Right-wingers are now arguing that because of the crisis, we have to reduce public spending and reduce income taxes. For these people, whatever the data, the remedy is the same - during the boom/bubble they said essentially the same thing, i.e. cut income taxes, free up "innovation".
I share the Right's disdain for Labour, although perhaps for different reasons. They are a disgrace, and certainly not a social democratic party: in all their years in charge they have done little to move Britain towards the kind of high-human-capital society I would like to see, and instead were cheer leaders, if not prime movers, in the banking fiasco.
Equally, while I have sympathy, even a natural liking for, the notion that technology and good management can raise productivity in public services, my feeling is that the gains that can be realized are hugely exaggerated. Britain still lacks a lot of basic, fairly physical stuff: accessible training, facilities for quality education (especially at the lower end), public sporting facilities, public spaces; on-the-ground comparison with our neighbours in Northern Europe really bears this out. Does anyone really think it is possible to see more of such things with a reduction in spending? Equally, in Britain's (many) deprived areas, by all accounts in most cases a small number of social workers/doctors/nurses are overwhelmed by the troubles of a poorly educated, often dysfunctional populace. Where are these huge numbers of public servants who can be let go without impact? I'm sure there are a few, maybe even quite a few, but enough to make a serious difference?
Britain needs a fundamental re-think of it's spending priorities. First, we need massive investment in public physical infrastructure and facilities, especially in deprived areas, and especially when this impacts human development (i.e. learning skills and abilities, early childhood experiences and so on) and in particular those many young people who are neither in training or employment. Second, a real move towards quality vocational training: we have a dire lack of people who can really do things well, from bakers to cooks to builders. This is where there is a real opportunity to both improve productivity and reduce expenses that arise in managing the fallout from having a vast number of untrained, often unemployable people. Third, a reduction in the size and importance of the financial services sector. It is not clear that the sector is at all profitable at the margin, absent implicit and explicit government support. However, it is clear that the distortions induced by this support enjoyed by the sector damage the wider British economy: what might all the smart young scientists and engineers have done if they hadn't gone into the City? Been brilliant teachers? Genuine entrepreneurs? Worked in R&D? Fourth, we need an infusion of technical expertise into management. In Britain most senior management, even at engineering firms, appear to know very little about the business they run. Thus, a CEO is almost always a lawyer/PPE/MBA or the like, rather than a PhD engineer or scientist. This is emphatically not the case in Germany, for instance, certainly not as often, and I think this is a major reason why Britain's scientific excellence does not translate in successful businesses.
But doing these things requires taking on the City and it's increasingly deadly grip on the national psyche. And that is where none of our political parties will go.