Vir Cantium

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So What Would You Do, Ed? 500 Days and Still No Word

Tomorrow, 6th August, will mark 500 days since Labour promised us details of how they would reduce the deficit. It was Budget Day on 24th March 2010 that the then Chancellor Alistair Darling was supposed to reveal Labour’s grand plan for putting the public finances back on track. Well, not really ‘back on track’, as they were only going to reduce the deficit by half. Let’s be generous and say they’ve found the rusty siding where they parked the train before they went off and embarked on their epic spending binge.

Second in command at the Treasury, lest we forget, was Ed Balls.

Ed Balls

Ed 'Chicken Licken' Balls. (Apologies for any other mental images this caption has just conjured up.)

So, what is Labour’s alternative? Part of the problem here is that they’re still not sure themselves. First, let’s look at their plans for the split of deficit reduction between cuts and tax rises. Darling was looking at a 66:33 cuts/tax strategy, along with his economic growth assumptions, to halve the £178bn hole. Then seven months later Alan Johnson, as shadow chancellor, made it 50:50. Clearly one who wanted to keep us on our toes, in January he made it 40:60. By then, of course, time had moved on and, partly thanks to the in-year cuts that George Osborne had made, the forecast deficit for 2014/15 was down to a still staggering £155bn.

Ed Balls, the current Chicken Licken shadow chancellor, has been more opportunistic; dodging any questions about his ideas, he prefers to carp on about reversing the VAT rise which, considering the Labour treasury team were also planning the 20% rise, is a bit rich. Then again it’s a well-known phenomenon that the metals markets spike whenever Ed Balls opens his mouth, such is the quantity of brass required for his neck.

Anyway, back to March 2010: Darling’s plans were based on pie-in-the-sky growth forecasts that were slashed by the OBR as soon as they came into existence. The fact that even these forecasts have been pushed downwards since then shows that whatever secret plan Labour may have had would have required significant recalibration.

However, let’s stick with the original numbers: they said that to reduce the deficit by half would have required £57bn in cuts and tax rises. Of this, £19bn was from the tax increases already announced before March 2010 and £38bn from cuts. Crucially, the Labour government deferred the details of the cuts – the departmental budgets – until the comprehensive spending review in October 2010 which, of course, they got away with not delivering by dint of being kicked out at the General Election.

So, 500 days and still no word from Labour where they would have found their £38bn of cuts.

Or, if we take the last stated policy of a 60:40 tax/cuts ratio, where the additional £3.8bn of tax increases would have come from.

Or, if we assume Ed Balls isn’t an opportunistic hypocrite and they wouldn’t have hiked VAT (which raises a forecast £13.45bn by 2014/15), the £17.15bn in tax increases.


(Pic. credit: Boris Backer)


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