Sean O'Grady: There are alternative policies, but Labour hasn't yet discovered them

Older readers may recall Tina – "There Is No Alternative". Many books have been written about the Thatcherite reforms of the 1980s, but none sums up The Iron Lady's approach better than that little gem of a soundbite. which summed up the "tough-but-unavoidable" message.

You may have guessed what I'm driving at here. Were it not such a blatant felony, David Cameron and Nick Clegg should have kidnapped Tina for their own use by now. For that is basically their policy too, and they have not yet hit upon a simple, catchy way of expressing it. A little job for their spin doctors over what remains of the summer, perhaps.

The irony is that in the 1980s there were plenty of alternatives put forward by the opposition parties. Even in its prostrate state, the Labour party managed to cobble together something called the Alternative Economic Strategy. The Cambridge economist Wynne Godley, who died earlier this year, was the intellectual force behind the strategy; and Tony Benn foisted it on the party. So richly detailed was it that in 1980 a paperback – Alternative Economic Strategy: Response by the Labour Movement to the Economic Crisis – came out. It advocated leaving the European Community; import and capital controls; a massive programme of reflation and public spending. It might or might not have worked; but, like New Wave music and comedy, it was alternative.

The alternative to the alternative was the Liberal-Social Democratic Party's advocacy of, well, old fashioned Liberal Social Democracy, the basis of which was an incomes policy, a now-forgotten alternative to mass unemployment as a way of restraining wage inflation.

We now seem to have fewer alternatives. One opposition party, having been co-opted into the coalition has fallen silent. Vince Cable seemed to have led public opinion against the idea of immediate, deep, public-spending cuts before the election, and his subsequent conversion has led to a corresponding shift in public opinion. Mr Cable is a pied piper, leading the British people hither and thither across the political landscape.

So that just leaves us with Labour. Not much choice there. Even allowing for the fact that the leadership contenders have to address the party rather than the country, the lack of imagination in their manifestos is depressing. Reproduced here are what pass for the highlights of their economic thinking. It is early days, but I cannot see Labour sweeping back to power on a pledge to pay interns. Not only, as many commentators have pointed out, do the contenders mostly look alike, but they think alike too. All are opposed to "Con-Dem" cuts, and all have fastened upon the idea of raising the minimum wage and rebranding it "the living wage", an expression last fashionable, oddly enough, in the early 1980s.

As you might expect from the consummate policy wonk and former head of the Number 10 policy unit, it is David Miliband who boasts the most substantial economic platform. Scrapping the charitable status of private schools to pay for free school meals combines cleverness and social justice; reviving the Lib Dems' mansions tax to pay for investment allowances for manufacturing industry (also a Lib Dem priority) is also smart. There isn't, though, a "big idea".

Ed Balls comes second for originality, mainly because of his recognition that the great middle-class boon of cheap Polish plumbers and builders has not been great for British plumbers and builders. Ed Miliband's distinctive idea is to retain at least part of the government's stakes in nationalised banks, though for what specific purpose and at what cost is not made clear. Andy Burnham scores least well on hard policy. Diane Abbott ditto, but she has a public finance trump card the others fear to play – scrapping Trident. The aforementioned Tony Benn is backing her.

No doubt in the years ahead the new Labour leader and shadow chancellor will come up with what Tony Blair liked to call "eye-catching initiatives". But who will be in the partnership? If a Miliband becomes leader is it wise to have the shadow chancellorship also occupied by a Miliband? The obvious choice, if not leader, is Ed Balls, both because he is the most combative and because of his long experience in economic policy-making under Gordon Brown. That's a double edged sword, though; for it makes it difficult for the last government's chief economic adviser to disown the very policies he invented. So maybe Burnham for shadow chancellor then, with his cleanish pair of hands and nice accent. He would make George Osborne look seasoned and statesmanlike by comparison, but what can you do?

So what about Tina? Is there an alternative? On the challenge of public finances it is tricky. Had the coalition not published its emergency Budget of accelerated cuts, complemented by a "down payment" of £6.2bn in immediate reductions, the nation might have been plunged into a Greek-style crisis. As well as Mr Cable, the Governor of the Bank of England, Mervyn King, has said as much, and for many people that it good enough (though Mr King's Bank may yet live to regret its flirtation with party politics). The noises from the markets and the spectacle of the May euro crises also made the point to the public. Labour needs to get round this.

Being a constructive type, let me offer Labour's contenders some advice. First, admit that the last government – "for all the right reasons" – ramped up public spending too much and left the public finances too weak to face the crisis. Unforeseen and unprecedented as the crisis was, public finances should have been stronger. That's what people think, and it happens to be the truth.

Second, "panic cuts" can be opposed – but not all cuts. Long-term public-sector pensions and welfare reform should be embraced. Public Finance Initiative reform too – a PFI Rebate, as proposed by Tory MP Jesse Norman, would be a vote-winner, and the right thing to do.

But spending and borrowing ought to be reduced faster than the last government planned. Labour should find practical alternatives; not raising VAT but bringing in a mansions tax and other taxes; protecting infrastructure spending that creates jobs and growth; attacking the excesses of public-sector "fat cats" and quangos; reaching an agreement with the unions to avoid strikes in vital services – using Labour's union links as a strength.

Deficit reduction is a managerial activity and requires a managerial response. All-out opposition to cuts will take the party back to the 1980s, ghettoised in defence of union-dominated public services: a pre-Blair core vote "strategy". I'd prefer the AES.

Central bankers can relax, a bit, but they still face some tricky dilemmas

By this time next week the world's central bankers will be some way through their annual shindig at Jackson Hole, Wyoming. This year, they can relax a little; the world is surely though the worst of the financial crisis. Yet in a way, the dilemmas the guys – and it is a very male-dominated world – face are as acute as at any time since the autumn of 2008.

A few months ago it looked as though the next move would be a modest tightening in policy, probably led by the European Central Bank and the Japanese. The ECB has indeed started to withdraw some of the extraordinary measures to rescue the banks, but no one else seems to be following suit, and the ECB may yet reverse that stance if another sovereign-debt crisis erupts

The slowdown in most of the world economy has now got the central bankers chattering about resuming their various programmes of quantitative easing. The US Fed has already done a little, rather symbolically, on this, and its chairman, Ben Bernanke, is wondering aloud about going further. And the Bank of England may yet launch its own new liner, the so-called QE2. In his Mansion House speech and since, the Governor, Mervyn King, has been keen to stress that the Bank stands ready to reactivate it. The Monetary Policy Committee minutes how it is actively under discussion. Crucially, the Chancellor has also made it clear that it is up to the Bank to stimulate the economy if needs be, and he will trust its judgement. The MPC has political cover.

What would be reassuring is some feeling that the central bankers realise, as some of their political masters may not, that unilateral action by individual nations is less likely to work in any case. The success of international co-ordination in 2008, led by Gordon Brown, was one of the few uplifting moments in the past sorry three years. Something of that sprit should be rekindled at Jackson Hole.

Additional research by Mayowa Sofekun

Hamish McRae is away