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. Continue reading →