Economic Policies for an Incoming Labour Government – Part 9

Economic Policies for an Incoming Labour Government

By Bryan Gould and George Tait Edwards

Part 9 Further Proposals and a Conclusion

The Wage and Salaries Increases Act

One of the main, and perhaps – to western eyes – most surprising features of

Japanese Prime Minister Shinzo Abe’s re-introduction of Shimomuran

economics is his attempt to ensure that there is a rise in Japanese wages.

In marked contrast to Coalition government’s determination to drive down

wages here, he well understands that higher wages are an important way of

raising demand in an economy which is intent on stimulating economic

activity – hence his implication that the advantage of relatively cheap

investment finance will be made available only to those firms that already

pay, or are willing to undertake to pay in the future, a proper level of

wages to their workforce.

An incoming Labour government should take a similar stance, with positive

policies for a greater share of national income by working people. In

particular, there should be an immediate rise in the minimum wage rate to

£8 an hour and an annual incomes and salaries growth target equal to the

estimated rate of inflation plus the estimated rate of growth plus 2% for the

first five years of the Labour Government. This, in the context of the other

policies here proposed, will spread effective purchasing power throughout

the economy and move all families out of poverty within the lifetime of this

government. Zero-hours contracts should be made illegal in the UK. The

disability and unemployment benefits system will so far as possible be uprated

to the levels which would have obtained if the Coalition Government

had never existed.

A second part of wage legislation will be enacted to provide that future

wage and salary increases will be divided, with the increases due to the

estimated annual rate of inflation paid weekly or monthly and the

estimated growth component paid as a lump sum every 1st November. This

measure will ensure the growth of real wages and limit inflation, and

provide earners with lump sum funds, which research has shown are more

likely to be saved, which in turn will increase the emergency funds of

families for holidays or to meet unexpected expenses.

It will also usefully increase the saving of British families, and will, in our restructured financial

system, increase bank funds for industry. That measure has proved very

effective in Japan, where it may have been another policy initiative

originating from the Japanese master economist Osamu Shimomura, and we

think it will be as effective in the UK as it was in Japan.

Improvements in The Machinery of Government

A review of the dominant and self-interested role played in the British

economy by the major banks leaves little room for surprise at the fact that

the various initiatives to support a British economic revival have all failed.

George Brown’s National Enterprise Board, the Industrial Re-Organisation

Corporation, and the more recent suggestion of a National Investment Bank,

all had and have one factor in common – they were inevitably small,

central, initiatives depending upon the co-operation and goodwill of the

Clearing Banks to allow them to work. Not surprisingly, over the last

century and a half, the British Clearing Banks have never had any interest in

permitting the survival of any organisation that could grow to challenge

their virtual monopoly and have ensured that such experiments did not

survive.1

The proposals above for the reform of the banking system will go a

long way towards remedying this situation and allowing genuine reforms to

take effect. If, for any reason, the banks succeed again in frustrating the

flow of lending for investment purposes to industry, it would certainly be

worth looking again at a National Investment Bank which would ensure that

such an objective was met, with that national bank having direct links to

the Local Community Interest Banks.

Finally, there is one additional change

in the machinery of Government that should be put into place.

The Economic Planning Agency

An Economic Planning Agency (EPA) will be set up in the Office of the Prime

Minister to fulfil the following goals:

– to provide competent, timely and accurate advice to the government on

how best to achieve the developing government objectives of increasing

______________________________________________________________

economic growth, managing inflation, and making due provision for the

impact of environmental changes on UK resources

– to report upon the locality and potential of British businesses, particularly

with regard to the development of the UK as a green economy

– to identify and recommend potential and emerging innovations and the

location of key knowledge-based growth hubs in the economy

– to provide a monthly report upon the outcomes of the regional, national

and local investments

– to calculate and comment on, as it may see fit, the capital-output ratios

and other key factors in the economic development of the country

– to identify blockages in the free flow of investment funding for national

and other viable projects, particularly with regard to national sea

defences and the investments required to accelerate the movement into a

greener economy

– to provide an Annual Economic Survey of Britain, summarising the

economic state of the nation and acting to improve the practical

economic understanding of key industries, and

– to report as regularly as it sees fit upon the results of various Government

initiatives and projects, particularly with regard to

– Green energy generation

– The safeguarding of national resources against rising sea levels and

extreme weather events

– The improvement of national education and research and

development facilities and

– Other emerging issues which the EPA wish to bring to the

Government’s attention.

These new institutions will mirror the more competent SME funding

arrangements and other existing industrial funding arrangements in

Germany. These new banks will be guaranteed by government, as in fact all

banks are in the last resort. There can be no foreign objection to the British

Government taking steps to ensure that British domestic industry has access

to financial facilities, similar to those that have existed, and which

continue to exist, to fund foreign industry abroad. Given access to

equivalent funding sources, we are confident that British invention will flow

through to factory floor innovation and British industry will no longer lose

its place in the world and will flourish through the fresh opportunities made

available to it.

Conclusion

It is that fresh economic understanding that should enable an incoming

Labour Government to reshape and reform the future of Britain. The

objective of that Government’s economic policy should be the restoration

of a civilised and progressive Britain where all of its people are free from

want, excellently educated, and achieving their full potential within a

much more prosperous and fairer society. Britain’s place in the world as an

innovative, highly developed manufacturing economy operating at the

leading edge of invention and innovation must be re-built. The fruits of that

success should be more equitably distributed, not only as a matter of social

justice and to secure a more integrated, happier and healthier society, but

also as a stimulus and contributor to continuing economic success.

1 For some of the methods used, see the Henley School of Management

Paper by Peter Scott and Lucy Newton “Jealous monopolists? British banks

and responses to the Macmillan Gap during the 1930s” which is at http://

www.reading.ac.uk/web/FILES/management/036.pdf

© Bryan Gould and George Tait Edwards 2015