by Jonathan Todd

George Osborne thinks he is being clever, setting a trap for Labour. But Labour should vote against his proposal, expected to be contained in Wednesday’s Autumn Statement, for a new law requiring that Britain’s structural deficit be eliminated by 2017-18. As it is not a trap, it is a boomerang.

“The duties imposed by the Bill are not accompanied by any corresponding sanctions,” he told MPs, when asked to vote by the then Labour government to put into law the halving of the deficit in two years. As declamatory legislation – an Act of Parliament which no one has any intention of enforcing – Osborne was right to dismiss it as “vacuous and irrelevant”.

Yet Osborne now advances his own declamatory legislation. What will follow as a result of his law from the deficit not being closed by 2017-18? Will the deficit be further extended by the government fining itself? Or will the government be required to learn their lesson in its prisons? It’s all funny money and silly politics.

Such tawdry legislation diminishes us. And if Osborne is going to pass laws making a deficit after 2017-18 illegal, doesn’t he anticipate people enquiring how he’ll make his government legal? Labour will make hay with speculation on what heartless plans he conceals. But his stated intentions are sufficient to damage him.

Under published Conservative plans, the Resolution Foundation “estimate that several government departments would face real-terms budget reductions of one-half or more between 2010-11 and 2018-19”. Budgets for DfID, the NHS and schools are nominally ring fenced, so other departments face a halving of their budgets.

How will the Home Office keep us safe on a shrunken budget? Are we to win ‘the global race’ with an FCO so puny? Will local government be recognisable after ‘the jaws of doom’ close?

Osborne is asking MPs to vote to make the continuation of government as we have known it illegal. While by 2010 there was fat to trim in the public sector, there is now less, so his plans entail a more dramatic state curtailment.

Have a look at Simon Wren-Lewis’ diagram. Sustainability indicates the level of the deficit that is consistent with maintaining an 80 per cent debt to GDP ratio, assuming nominal GDP growth of 4 per cent. You’ll see that fiscal consolidation over this parliament has taken the deficit relatively near this level. If this were our aim, we’d need some mix of cuts and tax rises in the next parliament. But, as a percentage of GDP, more than three times fewer than under Conservative plans.

Targeting and delivering a sustainable deficit is, given its constant ratio between debt and GDP, unlikely to raise any financing issues and would allow us to maintain government as we know it – albeit it would remain prudent to recast government as far as possible to secure growth, as sustainability assumes a healthy annual 4 per cent GDP growth.

This strategy wouldn’t remove the need for tough choices in the next parliament. Either some things would need to be cut absolutely or taxes would need to be raised judiciously. And some spending should be reallocated from activities that do less to generate growth to those that do more. But it would – unlike Osborne’s plans – retain a government capable not only of generating growth but the many public and social goods that we depend upon it for.

It is a travesty of public discourse as profound as the current arms race on immigration that Osborne, peddling nonsense on stilts, leads on the economy. Labour failed to accept any of the blame for the spectacular growth in the deficit after the financial crisis – the 2007 spending review should have been a bit tighter, it would have been preferable to not be so dependent on one sector, finance, for tax receipts – so have all of this blame forced upon us. We insisted that everything that went wrong after 2010 was Osborne’s fault, so when things started to improve, as they inevitably would, he claimed all of the credit.

While these strategic missteps make Labour now less capable than we otherwise would be of winning the public debate with Osborne, Labour should make the hard headed, not soft hearted, case for voting against him. We might showcase measures for making government more likely to deliver 4 per cent annual growth and more affordable, such as Frank Field’s proposal for an NHS Mutual. And consistently challenge the presumption, which Osborne trades on, that Labour is averse to tough choices. But these choices should occur with a framework aimed at a country that we would want to live in.

Osborne country would make UKIP voters of us all: enamoured more with the past than the future. That’s why, notwithstanding Labour’s limited capacity to advance hard headed cases, what he proposes will boomerang on him – if not before the election, then after. It would be an appalling failure, though, for these plans not to be properly scrutinised before and during the election. The lead that Labour has allowed Osborne on the economy inflates this risk. It is no exaggeration to say that the UK as we have known it, because Osborne country is a quite different place, depends on Labour doing better.

Jonathan Todd is Deputy Editor of Labour Uncut   

Tags: Autumn statement 2014, deficit, George Osborne, Jonathan Todd, national debt, Resolution Foundation

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