Today Ed Miliband started to re-frame the economic debate

by Dan McCurry

Thank god Ed Miliband has finally got a handle on our economic offer. Today he laid out a new narrative built around a “living standards” message with some good policy detail in the 10p tax pledge. He previewed the new approach at PMQs on Wednesday where he said that come the 2015 election, people will be asking “Am I better off now than I was 5 years ago?”

It’s about time, we really need this new, sharper approach.

On Tuesday night, I was speaking at an event by Pragmatic Radicalism where a number of people presented ideas for Labour economic policy and the audience voted for their favourite. My pitch was this:

“Even though we are right and they are wrong, we acknowledge that the Conservative party have a far more coherent economic policy than Labour. I believe that an economic policy of massive intervention, with massive stimulus, through massive infrastructure spending, should be presented with massive confidence by a leadership who will then stand their ground and defend their policy.”

Whenever I get up to speak at these kinds of events, I naturally imagine that my thoughts will be received with the kind of rapturous joy they deserve. Ahead of this event, my fantasy included the image of Amanda Ramsay in full Grecian toga, sprinkling rose petals in my path, as I stepped down from the podium to a roar of applause.

In fact my pitch provoked the question, “how will we afford it?” I had to patiently explain to these ignoramus’ that the £400 billion of quantitative easing was wasted on government bonds when it could have been spent of building schools and hospitals. We should be campaigning that future QE be spent on tangible investments in the real economy rather than delivered as helicopter cash to the banks and pension funds.

This policy response is difficult because people don’t understand where money comes from. Conversely, the Tory policy response is simple. Reduce the debt.

Contrary to popular belief, money is not created by the Bank of England, but by high street banks, under license to the Bank of England. When you deposit £1,000, Barclays will then lend out £10,000. The £9,000 difference is created out of trust.

The Bank of England stands behind Barclays and provides the guarantee. This is “fiat money” since it is not based on gold coin, or backed by matching deposits in the vaults, it is created out of government fiat.

The high street banks are indispensible to the money supply system because they are expert at measuring the risk of the money being lost. The Bank of England then measures inflation in the wider economy, and influences the supply by increasing or decreasing interest rates.

Following the credit crunch the high street banks stopped lending, and the supply of money dried up. The Bank of England was forced to step in and this was called quantitative easing.

The reason there is so much intellectual thinking and figuring over these issues is that we are in virgin territory. Out of control inflation has always been a part of the problem in the past, so if the banks did stop lending, it wouldn’t have been a problem, it would have been a part of the solution.

This time everything is different. In my opinion, when Mark Carney says he wants to target growth, he means he wants to pursue an inflation target which is higher than the current 2%. A higher moderate inflation rate would help reduce the deficit. The Americans are doing the same and dressing it up the same. So will others.

Adair Turner recently argued that in the future we could do quantitative easing for the purposes of funding government investment. The only reason the £400 billion of QE was spent on buying up gilts was due to convention. No one could imagine doing it any other way. In the future we could spend it wherever we like.

The last time there was a major discussion about economics was during the Thatcher period, when the government were advocating market forces, over intervention. I remember hearing PMQs on the radio, with Margaret Thatcher at the despatch box screaming, “Unprofitable pits will be closed! Unprofitable pits will be closed!”

It was a simple argument, which helped her to win. Right now the Tories are losing the austerity argument to Labour – everyone can see what’s happening on the high street – but they are still winning the central debate about debt.

Keynes is a difficult sell at a time of existing high borrowing.

At the Pragmatic Radicalism event I was wrong to argue that Labour should advocate massive spending as an electoral strategy, but right to be frustrated at Labour’s lack of a clear path.

Ed Miliband’s new narrative and today’s policy proposal are a good start in mapping out that path. They don’t offer a fully worked alternative but they do erode the Tory myth about us and put us in a much better position than we were even a week ago.

Dan McCurry is a Labour activist who blogs here

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16 Responses to “Today Ed Miliband started to re-frame the economic debate”

  1. Nick says:

    In fact my pitch provoked the question, “how will we afford it?” I had to patiently explain to these ignoramus’ that the £400 billion of quantitative easing was wasted on government bonds when it could have been spent of building schools and hospitals. We should be campaigning that future QE be spent on tangible investments in the real economy rather than delivered as helicopter cash to the banks and pension funds.

    Well, You’re the ignoramus.

    The money was spent on bonds. Those bonds are government borrowing, and the government has spent it.

    You’re a complete doofus if you think the money’s gone to the banks, its all gone to the government, via the banks. The alternative direct route is called printing. See Mugabe for how to do that.

    So tell us how you’re going to pay the 5,300 bn of pensions debts? The debt the government tell us there is a less than 50% probability of paying.

  2. McCurry says:

    There’s only so much space for details in a post like this.
    The vast bulk of gilts were held by banks and pension funds. We paid above the market rate for them.
    Only a complete doofus would hark on about Mugabe when referring to QE. Oh, I forgot, George Osborne predicted that QE would result in Mugabe-like inflation.
    The sorry fact is that QE has reduced the debt more than his cuts. Hence his enthusiasm for Alastair Darling’s policy.

  3. aragon says:

    As I commented earlier £2 per week is just too small to be significant.

