Labour's Fiscal Credibility Rule Has Laid Down a Challenge to George Osborne

John McDonnell's proposed Fiscal Credibility rule is a break with Osborne's failing "fiscal mandate". Osborne misses every target he sets himself to shrink the deficit. He said he'd clear the deficit entirely by now, but he's £70billion wide of that. He can only meet his target for reducing debt by selling off government-owned assets. And you'd be hard pushed to find a single credible economist who would support Osborne's restrictions on government investment.

The global financial crisis of 2008 hit the UK hard. Our financial system was too big and too high-risk - and when it sank it dragged the rest of the economy down with it.

Labour has learned the lessons from the financial crisis, Osborne and the Conservatives haven't. Light touch regulation failed us all. But so did previous governments thinking that targets could be pushed around, or so-called 'hard-and-fast' spending rules ducked with impunity.

John McDonnell's proposed Fiscal Credibility rule is a break with Osborne's failing "fiscal mandate". Osborne misses every target he sets himself to shrink the deficit. He said he'd clear the deficit entirely by now, but he's £70billion wide of that. He can only meet his target for reducing debt by selling off government-owned assets. And you'd be hard pushed to find a single credible economist who would support Osborne's restrictions on government investment.

Labour's Fiscal Credibility Rule has been drawn up with world-leading economists to provide a robust and credible framework for the government to eliminate its deficit and shrink the government debt. Importantly, it will allow a government to do this without Osborne's damaging austerity measures, and without blocking vital government investments.

The OECD, the IMF, the CBI and the TUC all now support government investment. Business leaders support government investment. George Osborne - for reasons best known to himself - has decided to ignore this coalition in favour of growth and has instead opted to push for massive restrictions on government investment.

So our Fiscal Credibility Rule is there as a rock-solid commitment to eliminate the deficit within a five year target and to have government debt lower as a percentage of GDP at the end of each Parliament.

We're doing this because it's the right thing to do. As John said in his speech - there's nothing "left-wing" about borrowing too much. There's nothing "socialist" about a government running up massive debts. Every penny misspent by government is a penny taken from someone else and wasted. The Labour Party has to show it thinks about how to earn money - not only how to spend money.

We need tight rules for our financial system. But we also need a future Labour government to act as a responsible custodian of the nation's finances. That means transparency.

This is where Labour's Fiscal Credibility Rule is a decisive break with rules governments have had in the past.

Other governments and oppositions have had rules and targets, including this one. But they've either ignored them, like George Osborne, or else had too much freedom to shift the goalposts. We will make a complete break with the past on this. We know that fiscal responsibility needs transparency and accountability. So instead of leaving future governments to set and make their own targets, we're going to give the Office for Budget Responsibility the task of overseeing whether or not our rule is met - and the obligation to "blow the whistle' if it isn't met. And to make sure the OBR is truly independent, we will ensure that it reports to Parliament for the maximum possible accountability and transparency. I'm concerned that the Treasury Select Committee has raised the possibility of previous Treasury ministers attempting to steer OBR decisions. That's not genuine accountability.

So Labour has learned both these lessons. Jeremy Corbyn's leadership is about learning from the best of the past - and admitting where we got things wrong. We want a transparent and accountable financial system alongside transparent and accountable government finances.

I believe Osborne has failed to learn these lessons about responsible finance and about government responsibility. He's unwinding rules that were put in place after the financial crash to keep risks in the financial system properly managed - for example, removing entirely reasonable new regulations for senior bankers. And he's made a great song and dance about his own "fiscal rules", but then simply ignored whatever targets he's set for himself.

Richard Burgon is the shadow City minister and Labour MP for Leeds East

Close

What's Hot