The economic alternative

Ever since George Osborne followed me into the Treasury he, and his Lib Dem colleagues, have been trumpeting the virtues of Draconian cuts in spending. They use the deficit as an excuse for excessive public sector cuts. There must be cuts but in the current climate any government’s priority should be growth, as I said and my colleague and successor Alan Johnson set out yesterday. The Labour government made growth and jobs a priority. We stopped the recession turning into a depression, and kept people in jobs and in homes. The Tories cite the example of Greece and the threat of downgrading from credit rating agencies to scare people. Parallels should not be drawn between the UK and Greek economies and they know it. The Coalition inherited a triple-A rated economy and in the months since Labour left office growth has risen faster than I predicted and borrowing is lower. The Government’s austerity plans threaten to derail recovery. – Alistair Darling, The Mirror

He did say that “Ed Miliband and I are clear” that halving the deficit over four years is the correct policy. “Our policy remains to halve the deficit by 2013, ’14”. But he immediately added that tax must “do more of the work” to balance the budget. He emphasised that “public services matter”, calling for an approach that “values public services” not one that “relishes curtailing them”. He said the approach must be flexible enough to react to changing circumstances — reminded his City audience of the Irish reversion into recession. And he highlighted the “biggest difference” between the Labour and Government positions as “the need to return to growth”, pointing out that “a rising dole queue means a bigger dole queue”. – The New Statesman

Accusing the Coalition of basing its timetable of cuts on the 2015 General Election rather than the economic needs of the country, Mr Johnson used his first speech in his new role to announce Labour would sting the banks for more money – an extra £3.5 billion on top of the UK Government’s already announced £2.4bn bank levy. “The banking sector is contributing £2.4bn whilst child benefit freezes and cuts will raise substantially more, so families take the strain while bankers grab the bonuses,” insisted Mr Johnson. “There’s no justification for such an unfair sharing of the burden, so we will ask the Government to think again and come forward with proposals for the banks to make a greater contribution.” While Labour would not increase personal taxation any further than planned, Mr Johnson said he accepted the Lib-Cons’ freezing of the basic rate limit for income tax from 2013. – The Herald

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AJ to “push for growth”

Johnson pushing for growth

Alan Johnson, the new shadow chancellor, has suggested banks should pay an additional £3.5bn a year in taxes on top of the £2.5bn annual bank levy already introduced by the coalition. Mr Johnson will set out his thinking in a speech in the City on Monday, but has made it clear that he wants higher taxes to play a bigger part than public spending cuts in the deficit reduction. The shadow chancellor said the pace and scale of Mr Osborne’s planned £83bn spending cuts were “masochistic”. He argues that deficit reduction should go hand-in-hand with more infrastructure investment. Mr Johnson’s proposal to raid the banks to pay for this investment was questioned by the Tories after he appeared to suggest that a new bank tax would only proceed if there was international agreement. Labour officials later said that Mr Johnson regarded international consensus as desirable – but it was not a precondition. – The FT

Alan Johnson, the shadow Chancellor, has said that banks should take a more prominent share in plugging Britain’s budget deficit, as he attacked the Government for its “perverse” plan to bring public spending under control. Mr Johnson, who admitted he was “mildly surprised” when he was given the job by Ed Miliband, also revealed that Labour would consider increasing capital gains tax to help to avoid the brutal £83bn spending cuts being lined up by the Chancellor, George Osborne. In his first major interview in his new role, Mr Johnson conceded Labour would have to be “more specific” about its economic plans, but promised to set out further details on tax policy during a major speech today. “We think tax, on the banks in particular, should play a bigger role in this,” Mr Johnson told the BBC One’s The Andrew Marr Show. – The Independent

Shadow chancellor Alan Johnson is to accuse the Government of taking a “huge gamble with growth and jobs” as he sets out Labour’s alternative to the Treasury’s £83 billion cuts package. In his first major speech in his new role two days ahead of the comprehensive spending review, Mr Johnson is expected to reject Chancellor George Osborne’s argument that Britain’s structural deficit must be eliminated within four years, and insist: “There is another way.” The shadow chancellor is expected to unveil plans to make the banks contribute towards investment in infrastructure as part of a £7 billion “push for growth”. On Sunday Mr Johnson accused the coalition Government of “economic masochism”, warning that by cutting “too deeply and too quickly” it risks pushing Britain into an L-shaped recession in which the economy fails to recover momentum and “bumps along the bottom” for a period of years. Unless growth is supported, Britain could repeat Japan’s “lost decade” of economic stagnation, he suggested. – The Press Association

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