Hidden behind the news of the Supreme Court Brexit ruling, the Tory government has been quietly rowing back on scrutiny of its own tax and spending plans.
They are doing this by pushing through a revision to the Charter for Budget Responsibility, just 15 months after it was launched by then-chancellor George Osborne.
The Charter for Budget Responsibility is essentially an outline of the government’s fiscal rules. It is a document that has the intention of demonstrating that a government’s own fiscal plans are consistent, watertight and planned well in advance.
In theory, if the fiscal plans put forward are credible, it provides long term stability for business and investors so that they can plan for the years ahead. It also reassures the people of Britain and indeed the markets that the government will secure the funds it requires for public spending and will not attempt to spend excessively.
The credibility of the government’s fiscal plan as outlined in the Charter for Budget Responsibility has however been called into question time and time again.
Labour opposed the government’s updated charter in 2015 as it epitomised the government’s austerity agenda and refusal to intervene and invest in our nation’s future. We said at the time that the targets for tax and spending that it set were unachievable without damaging the economy. That became obvious by the time of last year’s budget, and over the summer the government dropped its main tax and spending target. Yesterday, the current chancellor attempted to seek approval from Parliament to break with his predecessor’s fiscal targets and amend the charter.
Has the chancellor accepted the policy advice of international organisations like the IMF and the OECD, or the CBI and the TUC here in Britain, that austerity is not a credible economic model and that the government’s role is to support investment?
……..No, sadly he has not.
The amendments considered today leave the government still committed to its austerity agenda which has forced misery on the most vulnerable people in Britain and has failed to allow the necessary investment for future growth and prosperity.
It is encouraging that the previous surplus target for 2020 has been ditched and now the government seeks to balance the books at some point in the next parliament. This target meant, bizarrely, that by 2020 the government would be taxing people more than it spent. However, capital (investment) and current (day-to-day) spending are still lumped together and therefore the government’s ability to engage in large-scale investment is significantly constrained.
This is quite the opposite to Labour’s fiscal position: to deliver £250bn of direct government investment over a decade, with a further £250bn mobilised with private sector support through a National Investment Bank and network of regional development banks.
This is simply the scale of investment deemed necessary by organisations simply to put us on a level playing field with other industrialised countries around the world: the government’s own infrastructure pipeline lists £500bn of work to be getting on with. We would reverse decades of under-investment across the country that today mean too much of our economy is dependent on poorly-paid, insecure work.
Labour’s own fiscal rule, its fiscal credibility rule, would also ensure responsible management of the public finances by balancing day-to-day spending inside of five years, and ensuring that debt is falling as a percentage of GDP over the course of a parliament.
But when the economy suffers a shock Labour’s rules can be suspended when the independent monetary policy committee decides circumstances require fiscal policy to work together with monetary policy.
We know the rules contained within the government’s charter do not work effectively – and so does the government, that’s why they’re changing them. But rather than put in place a new fiscal rule that would provide the structure needed to rebuild and transform our economy as we prepare for Brexit, the chancellor has chosen to cut of the oxygen needed to create a fertile environment for business.
It is time he realised that we must forge a new economic destiny that ensures Britain has a prestigious place at the world’s table, not threaten to simply turn Britain into a tax haven.
We need to rebuild those communities who have been left behind for far too long. If anything should have awoken the government, Brexit should.
Those communities who had been starved of investment up and down Britain were angry, and they were right to be angry.
We have endured nearly seven wasted years where investment has been skewed heavily towards the places that already prosper. An economy where the government promises £5,000 of investment per head in London, but just £413 in the North East of England.
An economy where local authorities have lost £18bn of government funding in real terms between 2010 and 2015, with the poorest councils bearing the brunt.
An economy where the government slashes the budgets of vital services such as social care and then asks local areas, to “find the money yourselves” through council tax increases.
We were told that if we pulled together and dealt with the sting of austerity for a while things would improve.
So were these sacrifices worth it? Is the deficit at zero? Have we slashed national debt?
No……the government, on figures out this week, has added almost £700bn to the national debt.
This isn’t just more than the previous Labour government. It’s more borrowing than every single Labour government in history, added together.
We have an economy driven by consumer spending not trade and exports. Even the Bank of England has voiced its concern over the sustainability of this model going forward as much of this spending is fuelled by worrying levels of household debt.
Then we have what the Bank calls a lost decade on earnings where wages have stagnated to the extent that most non retired families have less money now than they did before the financial crash according to the Office for National Statistics.
Productivity growth has stagnated. We know German workers produce the same in four days as UK workers do in five. That is largely because they had governments that invested in industry and infrastructure. We have not.
This is not the soundtrack of a government who is jostling to make us one of the world’s leading economies post-Brexit.
This is a future based on low investment, low productivity, low wage, and little to no public services.
I am a Northern MP and I still recall the Conservative government of the 1980s stripping away industry from our towns and cities. Our communities suffered immeasurable damage and the government back then said that our Northern cities would simply be allowed to enter into a state of “managed decline”.
What we see in the amended Charter for Budget Responsibility, is in reality a Charter for Alternative Facts, which is no better than the steady management of decline.