Labour must support George Osborne’s budget surplus law

by Samuel Dale

George Osborne is fond of saying that in opposition you move to the centre while in government you can move the centre.

Ed Miliband’s disastrous attempt to move the centre from opposition is the latest example proving this valuable piece of political wisdom.

You can not change the rules of British politics from opposition but you can if you’re sat in the Treasury.

Labour built a new consensus over 13 years.

In the 2002 budget, Labour decided to increase national insurance contributions by 1p to fund higher spending in the NHS.

The Conservatives now back rising NHS spending every year.

The same is true of the minimum wage, devolution and public service reform

And so it’s happening again.

In his Mansion House speech this week, Osborne resurrected his idea to make deficits effectively illegal in “normal” economic times.

The plan is that only the OBR could approve a budget deficit and otherwise a surplus must be run. It shifts the political centre.

It’s an attempt to shrink the state and force future governments to cut spending or raise taxes if it wants to spend more.

Some in Labour argue it makes sense to “borrow to invest”, which justifies deficit spending even in good years. In simple terms it is sensible to take out a big mortgage loan (capital spending) but not a credit card (current spending).

Maybe. But the hard truth is that the economics don’t matter. With Labour’s economic credibility hole only the politics matter.

Labour has to support Osborne’s lock. That’s the blunt reality.

He gets to shift the centre because he won. Labour has to move to the new centre because it lost.

The Tories have won the battle over defining Labour’s economic record so we must concede and move on. And quickly.

These are the rules of British politics and the Labour leadership candidates must face up to it.

Once you accept political reality then you can turn it to your advantage.

And Osborne’s attempt to make deficits illegal is a great chance to face up to the past and rebuild economic credibility.

He wants it to put the opposition party in a bind and vote against fiscal restraint and for perceived profligacy. It doesn’t have to be that way.

The new leader could seize the moment. They could use it to apologise for running a deficit before the crisis, which has made current spending cuts longer and deeper.

They should consider supporting the overall envelope of the Tory Spending Review in the autumn.

They could – as some leader candidates are doing – back the lower £23,000 benefits cap.

The centre is shifting and Labour can’t get left behind. It must be aiming to fight the election in 2020 and not 2015 or 2010.

It can not change the political centre  from opposition – winning back power is the only chance to do that.

When you govern for 10 years or more you earn the earn the right to create a new consensus.

That is the brutal cost of Miliband’s defeat and we must get to grips with it.

Accepting Osborne’s balanced budget law in full is a good start.

Sam Dale is a financial and political journalist

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15 Responses to “Labour must support George Osborne’s budget surplus law”

  1. Ronald Mc says:

    This proposed law seems like a complete joke. But Labour won’t be in power for at least five years so maybe we should just vote for it and hold Osborne to it. I sincerely doubt there will be a surplus by the next election. He’ll probably use this new law as cover to shift his existing 2017 target for eliminating the deficit back a bit and when growth inevitably falls below projection at some point in the next few years that will blow him even further off course. So let’s make the fact that this law is nonsense into the Tories problem and not ours.

  2. Landless Peasant says:

    If it is to be illegal for governments to run a Deficit then it should also be illegal for anyone to have a Mortgage or buy anything on Hire Purchase.

  3. Landless Peasant says:

    All Loan companies will have to be outlawed too of course, but I don’t expect Labour to have thought of that, nor Gideon!

  4. Landless Peasant says:

    No more Credit Cards for anyone either. Oh dear, It’s all starting to look unfeasible isn’t it? Who’d have thought?

  5. ad says:

    “In simple terms it is sensible to take out a big mortgage loan (capital spending) but not a credit card (current spending).”

    That is the key issue. But it only works if people trust you to borrow only for capital, rather than current spending. And people don’t trust Labour to do that.

    Which leaves Labour looking like an alcoholic arguing that THIS TIME he really should be trusted with the keys to the wine cellar.

  6. Tafia says:

    No it isn’t unfeasible at all. bank loans, credit cards have absolutely nothing to do with deficits and sovereign debt. The only thing that’s unfeasible is your woeful lack of understanding.

    Labour has no option but to support this or it will look to the voter that it hasn’t learnt any lessons at all.

    The idea of running a surplus in good times in order to use it to maintain services etc in recessionary times is perfectly logical.

    Running a deficit in good times and an even bigger one in bad times is suicidal.

  7. Landless Peasant says:

    @ Tafia

    Dear oh dear, you actually agree with George Osborne! No wonder Labour lost. If Osborne insists on outlawing government Deficits then Labour should insist that the sameMUST apply to loans, HP & all forms of personal credit too, otherwisr it is just double standards and deficit or no deficit the entire country are free to. Be up to their eyes in debt, and debt is a bad thing isn’t it George? He can’t have it both ways!

  8. Landless Peasant says:

    Also, if Deficits in ‘normal’ economic times are to be banned then it should also be illegal to embark upon ambitious reforms during times of Austerity. How many billions has IDS wasted so far on the doomed Universal Credit debacle? These are the points Labour ought to be raising

  9. Tafia says:

    Labour should insist that the same MUST apply to loans, HP & all forms of personal credit too, otherwise it is just double standards

    It isn’t double standards at at all – and if you can’t understand even the basics of the difference between ‘sovereign’ and ‘consumer’ then you really should leave politics alone.

    And you still seemingly cannot grasp a fundemental – increasing sovereign debt and running a deficit during periods of positive growth is not a good thing because as soon a s a downturn arrives – which it will, you have no option other than to slash state spending and/or increase the debt hugely – which then makes recovery all the more difficult, lengthy, painful and time-consuming.

  10. john P reid says:

    landless peasant, i don’t think Tafia actually voted labour,not agreeing wioth something as being what one would want and not disagreeing with their motives are two different things

  11. Chris says:

    You are arguing that Labour should support a harmful and economically illiterate policy that we know is wrong in order to gain political advantage.

    Such a party would be morally bankrupt and have no right to hold office.

    If the opposition won’t oppose such policies it is failing in its duty to hold the government to account and betraying the people of this country.

  12. David Holland says:

    Labour signally failed to build ‘a new consensus’ in 13 years. It courted affluent voters and took its base for granted. Now it has lost both – and the recommended course of action is not only economic madness but ‘a good start’ on suicide.

  13. Anon E Mouse says:

    Landless Peasant must be a Tory stooge surely? If the Labour Party continues to attract people that mindset then they should prepare for a long long time in opposition. A long time…

  14. John P Reid says:

    Landless Peasant, when a country has a defecit, it is borrowing to spend on the people, a mortgage, if not paid, sees the house in question repossessed, and the bank gets the house,so they still get their money back, if a country has spent its loan on the people,and doesn’t repay it, the country that Kent the money, doesn’t get the money back
    They’re two different things

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