Labour swivel in the wind over Osborne’s plan to kill off public debt (and future public investment)?

Is George Osborne’s fiscal responsibility charter an instrument of “the fiscally irresponsible to con the public?” That’s according to George Osborne, when Gordon Brown tried to bring one of his own.

It may have been Brown’s early involvement that confused the shadow Chancellor John McDonnell two weeks ago…

“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.”

Two nights ago however he was confronted by an enraged parliamentary Labour Party, when he ‘pulled a U-ie’ (ie, when he possibly released exactly was going on)…

The Tories for their part are rubbing their hands: they clearly feel they have Labour swivelling on a stick:

The charter lays out a simple, popular idea – that the state should live within its means, and when times are good it should run a surplus to protect itself against a future downturn. Had the rule been in place in the early years of this century, then we would have had a more manageable state when the crisis struck, requiring less drastic trimming, more flexibility to cut taxes to soften the blow on workers and employers, and a rainy day fund to call on if needed. We didn’t, and the pain of the crash (and the years after) was greater as a result. That’s an idea the electorate strongly support.

It is popular as an idea. But in shorter form, forbidding Government to have debt is an unconditional commitment to end publicly owned capital investment in a country’s future. Osborne’s charter would, on the face of it, making public borrowing illegal.

Since debt is a necessary component of investment, the Charter seems to be intended to neuter the public sector from acting as anything other than an enabling framework, with all investment and delivery shipped out to and as the private sector. McDonnell’s contrition was real enough:

I realised as the consequences of the government’s failure to invest in infrastructure and skills, the cuts that are going to start coming now, I realised that people are actually going to suffer badly. And it brought it home to me, and I don’t want the Labour party associated with this policy.”

Bit late John. As one shadow cabinet minister has remarked: “They are finding it is not as easy as it looks.”

Adds: This irreverent take from Dan Hodges describes just how excruciatingly bad this is going down

 

  • aquifer

    To keep the economy running in a recession debt has to be created. British public debt pays a much lower interest rate than if an individual or business borrows. So keep it public if possible? And why should families do without their tax credits because of the mistakes of bankers? To build a bigger private debt mountain for it to fall over to be rescued again, at our expense, again?

    Osborne, having expertly engineered a recession, would still have been able to borrow under this ‘rule’, or ‘political hoax’, depending on your point of view.

  • chrisjones2

    “And why should families do without their tax credits because of the mistakes of bankers?”

    Perhaps they shouldn’t but that’s not the issue. The issue is building a system that encourages work not a culture of dependency

  • 23×7

    Better a u turn than a wrong turn. Are you seriously using Dan Hodges as a source of objective opinion?

  • mickfealty

    How do you work that out Chris? See the Dan Hodges link? No one, and I mean nobody builds anything without going into debt, whether they are public or private sector.

    This is a piece of nonsense and Labour should have treated it as such from the beginning. It was bad enough agreeing with it in the first place but then signally to the world you’ve been suckered by it?

  • mac tire

    Culture of dependency, Chris? Now, how do you define that?

    Say, for example, I was a student, relying on a student loan. I hope for better things. I am trying to do something about it. But, you know, I’m dependent on that student loan – sort of living beyond my means.

    You haven’t thought this out properly.

  • Zeno

    Well we can’t have people relying on the state so they can live in big houses and have wide screen TV’s and holidays every year.
    Except for the Royal Family obviously who fit that profile perfectly.

  • mac tire

    I’m sure there are people like that. But that is only a small part of the fraud that happens.Minute, in fact. Care to comment on how many ‘live beyond their means’ daily?

  • mickfealty

    No. Occasionally right. As is Owen Jones. But objective, never. Now are you going to keep pointing at the man or get dirty, break sweat and at least try to play the ball?

  • mickfealty

    It’s a distraction of the narrative George is pushing here. Like the stretch limo on the front of the Daily Mail this morning that had the pensioner lady in front of me spitting bullets…

    The Charter is an unenforceable fiction.

