It is extraordinary that both the main parties have now put forward their plans for meeting the deficit, which is going to prove the centrepiece of the election, yet neither plan carries credibility. Osborne has once again committed the Tories to £30bn of further spending cuts on a rolling 3-year programme, i.e. currently targeted at 2017-8. Even if that were politically practicable, which is far from certain, the idea that this will eliminate the structural deficit within that timescale is laughable. The deficit this year is likely to end up at around £100bn, and because of the fall in the government’s tax take (caused by the continuing squeeze on incomes, very low wages and zero hours contracts), the deficit is already growing, not falling, and for the reasons just given will continue to rise further in future. Osborne grandiosely claimed yesterday that “it commits us to finishing the job – and getting our national debt falling……….Once we have got rid of the deficit and have debt falling, we should be running an overall budget surplus”. This is total arrant nonsense.
Osborne framed this ‘commitment’ in the form of a new Charter of Budget Responsibility, which again has no substance behind it and is only used as a political gimmick to try to force Labour to fall into line behind his own flawed proposals which are not credible. Ed Balls’ response has been to say he would vote for the charter, but not be bound by a timetable, and that he would allow more flexibility in capital expenditure. These are helpful relaxations of an otherwise implausible target, but they fail to address the fundamental error in going down Osborne’s route in the first place. Put at its simplest, this is the wrong policy for cutting the deficit – largely because it isn’t cutting the deficit. The right policy is steadily to shift away from prolonged austerity, which isn’t working, to a gradual and increasing expansion of the economy bringing in its train real jobs, genuine growth, rising wages, higher household incomes, and thus a greater government tax take with which to pay down the deficit.
So why doesn’t Labour put this forward more confidently and assertively. It’s because the private polls show that people believe that Labour caused the deficit problem in the first place and therefore cannot be trusted with the nation’s finances. But people only believe that because the Tories say it incessantly and Labour never denies it. But Labour didn’t cause the deficit in the first place, the bankers did. And once the bankers had caused all this mayhem, Labour under the financial leadership of Alastair Darling did exactly the right thing to get the deficit coming down fast – a reduction of £40bn in 2 years. So why on earth doesn’t Labour start telling the truth instead of leaving themselves wide open to Tory lies throughout the election campaign?