The Guardian’s exclusive from John McDonnell in advance of the Labour conference:
McDonnell will announce that Labour MPs will be expected later this autumn to vote for the chancellor’s fiscal charter unveiled in the budget in July. It commits the government to delivering an overall surplus by 2019-20 and to running an overall budget surplus in “normal times”. The shadow chancellor said: “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.” But McDonnell makes clear that he takes a radically different approach to the austerity measures of the Tories
Is he going to rearrange the spending deck-chairs, or is he going to be asking (all of) us for a lot more money?
That is of course a rhetorical question.
The Exchequer appears never to have been able to persuade us (all) to part with more than 45% of GDP in any year, and in most quite considerably less than that. The long term trend appears to be around 38% of GDP. Even in the bad old days of deficit spending (justified on the back of forever rosy growth forecasts), the Government has never been able to spend more than 40% of GDP on any sustained basis. Yes, in the height of the global financial crisis it ballooned north to 45% of GDP, but as the Guardian reported with some horror back in 2011 the Coalition Government comprehensive spending review would see spending fall to 37% of GDP by 2018. I.e. broadly speaking, spending only what you can collect in taxation.
The Guardian was at it again in the weeks before the 2015 General Election:
This is where we return to the Corbyn Supremacy; a new Keynsian orthodoxy of deficit spending to fight recessions and surpluses at the peak of the economic cycle. An abnegation of the Brown doctrine of managerial tinkering in a haze of rosy forecasts. Beware though, once this is done, passed into law by parliament with the support of Her Majesty’s Loyal Opposition, Labour won’t be able to touch it. Ever again! The tories would wet themselves with the roaring good fun of turning parliament TV into a Punch & Judy show: “That’s the way to finance it” followed by “Oh no, it isn’t!”
This only leaves one route for the Labour party to differentiate itself from the tories; ask for permission from the British electorate to take more of their money in order that they can do more good things…
That’s a bold move, and one that absolutely depends on the EU referendum concluding with a vote to remain in the Union. There is absolutely nothing stopping Britain being a thriving success story outside the EU, but it would depend absolutely on a low-tax / low-regulation regime that bears more resemblance to Singapore than Belgium. Not exactly what Labour wants. But, presuming that the “stays” win the day, and do so with a looser less federal relationship with europe, perhaps Labour can make the case for a more collective society with a more continental social democracy. It would require a looser relationship with the EU in order to take the sting out pointing to France and saying “Want!” Quite the opposite perhaps, France would be used to show that Labour’s plans weren’t extreme after all, splitting the difference between tory Britain at 37% of GDP and France at 53%. You could do a lot with 8% of GDP.
I don’t believe Corbyn will be allowed to fight 2020, but then I doubt Labour can win in 2020 regardless of who sits as leader. Regardless of who fights and fails in 2020, supporting the ‘fiscal charter’ will change Labour permanently, and could come to be seen as Corbyn’s legacy.