Sometimes it’s hard to know what’s worse. To tell a good story badly, or not to have a good story at all. One is tragic, the other plain stupid. At times, Labour has been so poor at communicating its story on the economy that it’s been difficult to work out which is the case.
Just this week, Ed Balls attempted a demolition job on the Tories that went so wrong the wrecking ball swung back round and buried itself in his gut. In a speech made leaden by statistics, he claimed that the chancellor planned £70 billion of cuts that would take spending on public services as a share of GDP back to the 1930s, “a time before there was even a National Health Service”.
Leave aside the fact that this argument was killed last December (on a spending per capita basis, the state will be no smaller than in 2002), the shadow chancellor pinned his analysis on a £23 billion budget surplus by 2019-20 that is in the numbers but goes way beyond Conservative plans.
Most economists now reckon the improved outlook since December will give the chancellor an extra £10 billion for departmental spending. If he relaxes his austerity plans in 2019-20 by just £8 billion on top of that, the state will be no smaller as a share of GDP than it was in 1999-2000 under Tony Blair and the Tories would still be able to pay off £15 billion of the debt.
Sure enough, the day after Mr Balls’ speech, the chancellor let it be known that he planned to ease up in next week’s budget. That wrecking ball must really have winded.
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The tragic thing is that Labour has a good story to tell on the economy, it’s just not telling it. Britain’s big problem is stalled productivity, the amount a worker creates in an hour, and here Labour is on to something.
There is no more important subject in economics than productivity. It is “the ultimate determinant of people’s incomes and with it the capacity of our economy to support health wealth and happiness”, Mark Carney, governor of the Bank of England, said this week.
Vital as it is, productivity is a topic politicians shirk — largely because it’s not easy to explain. If there is one job they have, though, it is to persuade, to change the national conversation. Nitpicking through Mr Osborne’s numbers is not an economic vision. Labour’s “plan for prosperity”, set out in February, just might be.
Britain is a productivity laggard. Its workers produce 14 per cent less than the French every hour and, after a decade of playing catch-up, productivity growth since 2008 has flatlined. It is not an intractable issue, though. It requires patience and a bit of vision, such as outlined last month by the Organisation for Economic Co-operation and Development.
First, the think-tank said, public finances need to be brought under control to ensure Britain remains an attractive investment destination. Second, build more infrastructure, including housing. Third, improve the supply of credit to business, partly by strengthening competition among lenders. Fourth, improve education and ensure skills are better targeted to shrink the “mismatch” between qualification and jobs.
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In almost every category, Labour offers a more complete plan than the Tories. The exception is the deficit, but the difference between the parties is not the gulf presented. The Tories want to balance the books while Labour would allow about £25 billion of extra borrowing every year for infrastructure, as distinct from welfare.
According to the Institute for Fiscal Studies, Tory plans would take national debt as a percentage of GDP from 80 per cent to about 60 per cent by 2030, a level it has been below since 1976, the latest crisis excluded. Labour would cut debt more slowly to 70 per cent, equivalent to 1971 levels.
Labour would be building for the future, though, and Britain needs that investment. According to the World Economic Forum, the perceived quality of UK infrastructure is lower than both the G7 and OECD average, behind Portugal and Spain as well as France and Germany. UK investment spending is about 17 per cent of GDP, trailing OECD and G7 averages of 21 per cent.
Labour also promises to crowbar more private sector money into the country’s infrastructure. The party has pledged to establish a National Infrastructure Commission that identifies Britain’s long-term needs and prevents projects being over-ruled by a shift in the political wind. Democracy works on a five-year cycle. Britain’s investment needs can tie up pension fund money for ten to twenty years.
Credit to small businesses is shrinking by about 1 per cent a year. Labour would establish a British Investment Bank to fill the gap left by high street lenders. It is hardly a radical idea. The UK is the only G7 nation not to have a state-backed body supporting small businesses on a significant scale. On skills, the party would boost apprenticeships and introduce a technical baccalaureate for 16 to 18-year-olds.
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The Tories set the pace on productivity by cutting corporation tax from 28 per cent to 20 per cent, reining in red tape and boosting the annual investment allowance to encourage R&D.
Labour is not planning to repeal any of it, though corporation tax will stop at 21 per cent. Yet it is tarnished as the anti-business party, one by extension that has no solution for Britain’s productivity problems and hence no vision for long-term prosperity.
Part of that is because Ed Miliband clearly does not trust business, so it, in turn, doesn’t trust him.
With less than two months to the election, there is a better debate to be had than the old battlelines of small-state Tories versus Labour’s reawakened socialists.
Setting out a vision for Britain’s future is stronger ground for Labour than petty deficit point-scoring. Only it’s an argument the party seems incapable of making.
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Philip Aldrick is Economics Editor of The Times