‘A credible alternative’

Labour’s announcement of a fiscal responsibility rule to drive investment and tackle the deficit has drawn praise from eminent economists, as well as Unite’s general secretary Len McCluskey.

Shadow chancellor, John McDonnell, laid out the action plan during a speech at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) on Friday (March 11).

McDonnell said, “There is nothing left-wing about ever-increasing government debts, or borrowing to cover day-to-day expenses.

“And that is why we would commit to always eliminating the deficit on current spending in five years, as part of a strategy to target balance on current spending over a target five-year period.”

Labour will also increase investment to build homes and improve infrastructure, because reducing the deficit alone will not produce an economy that benefits everyone, McDonnell explained.

“It is essential for our future prosperity that we retain the ability to borrow for investing in capital projects which over time will pay for themselves,” he said.

“But we also know that we are entering a period of great uncertainty for the world economy, which may put many existing economic structures under pressure.

“So it is right that, if conventional monetary policy again becomes constrained by hitting a lower bound as it did after the global financial crisis, we understand when fiscal policy has to take some responsibility.

“And that is why we will reserve the right, for as long as monetary policy is unable to undertake its usual role due to the lower bound, to suspend our targets so that monetary and fiscal policy can work together.”

This week Chancellor George Osborne will be presenting his Budget to Parliament, after admitting that the economy is still struggling.

Osborne’s devastating cuts

Osborne will schedule more devastating cuts to vital services, even as he is introduces new rules that will see the biggest council tax hikes in England and Wales for eight years.

This is because Osborne is neglecting the welfare of ordinary people in favour of his chums in the city, said McDonnell.

“Instead of arguing for a financial sector that serves society, Osborne is arguing for a society that serves the financial sector. We chased the illusory gains of financial expansion, and neglected real wealth creation,” he added.

“The old rules have failed too many. They have meant extraordinary rises in inequality, and falling social mobility. They have meant low investment, low productivity, and low pay, even as a lucky few have done extremely well. Labour will rewrite the rules to build a fairer, more prosperous economy.”

Noble laureate and leading economist, Joseph Stiglitz, welcomed Labour’s plans, commenting that the Tory’s economic policies were “holding back” the UK.

He said, “The approach which John McDonnell is laying out is a credible and sensible one for managing the nation’s finances responsibly, whilst supporting sustainable economic growth.

“It is compatible with mainstream thinking and I hope that it will help move the political debate on from the current austerity approach which is holding back the potential of the UK economy.”

Unite general secretary, Len McCluskey, also praised the plans, saying that Labour offers people a credible alternative and would secure a brighter future for our young people.

“When George Osborne rams through further cuts to public spending in his budget this week leaving our police, children and social care services unable to function as they should, the public will know that this is because the government is doing it out of political choice and not necessity,” McCluskey said.

“Every notable global economic body now says that austerity is failing. Only recently the OECD pleaded with the Chancellor to approach the economy differently because his policies are not working, evidenced by the fact that he misses every target he sets himself, and are actually now endangering any real recovery.

“Where this government is sucking the life out of the economy with wage stagnation and super-charged insecurity, Labour is planning to restore growth and expand our national asset base by building the homes we need and improving our ailing infrastructure.”

He added, “This will be music to the ears of people up and down the country but especially to our young people desperate to forge a secure and brighter future. At long last they are being offered a hopeful alternative to the misery and ruined life chances that this government causes.”