Labor seeks to shake off image of excessive public borrowing
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Labor is expected to run in the next election seeking to neutralize accusations that its policies depend on excessive government borrowing with a set of fiscal rules very similar to those of Boris Johnson’s Tories.
In her conference speech on Monday, Rachel Reeves, the fictitious chancellor, will commit to a goal of balanced budgets excluding investments for infrastructure and public debt falling as a percentage of national income.
“I want people to know that there are fiscal anchors and that there will be restrictions and [for] whatever Labor commits to, we will explain where the money will come from, ”Reeves told the Financial Times.
“For every promise I take every commitment we make, we’ll explain how we’re going to pay it off and we won’t make any promises we can’t keep,” she added.
The binding elements of Reeves’ fiscal rules will be that Labor pledges to balance the current budget over the medium term by ensuring that tax revenues at least match daily government spending and that the burden of public debt is up to date. decrease. path.
These rules are essentially the same as the 2019 Conservative manifesto, which Chancellor Rishi Sunak is expected to announce in his budget on October 27.
The Chancellor wants to reach her period by 2024-25, while Labor should give itself a little more time before it becomes binding.
Reeves pointed out that the rules would make it possible to borrow and spend more on infrastructure than the Conservatives, who have pledged not to spend more than 3% of national income on public investments, but the self-debt rule. imposed will not allow infrastructure spending on a Labor government to be significantly higher than that.
The rules are much stricter than those proposed by Jeremy Corbyn’s Labor Party in the 2019 election, when it considered spending 4.5% of national income on investment, which also sought to balance the current budget, this which was achieved before the coronavirus crisis hit last year. .
Labor would introduce three additional budget rules, Reeves said, although these have the effect of being principles rather than binding constraints on a future Labor government. It would sanction borrowing to invest in infrastructure, introduce a permanent rule suspension mechanism if the economy is hit by an “exceptional shock”, and examine public sector assets and liabilities.
The final principle would prevent a government from seeking to reduce public debt by selling government-owned assets at low prices just to comply with the binding rules, Reeves said.
The rules, she added, would be more durable than Sunak’s because they were designed to last. “The purpose of my rules is that they don’t just last for one legislature, but they are rules that will always apply, but they give you the flexibility you need to respond to crises,” Reeves said.
The rules would not eliminate differences between the two main parties on public finances in the next election, as Labor was still likely to go to the electorate by promising higher public spending backed by higher taxes.
“We don’t set our tax and spending plans. . . and I would expect a Labor government to come up with a different spending envelope than the Conservatives in the next election, ”Reeves said.
To ensure that a Labor government gets value for money from public spending, it would also establish a value-for-money office, combining elements of the treasury and other existing parts of government to undertake regular spending reviews. public and public procurement to minimize waste in the public sector.