Posts Tagged ‘fiscal policy’

It was the risk not the spending that Labour got wrong

11/01/2011, 04:15:34 PM

by Anthony Painter

Ed Miliband is in a bind. He is tied to a fiscal policy that the public believes was profligate and irresponsible. His strategy so far has been to defend that record to the best of his ability. That is not enough. It may be time to switch tack.

The debate is homing in on the question of whether Labour was spending too great before the 2007 turbulence. And actually if you pull out the figures the answer is marginally on the side of ‘defend the record’- on the face of it. Current spending was in deficit ahead of the crisis though not catastrophically so- 0.3% of GDP in 2006-2007. The public sector net debt was lower than in 1997 at 36.6%.

None of this looks irresponsible in fiscal terms. Public sector productivity and inefficiency tell a slightly different story- there is no doubt that the money invested in public services post-2001 failed to raise output as it should have done. Steve Richards in his articulation of the case for the defence in the Independent this morning acknowledges that fact:

“Labour failed to address inefficiencies in the public sector and some of the additional investment was wasted needlessly, but the overall spending was necessary at the time, as Blair discovered then and some senior Tories discover now.”

So the case for the defence seems to exonerate Labour for imprudence but is more ambiguous on wastefulness. (more…)

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