  • Zeno

    “No one, and I mean nobody builds anything without going into debt,”

    I’d agree with that , or close enough, but everyone who goes into debt doesn’t build something. Borrowing to invest in growth is fine, Borrowing to exist isn’t.

  • 23×7

    Dan Hodges doesn’t just play the man he rugby tackles him then kicks him in the head. McDonnell is guilty of making a tactical mistake, over a non issue, which he’s apologised for. If it had been a u turn over something important like health, education or trident we may have an issue.

  • mickfealty

    The charter may be trivial, and part of an isolation strategy by the Tories and of course Labour have been pretty blunt on health for much of the last four years, but there is an issue of political short sightedness here. This is what happens perhaps when protest alone leads the opposition?

  • SeaanUiNeill

    Indeed , the charter is in conflict with the most basic issue of Parliamentary Sovereignty, that no Parliament can pass laws that future Parliaments cannot simply change. It is unenforceable, and accordingly is simply an exercise in propaganda intended to make the Conservative administration appear to have a financial competence they have not yet displayed, considering that they are still unable to fulfil the conditions of the charter themselves. This is playing to audiences, in a kind of demagogic political théâtre du Grand-Guignol.

  • 23×7

    Politics needs both a heart and a head. Labour has just found it’s heart and over the next 5 years we will see if it can also find it’s head. Protest alone however is not leading the opposition as can be seen by the use of Stiglitz and Piketty as advisors.

  • kensei

    No Parliament can bind a future one. It is completely unenforceable, and the experience of US States that pass balanced budget amendments or no tax increases amendments is appalling. You either get bad policy or hidden policy. It’d have been justifiable to fight it on any of those grounds, and Osbourne’s quote could be repeated ad infinitum to take the edge off.

    But this was all politicking. So saying you’d support it is fine, then you just either ignore it or gradually shit it out of the road in power. A U-turn is the worst of all options. It was also unneeded. mcDonnell had already mentioned excluding the capital budget at the party conference. Simply harden the line. Offer an amendment to exclude the capital budget (could have also plumped for the NHS) and then vote against if the amendment fails. Then you either have forced a concession from the government or you’ve maintained opposition based on a credible and consistent stance.

    It’s so early in the Parliament it might not matter. the biggest problem is the rebellion. Too many MPs hate Corbyn and want him out ASAP and this is an easy opportunity to defy him. Blair would have caused them a lot of discomfort. I’m not sure Corbyn can easily.

  • SeaanUiNeill

    I wonder just how many of these people who speak of a culture of dependency would view the matter if they were obliged to live on benefits for a year, or longer. A great deal of hot air is expended by those who view the benefit system through the lens of a bumptious press employing hyperbole for effect. The hard reality of people living in bare flats without the ability to feed or clothe their children due to long term unemployment is rather less headline grabbing than the “split limo” story Mick uses below as an image of such distraction.

  • IRF

    “mcDonnell had already mentioned excluding the capital budget at the party conference. Simply harden the line. Offer an amendment to exclude the capital budget (could have also plumped for the NHS) and then vote against if the amendment fails. Then you either have forced a concession from the government or you’ve maintained opposition based on a credible and consistent stance.”
    I think that was precisely McDonnell’s plan, and why he said he’d go along with it two weeks ago. But then it became clear that procedurally that wasn’t possible (I think it took the form of a Statutory Instrument which could only be voted for or against, rather than primary legislation where there would have been an opportunity to move amendments as you suggest), so they had to perform the U-turn. Change of tactics rather than change of policy is how McDonnell put it, although I agree it was rather clumsy in the execution. I think that the Tories’ guffawing and cheering at his discomfiture could damage them more in the long-term though, as it appeared that they were gloating about imposing cuts on the poorest in society. Nasty Party and all that.

  • kensei

    Interesting. There is a lot of discussion on US politics blogs about how parties use and abuse procedure, but much less here.

  • kensei

    So is it worse politically than competently pushing through a policy that has a former voter recant and break down on TV?

  • mickfealty

    Just blogged that one Ken…

  • Zeno

    I was just making a joke that the Royal Family live off the state and have big houses, holidays every year and wide screen TV’s.