Problem is, it is not sensible to tie your hands with arbitrary fiscal rules. Just as most people can't buy a house without a mortgage, a sensible government should tailor its economics to the tasks it thinks it can achieve. If it needs to borrow, then it needs to borrow. A prospective government only needs to show that the return on investment is likely to outweigh the costs. The Guardian got this right, in
its editorial last year, after Rachel Reeves announced her fiscal rules.But that was last year. Here is a link to Reeves'
speech today. It sells a vision of 'modern supply side economics'. Supply-side economics (per
Wikipedia) "is a
macroeconomic theory that postulates
economic growth can be most effectively fostered by
lowering taxes,
decreasing regulation, and allowing
free trade."
Hmm. Low tax, light-touch regulation, and free trade. Yikes. Surely Reeves, as a Labour Shadow Chancellor isn't adopting right-wing economics? Let me read
today's speech again. Oh, it says here
'Labour’s alternative is based on partnership between government and business – working for sustainable growth'. So it's right wing economics with added government intervention! I see. But hang on...that sounds familiar... oh yes, of course! It's the Third Way! It's bloody Blairism!
It's as if Labour learnt nothing from its last two terms of government, years when its declining vote share eventually led to electoral oblivion.
Labour is talking about the 2020s - climate change, low growth, low productivity - but its habits of mind are stuck in the 1990s.