’m heartened to see the ‘ social democrat’ side of the Liberals making a stand for what they believe in.

Perhaps….just perhaps, they are starting an honourable and short journey back to Labour ?

Well, apart from being historically inaccurate and economically flawed, this was a great post!

Cuts won’t work? Ok, well how about instead of moaning about ‘cuts’, why don’t you tell us how much you think the government should be spending? And I mean in pounds, shillings and pence, not just some fluffy “well they should spend more” answer. Exactly how much do you think government should spend? Government cannot spend an infinite amount, so let’s have a figure.

Then once you’ve given your answer, I want you to justify why you didn’t give a higher one. Tell me why you stopped at that amount, rather than another billion or so.

@ George W. Potter

Not accurate. Look carefully at what motivated ‘the gang of four’ to break away from Labour.

David (Lord) Owen, Shirley Williams, Bill Rogers and Roy Jenkins were the ‘pathfinders’ and opportunity for new Labour to be born. Social Democrats by instinct or history are well aware of this.

The only losers in this coalition are going to be the old Liberals and left wing tories.