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  1. Politics
10 March 2017

The Tories used the budget deficit to attack Labour – so why haven’t they fixed it yet?

Labour should not be absent from the pitch when Tory Chancellors are scoring own goals. 

By Alison McGovern

Given the hoopla over the NICs rule changes for the self-employed, a person could be very much forgiven for thinking that was the only long-standing Tory commitment Philip Hammond broke in his first Budget outing on Wednesday.

Sadly, this is not true. 

Habitual Westminster watchers will recall that the Tories proclaimed their mission in government early on: to deal with the deficit and the growing pile of debt the country had taken on in order to make sure that there was still money in cash machines to be withdrawn, given the drastic failure of certain banks to understand the risk they themselves had taken.

“The mess that Labour left us” – remember that?

No such excuse should be available to the Conservative party ever again.

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Here are the facts. At the autumn statement 2016, the Office for Budget Responsibility judged that the government had broken their own deficit rule (the fiscal mandate). The Institute for Fiscal Studies now say “fiscal policy is not currently subject to any fiscal targets that can be met or missed in this Parliament”.

In other words, when it comes to the budget gap, the government have let themselves completely off the hook.

Recall that after the general election in 2010, George Osborne changed course from Alistair Darling’s March 2010 budget by introducing spending cuts aimed at eliminating the deficit. His original target was to achieve cyclically-adjusted current balance by the end of a rolling five-year forecast period. In December 2014, this was changed to target a balance by the third year of the rolling five year period (that is, by 2017). Then in autumn 2015 this was changed to be a surplus by 2020-1 and then keep running a surplus “in normal times”. Then in autumn 2016 this was changed to be a target to reduce net borrowing to below two per cent of GDP by 2020-21.

Spot the pattern? Tory Chancellors who loudly proclaim the virtues of having a budget surplus, have, in the end, presided only ever over deficits.

But it gets worse. The deficit, as the gap between money coming into the Treasury and money spent, has to be paid for by borrowing. And quite rightly, the Tories’ deficit target was matched by a debt goal. Borrowing to invest in structural improvements to our economy is clearly the right thing to do. But that is very different from permanent borrowing to prop up day-to-day spending.

Yet the Tories have delayed their target on debt three times since 2010

Their original target was to have debt falling by 2015-16. Then in 2014 that was delayed until 2016-17. Then in 2015 the target was to keep it falling every year until 2020-1. Then in 2016 that was changed to be “falling by 2020-1”.

This “goal” looks like one that will always be swerved as the Tory mismanagement rolls on.

At autumn statement 2012 the OBR first reported that the debt target was “more likely than not to be missed”. At this point the target was “to see public sector net debt…falling as a share of GDP in 2015-16”. The target continued to be forecast to be missed until a new target was introduced.

The OBR first assessed the new target in March 2015, at which time it was being met. Coincidentally, just in time for the General Election.

The debt target was next breached alongside Budget 2016. At this point the target was for “public sector net debt to fall as a percentage of GDP in each year to 2019-20”. The target continued to be missed until it was revised.

And now, we in Britain are still left with the job of fixing this mess, even with the headwinds of Brexit looming, and the storm clouds of DonaldTrump’s economic protectionism on the horizon.

I have written before on what I think is the Labour way to approach this substantial challenge, along with the demographic problem that we face.

But the truth is, Labour are in opposition. And that means we must be ruthless in exposing the Tory failure on their own terms. We cannot be absent from the pitch when all around us Tory Chancellors score own goals.

The budget deficit was used repeatedly by Osborne as an attack on Labour’s record in office.

This has now been demonstrated to be ludicrous chutzpah. Laughable, if it were not so serious. Ironic, if it were not to have such lasting consequences for all of us.

It’s time we moved on from a debate about the Labour past, and looked at what the Tories are doing today. We should show the leadership the country badly needs, and take this fight on.

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