Labour will support Osborne’s fiscal charter – but not his methods

This article could have been headlined ‘Guardian misrepresents Labour policy – shock’, except it’s no shock that the Guardian has been playing silly beggars with its headlines.

The headline under which the following quoted material was published was ‘John McDonnell: Labour will match Osborne and live within our means’ – which presents a false picture of the left-wing Shadow Chancellor supporting George Osborne’s extreme-Conservative plans for the economy.

In fact, McDonnell has made it clear that he has no intention of supporting the methods Osborne claims will balance the books – and quite right too, because they won’t.

Osborne has been lying to the public for more than five years, claiming that he can balance the books by cutting spending. Instead, he has been ensuring that the books will not balance, because government spending cuts means a reduction in government income as well – as any economist worth half a farthing will tell you.

McDonnell is confident that he can support Osborne’s fiscal charter because it commits the UK government to delivering an overall budget surplus by the financial year 2019-2020 – the last year of the current Parliament. On his current policies, Osborne isn’t going to make it.

Let’s repeat that: Osborne will not balance the budget by 2019-20, using his current economic policy plans.

Instead, McDonnell would invest money in the economy, ensuring that the UK grew its way out of deficit and debt. This is, in fact, the only way to do it. If he puts the money into areas with high fiscal multipliers, he’ll do all right.

To the possible surprise of some on the left, McDonnell will announce that Labour MPs will be expected later this autumn to vote for the chancellor’s fiscal charter unveiled in the budget in July.

It commits the government to delivering an overall surplus by 2019-20 and to running an overall budget surplus in “normal times”. The shadow chancellor said: “We will support the charter. We will support the charter on the basis we are going to want to balance the book, we do want to live within our means and we will tackle the deficit.”

But McDonnell makes clear that he takes a radically different approach to the austerity measures of the Tories, whose deficit reduction plan is achieved mainly through spending cuts, as he says that Labour would ease the burden on low- and middle-income earners.

Labour would also stimulate economic growth by borrowing to invest in infrastructure projects, McDonnell said. “We will tackle the deficit but the dividing line between us and the Tories is how we tackle it. Our basic line is we are not allowing either middle or low earners or those on benefit to have to pay for the crisis. It is as simple as that.”

Source: John McDonnell: Labour will match Osborne and live within our means | Politics | The Guardian

If you’re asking what a fiscal multiplier is, you haven’t been paying attention for the last five years and have a lot of reading to do

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6 thoughts on “Labour will support Osborne’s fiscal charter – but not his methods

  1. Brian

    This is all very well for “fiscal multipliers”, but who is going to support all these offspring when they come to retirement age? the taxpayer as usual ! I say stop these fiscals in their tracks.

  2. David robinson

    The way I see it come 2020 osborne will say “we are nearly there and we need another 5 years to finish the job” and no doubt there will be plenty of suckers who will fall for it!!

  3. Rupert Mitchell (@rupert_rrl)

    I like the Fiscal Charter that John McDonnell has outlined and it has nothing to do with Osborne’s “Fiscal Policy” as it implies balancing the books more evenly by making those who caused the imbalances in the first place, and those who can easily afford it to do the financing, rather than those who were completely innocent and cannot.

    1. Mike Sivier Post author

      Don’t confuse the Charter with Osborne’s policy – they’re two different things, really, and that’s what John McDonnell is saying.

  4. mohandeer

    There are various means by which the economy can be encouraged rather than stalled. Richard Murphy has several plans that could be utilised. Osborne has printed money willy nilly under QE but instead of investing it in growth areas he has squandered it. PQE under the right conditions does not create inflation, neither does tackling the corporate welfare tax cuts which cost the country approx., £124 billion, a possible £20 billion could be saved and placed at the treasury’s disposal so too could the Corporate Tax Evasion of close to £93 billion. Osborne made the promise of only £5 billion but the HMRC does not have the qualified staff to do it, nor will they under Osborne. That £5 billion was also a lie which the Tories proffered as incentive to vote for them. For the record the BoE is expected to run an inflationary rate of 2% which it currently is not doing. We could also use another tax which if the EU adopted could bring in upwards of £25 billion depending on stock market trading transactions completed. There is certainly no excuse for Osborne’s continued incompetent strategies being pursued. If some of the finest minds in economics and the markets and banking are now promoting PQE then people not qualified to comment on it like Osborne and Cooper should look to those who are and listen. I don’t think I would like to argue with the likes of Stiglitz and Ellen Brown.

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