Another chance to aviod disaster
Another chance to aviod disaster
Ken Livingstone MP warns against antagonising Lavour voters.
Labour's National Executive Committee will agree a system for selecting our candidate for mayor of London on 23rd March - it had previously been expected to do so in January. There are plenty of rumours about the reason for this decision, not least of which is that the Millbank Tendency has still not settled on a candidate. But it may be that some in Millbank have come to the conclusion that there is more to be gained from allowing London Labour Party members the opportunity to nominate candidates of their choice than there is in antagonising them during the European elections. Leaving the decision for a while may put off a skirmish over the removal of CLPs' right to nominate, but it also gives Millbank time to think.
Indeed, there is a very coherent case for a democratic selection process. Labour will have been through a series of electoral tests by the time we come to select in London, and no matter how well the Party fares there is little chance that we will escape without some losses given the high starting point we are defending.
Gordon Brown's pre-budget report last autumn claims that the economy will grow by between 1% and to 1.5% in 1999. It presumes that the economic slow-down will not lead to an increase in the level of unemployment sufficient to put downward pressure on the growth of real wages. While this could be the case, the real errors in the budget forecast are in those the Government cannot control or will not control, such as investment and trade.
The report also predicts that fixed investment will rise from between 1.75%-2.25% next year, which is nonsense. It isn't credible to suggest that fixed investment will grow almost twice as rapidly as GDP. One of the clearest features of the business cycle is investment fluctuation at a greater rate than GDP. Fixed investment invariably rises faster than GDP during the upswing of the business cycle and falls more rapidly during the downswing. As we are now in the downswing of the business cycle, fixed investment will rise less than GDP in the coming year. In fact, the figures had already turned downwards by the second quarter of 1998 - declining by 1.4% compared with the first quarter.
Treasury advisors seem even less well informed on the impact of trade. The Treasury report claimed that the worsening of Britain's trade gap will cut 1.25% from our GDP in 1999. Up until the second quarter of 1998 exports of British goods and services rose by 4% - a dramatic decline from the peak of 9.5% in the third quarter of 1997 following the impact of high interest rates and an overvalued pound, the surge of cheap imports from Asia as well as the slow down in the whole global economy. Unfortunately the decline of the value of the pound has been too slow because of high interest rates.
This reflects the Government's failure to tighten fiscal policy sufficiently during our first year, leading to the Bank of England's interest rate rises. Even if we make the optimistic assumption that fixed investment is merely flat in 1999 and that the deterioration of net trade is 1% of GDP, this gives GDP growth for next year of zero. It is more likely that fixed investment will fall and that net trade will deteriorate more rapidly than Gordon expects. If this is the case then the economy will slip into recession. If there is a more rapid than expected recovery in Asia and Japan these figures would improve, but equally a devaluation in China or a collapse on Wall Street would dramatically worsen these figures.
Declining investment will undermine lethally the welfare to work programme and even the optimistic scenario of zero growth could mean the loss of up to two thousand seats on Labour councils in May, if the downswing reaches its low point before the local elections. We are handing our opponents in the Welsh and Scottish elections a dagger aimed at our heartlands.
But we do not have to have to compound the Party's problems in London. Even Simon Jenkins of the Evening Standard, who has not exactly been a friend of the left, wrote recently that the Stalinist code for "stop Ken" goes flatly against the original intention of the reform: that the mayor be an independent figure who would fight for London and not simply do the Government's bidding. It would be a tragedy if having created this new government for London it then fell into the hands of a Tory mayor because of a backlash by Londoners. Tory hypocrisy over the London authority does not diminish their capacity to exploit Labour's selection row and economic difficulties. The breathing space that has opened up between now and the March NEC provides an opportunity to remove the threat of a nobbled selection process that Millbank must seize.
Alan Simpson is away.
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