Published on 12 Oct 2015

Labour to vote against fiscal charter

In a shock reversal, Labour is to vote against the government’s proposed charter for budget responsibility.

The charter, flagged before the election, would commit the government by law to balancing the books within three years – provided there is no global crisis. It would also solidify the principle of a welfare cap and formalise the duties of the office for budget responsibility (OBR).

Labour’s shadow chancellor John McDonnell had previously said Labour could vote for the document. Some backbench Labour MPs were nervous about the party being seen to oppose fiscal discipline, while McDonnell himself had intended simply to ridicule the charter as irrelevant.

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Today, in a letter to Labour MPs, McDonnell has reversed his former stance and called for the party to oppose the charter, whilst publishing its own alternative document.

The letter says:

“In the last fortnight there have been a series of reports highlighting the economic challenges facing the global economy as a result of the slowdown in emerging markets.

“These have included warnings from the International Monetary Fund’s latest financial stability report, the Bank of England chief economist, Andy Haldane, and the former Director of President Obama’s National Economic Council, Lawrence Summers.”

Labour had planned to move its own alternative to the charter, and to table amendments, but I understand both these possibilities have been ruled out by the clerks of the Commons.

McDonnell says:

“I believe that we need to underline our position as an anti-austerity party by voting against the charter on Wednesday.

“We will rebuff any allegation of being deficit deniers by publishing for the debate our own statement on budget responsibility. We will set out our plan for tackling the deficit not through punishing the most vulnerable and decimating our public services but by ending the unfair tax cuts to the wealthy, tackling tax evasion and investing for growth.”

The move follows the SNP’s announcement this weekend that it will vote against the charter and publish its own alternatives.

The move is set to be debated at a PLP meeting tonight.

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13 reader comments

  1. CharlesJ says:

    So hopefully they have finally seen this for what it is – a trick.

    Even Keynes who originally advised this, subsequently changed his mind in favour of Abba Lerner’s “functional finance” instead. It takes no account of depreciation and interest, and that growing GFCF incurs future commitments to fund extra day-to-day spending. It does not take account of situations where infrastructure spending is not necessary or possible, in which case, and where there is a spending gap, the economy must be supported by an increase in current expenditure instead, consistent with the sectoral balances.

  2. Janet Harriman says:

    This is great news. Finally a party standing up for the most vulnerable in our society. The Tories cannot go unopposed by Labour. Labour are the party that should and will represent those on the receiving end of these brutal cuts.

  3. Jed says:

    The Budget Charter is being used as a way to prop up credibilit for the Government. The debt has spiralled out of control in the last half decade of Conservative Rule. By having a Charter, the Conservatives can wring their hands and apologise for endless cuts without ever being held to account for them.

    Quite simply it is an attempt to bore everybody into submitting to endless Austerity. By setting up the Office of Budget Responsibility (Behavioural Influence Unit speak for Office of Austerity) and insisting the Budget is Balanced the Conservatives are ensuring – as has happened in the US – that an endless cycle of downward spending will occur. Detroit happened because of balancing budgets being mandatory. The endless, broken, record telling everyone, we cannot spend on that because the budget cannot be balanced if we do, will be the only excuse ever needed. It will bore the alternatives out of dialogues. Like a screeching child asking are we there yet.

    If there is an international crisis: we can spend but because there is an international crisis we do not have anything to spend. If there is no international crisis: we can not spend.

    So spending on weapons systems such as Trident (at £100Bn) will be allowed even if creates a deficit but spending on unemployment benefits (at £3Bn) will be disallowed even if those benefits are merely repaying National Insurance to the people who payed them in.

    It is a con trick. It is a con trick of ambitious proportions but it is a con trick nevertheless. The Current Chancellor has run up more debt than all of the Labour Party Governments of the twentieth century combined. The presence of the Office of Budget Responsibility has not stopped him from doing that. So what would change with a mandatory Balanced Budget.

    What would change would be the ability of the Conservatives to push a vote of no confidence whenever they were in opposition on the simple premise: that is not responsible budgeting and could cause a budget deficit. For any spending.

  4. John Nelson says:

    DON’T BE AFRAID TO SAY NO.

  5. Ruth Wilson says:

    Of course Labour needs to oppose and vote again Conservative fiscal policy. It is diametrically opposite to their agenda and analysis.

  6. Nick Heard says:

    That’s consistent at least. Look forward to seeing the details in the Shadow chancellor’s proposed alternative… Especially when we get of the likes we did today about Facebook’s shocking poor contribution to the nation’s coffers

  7. Kenneth Toulson says:

    You can see why Jeremy Corbyn has got the morally bankrupt Tories and craven New Labour ‘entryists’ frothing at the mouth. Jeremy’s root and branch solutions to the economic crisis, wholly caused by the finance sector through the reckless greed of the bankers, has exposed the Tory and right-wing’s politicians’ lies that sought to use the crisis to turn the clock back to the 19th century by dismantling the NHS and the entire welfare state. This is not because they believe that the country could go bankrupt but that they are ideologically opposed to public services and the welfare state and are committed to handing over our public services to big business. Consequently, the Tories wasted no time in implementing their vicious anti-worker policies, similarly we should be no less passionate in our fightback.

  8. Daphne Gilbert says:

    Excellent idea! SNP and Labour need to join forces as often as possible.

  9. Chris Davies says:

    I believe that the Labour party should vote against this charter and present its own anti austerity charter to counteract the one the Tories are proposing. I am a Labour party member and expect the shadow cabinate to support our elected leader Jeremy Cornyn.

  10. Tam Pearson says:

    Cameron and Osborne failed to meet any of the financial targets set in their own contracts to the uk electorate in 2010
    The global elite, bankers, financiers, corporations created the global banking crisis in 2008.
    Through their corruption, deceit, fraud, in the American sub-prime markets they were bailed out by taxpayers with 10’s trillions in financial interventions /bailouts.
    The elite have doubled their personal wealth to £500 billion since.
    The uk now has debts & liabilities equivalent to 1,000% of GDP rising each year hidden from the public. Interest repayments of £250 billion/ annum for government debt/ liabilities.
    Austerity measures proposed have failed to balance the
    budget, structural budget, current account, trade balance; all being in deficit
    The neo-liberal agenda has failed

  11. Xan Phillips says:

    We all like our politicians to say the same thing week in week out but if circumstances change shouldn’t policies change? I’m sure George Osborne would change his policies if certain facts came to light. maybe this is a lesson that we should be more flexible in our thinking. Should we be worried that with this new information coming to light George Osborne hasn’t changed his tact, that he seems blind to the dangers ahead.

  12. Isolda mcNeill says:

    At last, Labour becomes the party of opposition and does what those who voted for Labour want and need it to do

  13. James Davies says:

    Credit to McDonnell for making the right decision and not being afraid to change his mind upon proper inquiry.

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