When will the Tories admit their growth strategy will hurt?

Sunny’s initial reaction to the Bank of England May Inflation Report is logical, the Tories ‘growth strategy’ isn’t working because:

…there isn’t much demand or household confidence in our economy. And why might that be? Thanks to Osborne’s massive spending cuts.

I’m cool enough to have just watched a recording of press conference. Over the medium term, the Bank predict lower growth, higher inflation, depressed house-hold consumption and identify the Tories’ big punt on investment and net exports acting as handmaidens of growth.

I agree with Sunny, it is a good idea for Balls to return to his “growth denier” tactic in the short-term. But in the long-term, Labour’s strategy needs to be able to confront an election in 2015 faced with a growing economy. Assuming the Tories’ growth strategy bears fruit, and that’s a big if, there remain at least two key chinks in the coalitions growth strategy.

Consumption contributed none of the growth in 2010, it all came from investment, stock building and net exports. This trend is expected to continue. This means, as Larry Elliot said at the conference, even if we get a recovery in output, a lot of people won’t notice. This would produce a sizeable constituency who have been hurting without much reward come 2015’s election.

An interesting graph is on page 28 of the inflation report. There’s been a large change in the ratio of full to part-time work, with part timers leaping from about 25% to about 27% of the employed. That is good, in as far as keeping people in some sort of employment is a very good thing. But it would become very bad were that to become a permanent fixture rather than a cyclical buffer for the economy. Here is another constituency who will not be convinced by talk of a recovery, as they are stuck in a no prospect part-time job.

The challenges for the Tories over the next 4 years (but especially in 2015) will be productivity growth below trend, frustrated part-time workers, and anaemic house-hold consumption. If Labour are going to present an alternative strategy they need to outline why the Tory plan is bad. Duncan has begun to illustrate an alternative based on wage led growth and I would argue that these are the two constituencies which need to be targeted. Attacking the Tories is good politics, but it has to lead to good policy aimed at the right people, else Labour will remain in the wilderness.


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