Labour’s economic mission for highest growth in G7 not ambitious enough, says leading economist – UK politics live
Good morning. Jeremy Hunt, the chancellor, has given an interview to Sky News in which he said that he would be comfortable with interest rate rises pushing the economy into recession if that had to happen to bring down inflation. Asked if he was “comfortable with the Bank of England doing whatever it takes to bring down inflation, even if that potentially would precipitate a recession”, Hunt told Sky’s economics editor, Ed Conway:
Yes, because in the end, inflation is a source of instability.
And if we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.
I have to do something else, which is to make sure the decisions that I take as chancellor, very difficult decisions, to balance the books so that the markets, the world can see that Britain is a country that pays its way – all these things mean that monetary policy at the Bank of England (and) fiscal policy by the chancellor are aligned.
Hunt’s willingness to actually the question is commendable. But in the Treasury right now there are probably communications advisers who, in between pulling their hair out, are reminding the chancellor that there are reasons why politicians dodge questions in interviews.
Graeme Wearden has more on this on his business live blog.
The Hunt comments are a gift to Labour, but the opposition is also being criticised on economic policy this morning. Jim O’Neill, the former Goldman Sachs chief economist and a former Treasury minister, has described Labour’s economic mission, to secure the highest sustained growth in the G7, as “daft”.
In an interview with the Power Test, a political podcast hosted by Ayesha Hazarika and Sam Freedman, O’Neill explained:
It [Labour’s economic mission] is kind of daft really. I like a lot of what’s behind it. But it’s a bit silly. I’m somebody that spent the best part of 40 years looking at global growth and, obviously, there’s another six countries you can’t do anything about how they grow directly. But, much more importantly than that, it’s not a really credible sign of ambition because part of the problematical broader world we’re living in is that most of those G7 countries don’t grow very well either.
O’Neill was a Treasury minister in David Cameron’s government for about a year and a half, and so you could try to dismiss this as just a Tory attack. But O’Neill was given a Treasury job on the grounds that he was an expert, not a Tory, he sits in the Lords as a crossbencher, and last year Rachel Reeves, the shadow chancellor, proudly announced that he was advising Labour on start-ups policy. He is not a Tory stooge.
In other parts of the interview, O’Neill was more sympathetic to Labour thinking. He said borrowing could be beneficial.
We have to get out of the conventional way of thinking that, frankly, has taken hold across the whole of the world because otherwise we haven’t got the slightest chance of getting out of the situation we’re in.
At the heart of conventional economic thought is that debt is bad and so you have got to avoid it. A lot of that actually is pretty sensible. But it doesn’t distinguish between government spending to create more wealth and assets, and government spending to consume or maintain our nice little cosy lives. And there’s a huge difference.
And he called for more investment in infrastructure, arguing that bodies like the Office for Budget Responsibility and the Infrastructure Commisison should get more authority. He explained:
You basically think of it as a parallel for fiscal policy of what we did with the monetary policy council when it came into existence. And you ask these guys who’ve got independence to say, what are the areas of investment spending that are going to create? What economists would call very strong positive multipliers … to create very significant growth and wealth for the future.
There is not a lot in the diary today. Parliament is in recess, and we’ve got a bank holiday weekend coming up. But Keir Starmer is campaigning in Scotland, and due to do broadcast interviews.
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