Labour's challenge on the economy

12 April 2012

There could hardly be a better time for Labour's

Yesterday's soaring unemployment figures were a signal that the Coalition's strategy on fiscal austerity may not be working - namely, that a resurgent private sector will provide jobs to compensate for lost public sector ones. Labour's argument is not that public spending cuts are not necessary but that the pace and scale of the cuts are too ambitious for an economy in which growth is so sluggish.

Labour is doing its job in identifying the costs of the Government's approach but there are holes in its own strategy: at conference, Mr Miliband's most distinctive policy, to reward good business and punish bad through the tax system, failed to make clear which is which. And the Government can argue that there is no alternative to its fiscal austerity programme: Britain would be punished by the bond markets if it failed to meet deficit-cutting targets. More pertinently, ministers can argue that Labour's public spending did not necessarily translate into better services.

The problem is that the private sector - which did indeed compensate for public sector job losses over the past 18 months - is being squeezed by low demand, unless the demand is for goods in Poundland. And small wonder: the rate of inflation in the basics has left people with much less money to spend. But the larger problems in the economy aren't susceptible to easy solutions. Flooding the market with new money through quantitative easing may help keep interest rates low, but that is not quite the same as making it easy for business to obtain credit.

The EU's new rules to give greater stability to the banks, whereby they will have to come up with a bigger ratio of cash or solid assets to their risky investments, may be much-needed but they may also have the short-term effect of making banks less willing to lend. And that looming problem, which the boss of Deutsche Bank says could result in a new credit crunch, is a cloud on the horizon which none of the parties can dispel.

Fat nation

The Health Secretary, Andrew Lansley, has come up with a formula for tackling obesity with which it is hard to argue. We are, he says, eating too much and we should eat less. Quite so. The alarming increase in diabetes can in part be attributable to poor diet. The problem is that Mr Lansley is still not prepared to do very much about it.

Other nations have the same problem and have come up with fiscal solutions: France, sensibly, is to tax sugary carbonated drinks, a measure which could usefully be adopted here. Denmark, less sensibly, is to tax fatty foods, which includes natural products such as butter. The problem could be helped by bans on advertising junk food, especially fast food aimed at children. There could also be measures to outlaw the promotion of foods with high sugar content to children. Yet to cut our consumption of processed, sugary food requires a willingness to take on the big food manufacturers and retailers. And so far, ministers seem reluctant to do anything of the sort.

Safer for cyclists

The Government's proposed overhaul of traffic signs should drastically reduce the amount of street clutter and give councils more freedom to ensure signs meet road users' needs. Even better, the reforms will include the provision of more mirrors to improve visibility at dangerous junctions and more cycle lanes. These changes should make streets more attractive - and less dangerous.

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