    The two same applies to the two Ed’s fiscal stimulus.

    They seem determined to stick to the spending plans and fiscal envelope.

    Talk about rearranging the deck chairs on the Titanic.

    Austerity soon wears thin, while Labour may highlight the cost of living, but no solutions offered by the Labour party.

    At least half a billion of public investment, is required.

    Now that is a fiscal stimulus.

    How do I pay for it ?

    Simples !

  4. aragon says:

    That is UK Billion of 10^12 or US Trillion, not the US Billion or 10^9.
    Or I typed the wrong value … 10^12 is unambiguous.

  5. iain ker says:

    Yawn. What do we do?

    Yawn. Spend money.

    Yawn What on?

    Massive yawn – schoolsnhospitals.

    Where were all the quote Keynesians unquote Keynesians when the economy was in a bubble?

    When the economy picks up again the ‘Keynesians’ will stop being ‘Keynesians’ and will become ‘Whichevereconomistrecommendsspendingians’.


  6. Ex-Labour says:

    Millibands “good start” ? Millibands spin, lies and hypocracy more like. He and Balls supported Brown abolishing the 10p rate, now they say they didn’t. However we have this thing called media which keeps recordings and interviews on tape and guess what, out pops Milliband enthusiastically supporting the cut a few years ago. The mansion tax will not raise anything like enough to support the 10p tax rate – probably £5 Billion short of whats necessary and the Red Eds know this. This is vapour politics at its worst. Apprently Milliband has now said its not a manifesto commitment – WTF !!!

  7. swatantra says:

    Best that EdM got the 10p Tax fiasco off his chest now than later. Somehow we have to close the Chapter on the Blair-Brown years and move on. And show we have moved on.
    Yes, in some ways they were good times, but in other ways they were bloody awful.
    As Dickens put it: ‘The best of Times, and the worst of Times’.

  8. Victor says:

    ‘This policy response is difficult because people don’t understand where money comes from.’

    Sorry to disappoint,but Balls confirmed right after the speech that it wasn’t a manifesto comittment,just more hot air.

  9. McCurry says:

    I love the way Ex-Labour calls everyone a hypocrite while hiding behind a pseudonym which purports to make him a former supporter.
    We have a thing called the media which you can hide behind and attack everyone else’s integrity.

    @Swatantra, I don’t think we should apologise for Blair or Brown. I think the Tories should apologise for Cameron and Osborne.

  10. Amber Star says:

    @ Ex Labour

    Do you work for Conservative HQ? Because I’ve noticed that loads of pro-Tory comments, on lots of different blogs & under many different names, all have the same spelling error: Hypocracy instead of hypocrisy.

  11. swatantra says:

    Whenever and wherever we’ve made mistakes, we shoud apologise for them.
    Mind you, apologies never make up for, or should ever make up for, those mistakes.

  12. e says:

    This is tin hat territory; ground on which useful debate really needs agreed definitions, and social costs acknowledged and accounted for. But as indicated, the point is Labour has prised the door open which offers meaningful hope; the possibility of diverting off the current path to neo-feudalism and moving instead towards a fairer 21st century political-economy.

  13. Andy says:

    @Swatantra – an apology without an act of contrition is worthless and only the easily fooled and easily led should accept an apology without one.

    As for tax etc, the basic tax code should be the over 21 minimum wage rate for a fulltime week. Nobody should pay tax until they cross that threshold.

  14. Ex-Labour says:


    McCurry you couldn’t be more wrong if you tried. As I have said in response to other blogs on this site, I voted Labour for 30 years and supported my local Labour party during this time.

    As for being a hypocrite – yes I was. I voted Labour because I come from a Labour supporting family in a Labour area, but I no longer believed in their policies or competence when Brown came to power as PM. I finally realised I was being hypocritical when I didn’t believe anymore yet continued my support.

    @ Amber Star

    Sorry for the spelling mistakes, sometimes my stumpy little fingers type too fast.

    As for your ‘conspiracy theory’ that I’m some sort of Tory spy. Way off the mark I’m afraid (see above). I’d also be interested to see what other blogs you have seen me on ? To my knowledge whenever I have commented I always use the same name.

    Let me be clear. What I am is someone who thought Blair was a good thing for Labour and the country – apart for his Iraq war mongering which was a mistake and his love of the EU. The way the party is now being driven by elements of the far left lurching back to the old ways of tax and spend is depressing. There will come a time when M&B have to provide some policies and just not keep sniping from the sidelines, and thats when the real direction of Labour will show through to the public.

    In a nutshell – Milliband is a union stooge and Balls is power hungry opportunist.

    More Lasagne anyone ?

  15. McCurry says:

    Well done Amber. The fingerprints of Tory HQ are before us.
    You’d think they have better things to do, like running the country, but instead they are obsessed by the Labour Party.
    The Tories have a massive inferiority complex.

  16. Ex-labour says:


    You clearly have no idea what you are saying. The fact that a former Labour supporter dares to disagree with the left wing loons you seem to feel that I’m not who I say I am. Is this the direction of Labour discourse or do you not have anything sensible to say? They say there is nothing more Stalinist and self righteous than the left when challenged.

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