The shape of a new Labour alternative economic strategy has been unveiled by Shadow Chancellor Alan Johnson with a prescription for higher state investment and a shift in the balance of taxation.
In an outline of the basic foundations of the party’s alternative to the coalition’s record £83 billion in spending cuts, Mr Johnson said investment would be a more effective way of reducing the £155 billion national deficit and producing economic growth.
Radical plans to make banks pay a £7.5 billion levy towards a “push for growth”
are contained in the broad strategy. It was the first time since the 2009 Budget that Labour’s official policy has focused on investment as part of the solution to the current crisis.
Mr Johnson accused the Government of “taking a huge gamble with growth and jobs” but in a radio interview said that the threat of a “double-dip” recession may yet be averted.
While taking former Chancellor Alistair Darling’s policy of halving the deficit over four years as a “starting point”, Mr Johnson stressed that he would be prepared to adjust to changing economic circumstances. This was seen as confirmation that he and Labour leader Ed Miliband have agreed to move the party’s policy on to a “new economic paradigm”.
Mr Johnson said: “We are constantly told that there is no alternative to the current economic strategy pursued by the Government. But there is another way.
A balanced approach. That gets the deficit down, but recognises that growth and jobs are not a sideshow to an economic strategy. They are what it is for.
“And that approach requires thinking again about the role that capital investment plays and prioritising it.
“Without growth, attempts to cut the deficit will be self-defeating.”
Investment is seen as key to recovery but the Government plans rely on the private sector to fill the gap left by the public sector cuts. Critical analysts argue that this approach ignores the fact that a private sector investment slump is at the heart of the crisis with a collapse of £44 billion, or more than 70 per cent of the entire contraction in the economy.
