Labour’s economic credibility has received a boost this morning after a group of 168 economists signed a letter supporting the party’s plans for much higher government investment in the economy.
Published in the Financial Times, the letter said Labour has “understood the deep problems we face,” which include “10 years of near zero productivity growth” and stagnating corporate investment.
The letter is mostly signed by left-of-centre academics, who are seeking to counter the mainstream attacks on Labour’s radical spending agenda.
The party’s plans – which include increasing spending by £83bn a year to pay for things like free university tuition – were harshly criticised as not credible by business bodies and many think tanks after they were unveiled.
Yet the economists today said Labour’s plans were equal to the task of boosting a struggling economy in which “a gulf has arisen between London and the south east and the rest of the country” and “public services are under intolerable strain”.
“Given private sector reluctance, what the UK economy needs is a serious injection of public investment, which can in turn leverage private finance attracted by the expectation of higher demand,” they wrote.
The letter was signed by former Bank of England rate-setter Danny Blanchflower, who has in the past quarrelled with Corbyn over his leadership of Labour.
Among the other signatories was Lord Meghnad Desai, emeritus professor of economics at the London School of Economics and Simon Wren-Lewis, emeritus professor of economics at the University of Oxford.
Attacking the record of the Conservative party, which has been in power since 2010, they pointed out that “average earnings are still lower than in 2008”.
They wrote: “We need a serious attempt to raise wages and productivity. A higher minimum wage can help do this, alongside tighter regulation of the worst practices in the gig economy.
“Bringing workers on to company boards and giving them a stake in their companies, as most European countries do in some form, will also help.”
The economists’ praise of the Labour manifesto was certainly warmer than the reception it received by business bodies and think tanks at its launch.
The Institute for Fiscal Studies, for example, said Labour’s argument that only big companies and the richest five per cent of earners would face higher taxes was “not credible”.