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George Osborne's plan to put you into debt: He wants you to be spending nearly two times more than you earn, so he can balance his books. What a (insert your own expletive here)!

George Osborne’s plan to put you into debt: He wants you to be spending nearly two times more than you earn, so he can balance his books. What a (insert your own expletive here)! [Image: Huffington Post.]

They were lining up to make fools of themselves after last night’s debate on the ‘Charter for Budget Responsibility’.

The Tories, of course, didn’t have to wait until after the debate – the fact that it took place at all made George Osborne look like an idiot. He had dismissed plans for a Labour-sponsored fiscal responsibility act as a “completely feeble stunt” back in 2010, but last night laid himself wide open to accusations that he was doing exactly the same thing.

In fact, it seems, he was trying to lay a “deficit trap” for Labour, in trying to get the Opposition party to explain how quickly it intends to balance the books.

No dice. Labour was quite comfortable with the charter, pointing out that it sets no date for the elimination of the national deficit but merely puts it in the third year of an undefined ‘five-year cycle’. The strongest words on the subject in the charter are that the books should be balanced “as soon as possible” which, Labour pointed out, is entirely consistent with the party’s own strategy.

In addition, as the Institute for Economic Affairs thinktank pointed out in the Huffington Post, no government can bind its successor (force it to continue a policy run by the previous administration). This means that Labour has supported a bill that conforms with Labour plans, and remains free to carry out those plans in whatever way it chooses, post-May 7, if it wins the election.

Shadow chancellor Ed Balls was so sure of his ground, he quoted an assessment of Osborne’s debate by the right-wing, reactionary Taxpayers’ Alliance, whose chief executive Jonathan Isaby labelled it a “meaningless political gimmick of the most transparent kind…that serves only to remind taxpayers how dramatically the Chancellor has missed his own original target”.

It isn’t often the Taxpayers’ Alliance turns out to be more intelligent than the rest, so let’s give it its due in this instance.

Claims are already circulating that Labour’s plans, which allow for borrowing to continue on infrastructure projects – investing in the economy, could add an extra £170 billion (in today’s terms) to the deficit during the 2020s. This assumes that such investment will yield no positive benefits to the economy, and there is no evidence that this would be the case. In fact, experience suggests the exact opposite.

An extra £170 billion of spending won’t matter one jot if tax receipts increase by more than that amount.

Ed Balls knows this – and said as much in the debate: “Three factors can bring the deficit down: spending cuts, decisions to raise taxes, and what happens to the underlying growth of the economy and the tax revenues which flow from that. The Chancellor did not talk about the third factor, for understandable reasons.

“Ultimately, the only way of reversing the problem is yes, to cut spending, and yes, to raise taxes… but also to get the economy growing in a stronger way which will bring in tax revenues.”

You see, while the economy is (technically) growing again, the jobs that have been created are in low-paid, often insecure work and there is lower productivity. As a result, income tax receipts are a cumulative £68 billion lower than Osborne’s 2010 forecast, and national insurance contributions are a cumulative £27 billion lower than he planned. But this was always going to happen with a Tory chancellor.

Tories always try to depress wages, in order to maximise profits for business owners and shareholders who vote for them. This means that income tax must fall, yet – bizarrely – they always seem surprised when it happens.

The fact that Osborne’s low-wage economy means more working people receive benefits is another cost burden for the Treasury. Labour, of course, plans to eliminate this by getting workers onto a living wage.

Osborne’s own plans would cut government spending – mostly on the kind of wealth redistribution that allows the poorest and the working-class to enjoy a reasonable standard of living – by around 26 per cent, totalling a massive 41 per cent since 2010, if a Conservative government is returned in May.

In addition, he is relying on a £360 billion borrowing spree by UK citizens, according to the Office for Budget Responsibility – which will leave households with an amount of debt 180 per cent larger than their income (see the image at the top of this article).

Just think about that. Back in 2010, he was comparing the national debt to households having ‘maxed out’ all their credit cards. That was when the debt totalled 78.4 per cent of GDP (the amount of income the nation generates every year). Why is he now saying that households should take on a burden that is proportionally more than twice as large?

Of course the comparison between national and household budgets is pointless because they do not correspond with each other, as Green MP Caroline Lucas pointed out in yesterday’s debate. Unfortunately she then went on to make a fool of herself by claiming, on Twitter, that the 18 MPs (including herself) who voted against the charter are the only MPs who are against austerity. If she knows enough to point out the difference between national and household budgets, she should know that this is inaccurate – therefore this was a direct lie to the electorate.

The effect of all this bluster – especially on Twitter last night – must be similar to the proverbial turkeys queuing up for Christmas. If anybody still wishes to tell us all that Labour’s plan for economic growth means the party avidly supports austerity, let us look forward to their detailed and clear explanation.

Based on current experience, we may be waiting a long time.

Follow me on Twitter: @MidWalesMike

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