“It’s the economy, stupid!”

We’ve heard a lot about immigration in the wake of the Eastleigh by-election, particularly from the UKIP scaremongers and their fellow-travellers. But I’ll bet people are still more concerned about the flatlining economy. The UK needs stimulus in order to recover. If you keep cutting, you remove the opportunity to grow. I’m better on microeconomics than macroeconomics, but it seems clear to me that if you invest in both analogue and digital infrastructure, especially the digital, the economy will recover quickly. Companies seek debt or equity, or both, when they want to develop or expand – why doesn’t this country do the same?

Today’s Guardian features a letter from Michael Meacher which outlines several possible steps to the UK’s economic recovery.

“Patrick Diamond, former adviser to Tony Blair and Gordon Brown, is right to focus on Labour’s economic policy after Eastleigh (One Nation? Not Yet, 1 March), but is still fixated on “fiscal discipline” (for which read “cutting less far, less fast”) without any obvious plan for growth. Nobody is going to recommend fiscal incontinence, but merely tweaking the disastrous Osborne cuts agenda a bit won’t remotely produce recovery. With a worse recovery than even in the 30s, a deficit in traded goods now exceeding £100bn a year, a 6% fall in real incomes and an imminent and unprecedented triple-dip recession, the emphasis must now be overwhelmingly on a real growth strategy.

That does not mean balancing the books by a further growth-destroying orgy of cuts, but rather by a radical reduction in today’s grossly excessive unemployment level of 2.5 million. That would hugely cut the benefits bill (it costs £7bn a year to keep a million people on the dole), increase government tax receipts to pay off the deficit, and provide much-needed social housing, enhanced energy and transport infrastructure, and lay the foundations for the future low-carbon economy. And this is quite consistent with fiscal prudence.

Instead of handing another £50bn of quantitative easing to the banks, the same sum could be directly invested to generate over 1.5 million jobs within two years. Or RBS and Lloyds (82% and 43% state-owned), instead of being privatised could be instructed to prioritise lending for an agreed manufacturing strategy. Or the £155bn wealth gains of the 0.1% ultra-rich over the last three years could be taxed to fund a million jobs. Or borrowing £30bn at today’s 0.5% ultra-low interest rates would cost just £150m, but still kickstart growth and put a million or more back to work. Even the markets would approve of that.

Michael Meacher MP
Lab, Oldham West and Royton”

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