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Left MPs fighting for Labour to abandon cuts plans won an influential ally yesterday as top economist Ann Pettifor backed their alternative to austerity.
The Policy Research in Macroeconomics think tank chief warned last month that Labour was walking into a trap by aping Chancellor George Osborne’s deficit reduction rhetoric.
Now she has thrown her weight behind 15 MPs who united on Monday to urge shadow chancellor Ed Balls to defy Tory plans for “prolonged austerity.”
A statement penned by Michael Meacher called for Labour to cut Britain’s £90 billion deficit by “kick-starting the economy” with public investment.
It said that a million jobs could be created “without any increase in public borrowing” by directing publicly owned banks to invest £30bn in key industries.
Ms Pettifor called the suggestion “eminently sensible,” saying there was an “urgent” need for the government to compensate for “private-sector failure.”
She told the Star: “At a time when the British and European banking system is still broken and banks are not lending at low rates to support private-sector investment in the real economy, the government must step in.
“This means government must invest in sound infrastructure and expand well-paid, skilled employment which in turn will increase Britain’s productivity.
“Politicians should look after employment, as Keynes once argued, and the budget will look after itself.”
Support from respected Ms Pettifor, whose 2014 book Just Money busted the myths behind modern finance, will boost the MPs’ bid to break Labour away from the cuts consensus.
She praised them as the “lone political voices” calling on the government to implement growth policies.
Prime chief Ann Pettifor on economics
Labour MPs are right to argue that the government can borrow from itself — from the Bank of England, which is effectively a semi-independent department — at historically and unprecedented low rates of interest in order to secure future prosperity.
As a share of national income £30bn is not excessive and the repayment bill would be affordable.
But there is another important point — public investment effectively pays for itself because creating well-paid, skilled jobs will generate income and sales tax revenues from the newly employed with which the borrowing can be repaid.
George Osborne has learned to his cost that shrinking the numbers of British people employed in good, well-paid jobs is a form of self-harm.
Unemployment, part-time employment and low pay don’t just hurt workers. They slash tax revenues for the Treasury — and increase borrowing and the overall public debt.
“Look after employment,” as John Maynard Keynes once argued, “and the budget will look after itself.”
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