Labour, the Greens and the Lib Dems are singing from the same destructive hymn sheet

JAMES VITALI

With many bookmakers now predicting that the next General Election will yield a hung parliament, thoughts have begun to turn to how a hypothetical coalition government might be cobbled together. There is even talk about tactical voting producing a “rainbow” coalition among the Greens, the Liberal Democrats, and the Labour Party (or what is left of it) in order to keep out the Tories and Reform.

On the surface, these parties have little in common. They are currently taking pieces out of one other as they vie to be the dominant force on the left. But in one particular area, it is becoming clear that some sort of consensus is emerging. That is on the question of how to manage the British economy, where all three are currently offering various flavours of the same nonsense.

This month, prominent figures in these main left parties delivered set piece speeches about the ideas underpinning their respective economic approaches. Ed Davey, Rachel Reeves, Zack Polanski: fool, fraud, firebrand. But for all their variety as characters, these three individuals all proffered a strikingly common economic worldview. And it is a worldview resting upon three key pillars: a belief that Britain must pursue closer European integration, a certainty in net zero as a driver of prosperity, and what I call the statist imperative.

In the first instance, the Greens, Liberal Democrats and Labour are all now united in the view that Britain cannot flourish without being closely aligned with the European Union. “Brexit did deep damage”, Reeves argued this week in her second Mais Lecture (quite why she thought a second bite of the apple was necessary is a mystery); areas in which autonomy and sovereignty might be beneficial to the UK are “exceptional” in her words.

Polanski said much the same in a recent speech to the New Economic Foundation — leaving the EU was like taking a “sledgehammer” to our economy, he claimed. Unsurprisingly, it’s the Liberal Democrats who have the most radical position on this topic, saying the other parties have been “timid” in their commitment to reintegrating Britain with the EU. Davey pledged full customs union and freer movement of labour in his latest speech.

The fact that the most salient problems with the UK economy predate Brexit seems not to have been a consideration for those who see some form of re-entry into EU institutions as a panacea for our anaemic growth. And given that the EU’s performance over the last decade has been highly disappointing, and that the EU’s share of global GDP continues to fall, is that the economic future that we want to tie our country to?

Secondly, the “just energy transition” has become not merely a social cause but a defining component of the British left’s economic agenda. With energy prices so frequently cited as a factor inhibiting growth across the entire economy, so-called “free” solar and wind energy appears to be an attractive proposition. “Homegrown renewable energy” will “cut bills” argue the Liberal Democrats; according to the Labour government, energy security will be secured through “offshore wind in the Celtic and the North Sea” at the expense of North Sea gas; scaling up renewables will mean we are no longer vulnerable to supply shocks in the Green Party imaginary.

Of course this belief is based on the erroneous idea that there are no economic trade-offs in seeking to totally replace dense energy sources with renewables. Nor does the left appear to recognise that gas is going to remain an important part of our energy mix for many years to come, not least because of the intermittent nature of wind and solar energy. Either way, an energy policy dedicated to the ideology of net zero as-fast-as-possible will lead to higher costs for households and businesses, not lower bills.

Finally, and despite the fact that each party on the left wishes to present their ideas as novel and fresh, all continue to be united by that old statist view that the path to prosperity lies through government management. Of course, this social democratic perspective is now given a different name — the “active” or “catalytic” or “strategic” state, depending on the day of the week. But the idea is the same: that it is the state, not individuals or businesses, that drive economic growth.

Every major political party agrees that low investment and subdued productivity growth constitute the two biggest drags on the British economy. What unites the left is a view that addressing these issues depends on a bigger role for government. In the case of investment, this is to be achieved by borrowing more. And while it is the Greens who are most outlandish in their claims — Polanski says we must all stop “equating the government’s finances with a household’s” and vastly increase borrowing to fund investment — they are not alone in their view. It is Reeves who has sought to change the fiscal rules to allow the government to take on more debt. It is the likes of Andy Burnham who argue that we should be less “in hock to the bond markets”. Even the Liberal Democrats believe that higher public spending should come from borrowing rather than spending reductions elsewhere.

On productivity, Labour has set out the statist agenda most explicitly. “Securonomics”, an approach which Reeves doubled down on during her Mais Lecture, holds that the state must guarantee people’s financial security, in order to provide a platform for improved economic performance. It is on this basis that they have justified further intervention in the jobs market, or discretionary welfare to support people with their bills.

But the same logic lies behind the Green Party’s obsession with instituting rent controls and redistributing wealth through higher capital gains tax, or Davey’s statement that the government should be “more generous” in its support for household bills. All contend that if we let the state control the economy more tightly, it will be able to provide us all with more security, and growth will somehow magically ensue.

The truth, of course, is that much of the opposite will happen. A bigger state will not have a “multiplier effect” as Polanski — a learned Keynes scholar to be sure — puts it, but will instead impair the dynamism of the wealth-creating parts of the economy. Indeed, we already have evidence that Reeves’s tax and borrowing increases have hurt private investment.

Each major party on the left wishes us to continue trudging down this path towards further impoverishment

The British left is in fantasyland. With debt set to exceed 270 percent of GDP by 2070 according to the Office for Budget Responsibility, they want more borrowing. With energy bills higher in the UK than most peer economies, they want us to be even more exposed to global supply shocks. With government expenditure already comprising about half of the GDP, they want the state to do even more on our behalf. And however much they try to differentiate themselves, each major party on the left wishes us to continue trudging down this path towards further impoverishment.

All of this makes it even more essential that British conservatives start getting on the same page in advance of the next General Election. Some old truths need restating with renewed clarity and conviction: that the sources of our prosperity lie not in government, but in the energy and enterprise of the British people, that the world is a competitive marketplace, and we need to start competing much more effectively, and that a politics of envy can never produce a society of enterprise and entrepreneurship. As the bookies show, the stakes couldn’t be higher.

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This article (A crippling consensus) was created and published by The Critic and is republished here under “Fair Use” with attribution to the author James Vitali

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