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What is the difference between Tory and Labour policy on the deficit?

Osborne has made clear he intends to enforce further enormous cuts in public expenditure (£25bn for starters in the next Parliament) in order to achieve a budget surplus by 2018-9. Previously Labour had been committed by Ed Balls to match Tory spending plans only to 2015-6. But now in his speech to the Fabians on Saturday he has gone much further and committed the party to public expenditure cuts all the way to a budget surplus in 2019-20. What’s now the difference between Labour and Tory austerity plans except that Labour will supposedly take one more year to get there?

Apart from bandying around figures and timescales, the crucial question is how these further colossal cuts will be made since the deficit last year was still £111bn? If Osborne is expecting an upsurge in economic growth to pay for a significant proportion of this deficit through much increased tax receipts, he is skating on very thin ice when none of the conditions of solid, sustainable growth are yet there at all. As for Labour, Balls has left open the option of extra infrastructure investment and particularly a large additional house-building programme, but it still isn’t clear how much of the deficit he plans to clear through public investment and how much via similar spending cuts which match the Tories.

This is not a good place for Labour to be. What the British people want to know is whether Labour has alternative proposals to cut the deficit which don’t involve endless austerity on the Tory model. There is a glimpse of that in Balls’ speech, but it urgently needs some fleshing out to make it credible. Otherwise the public will draw the conclusion (maybe unfairly) that there’s nothing much to choose between the two parties’ policies to deal with the deficit since they both appear to be backing prolonged austerity.

Right from the beginning after the financial crash there have always been two options for tackling the deficit – one is the Osborne route of drastic cuts in expenditure and the other is the Keynesian route of using public investment to kickstart a stagnant or shrinking economy and getting a million or more off the dole queues and into work within 2 years. The former has been tried now for nearly 4 years, has severely weakened the economy, and has impoverished swaths of the population without actually cutting the deficit more than marginally (from £118bn to just £111bn over 3 years).

So why isn’t Labour proclaiming the alternative plan for all it’s worth? It can be financed without any increase in public borrowing either by instructing RBS and Lloyds to prioritise lending for industry, or by using a further small tranche of quantitative easing to invest directly in agreed industrial projects, or by taxing the 1% super-rich (not just the restoration of the 50% income tax rate, but their wealth gains since 2009). If that is what Balls is intending to do, why isn’t he saying it loud and clear? And if he isn’t intending this, how does he expect Labour to win the election with prolonged austerity ties round its neck?

4 Comments

  1. Rod says:

    “why isn’t Labour proclaiming the alternative plan for all it’s worth?”

    Probably because Labour has no intention of implementing an alternative plan.

    We should be grateful for the honesty of the Labour leadership.

    If they want to make a habit of honesty perhaps they should rename themselves the Progress Party, or enter into a coalition with their allies and call themselves the LibLabCon. Certainly, it wouldn’t indicate a policy change.

  2. TimP says:

    I say it again, there’s always Left Unity.

  3. swatantra says:

    The ‘Left’ and ‘Unity’ is an oxymoron.
    Ken Loach is onto a loser.

  4. John reid says:

    The bloke who said to Neil Kinnock we’ve got our party back was right, now here’s to 15 more years in opposition,

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