Ed Miliband has promised that a Labour government will eliminate the UK budget deficit by the end of the next election.
The shadow chancellor, Ed Balls, earlier told the BBC there was “now a big choice” between Labour’s spending plans and those set out by George Osborne.
But neither Ed gave away much in the way of hard detail about how Labour’s approach to cutting the deficit would be different to that of the Conservative chancellor.
Politicians from all the leading parties have been accused of running a “candour deficit” over their economic plans: failing to come clean about how they will implement the cuts they all agree will be needed.
Here’s what we know about how the three main parties would try to balance the books – and what we still don’t know.
We’re not where we should be. Forecasts in 2010 suggested the deficit should have fallen to less than £40bn this year. Instead, it’s running at more than £90bn, largely because the economy has performed worse than expected.
All three main parties say we have to eliminate the deficit. But they have different ideas about how to go about it, the pace of consolidation, and what to do after we get back in the black.
George Osborne set out his latest spending plans up until 2019/20 in the autumn statement last week.
He wants to eliminate the deficit by 2017/18, running a small £4bn surplus in 2018/19 and a larger surplus of £23bn in 2019/20.
A lot of this reduction will be driven by more public spending cuts.
The Institute for Fiscal Studies says only between 23 to 39 per cent of the cuts planned in 2010 have been delivered so far, depending on how you measure spending.
So the pace of spending cuts will actually have to accelerate from now until 2020.
The independent Office for Budget Responsibility (OBR) said the cuts are so deep that public spending as a percentage of GDP will fall from 40.5 per cent this year to 35.2 per cent in 2019/20.
“That would probably be the lowest in around 80 years”, the OBR said. This is the source of Labour’s rhetoric about the current government “taking Britain back to the 1930s”.
It has to be said that the OBR has hinted fairly heavily that the next government will not actually be able to deliver cuts of this severity in reality, saying they “would pose a significant challenge if they were confirmed as firm policy” but “we do not believe that it would be appropriate for us to assume, ex ante, that these cuts would be inherently unachievable…”
The government has made commitments to ring-fence some spending – like health, education and international development – but only until next year.
It looks like cuts rather than tax rises will do most of the heavy lifting, although David Cameron has declined to rule out raising VAT again when repeatedly asked about it in parliament.
Mr Balls says he wants to eliminate the deficit as soon as possible in the next parliament, which effectively gives Labour more time – potentially until 2020 – to balance the books.
But there will be cuts every year until the deficit is cleared.
Today’s big attack on Tory spending plans suggests public spending would not fall to 35 per cent of GDP under Labour, although the shadow chancellor declined to say what he thought an acceptable percentage is.
Labour have already set out a number of planned tax rises, including a “mansion tax” on homes over £2m and the return of the 50p tax rate for those earning more than £150,000.
Mr Balls has said that the NHS budget will remain protected from cuts and the commitment to spend 0.7 per cent of GDP on international development would continue – but the precise details of how cuts will be spread across government have not been laid out yet.
Danny Alexander has sought to position the party somewhere between the other two, saying: “Labour will borrow too much, the Tories will cut too much.”
Like the Tories, the Lib Dems say the deficit should be eliminated by 2017-18, but like Labour, there is no commitment to more cuts after that: public spending should rise in line with economic growth.
The Lib Dems have said tax rises would play a bigger part in their plans than the Conservatives and like Labour, they want a mansion tax on properties worth more than £2m.
Unlike both Labour and the Conservatives, the Lib Dems have left open the option of borrowing more to fund selected infrastructure projects, which they say will help boost growth.
Mr Osborne’s plans are the toughest. He wants to eliminate the deficit by 2017/18 then continue the cuts, running a surplus of £23bn by 2019/20.
Labour’s targets are looser: they have given themselves another two years to get the deficit down to zero, and they are not making any promises about a surplus, giving them more wiggle-room to make less severe cuts or tax rises.
The Lib Dems share the Conservative 2017/18 deadline for getting rid of the deficit. But unlike George Osborne, they say public spending should rise in line with economic growth after that.
So both Labour and the Lib Dems have given themselves more leeway than the Conservatives when it comes to the pace and severity of cuts or tax rises. Obviously the price of looser deficit reduction is that debt will fall less quickly as a share of national income.
Both are keener on using tax rises to raise income than the Tories, who want spending cuts to do most of the work.
Whatever the make-up of the next government, there’s still a huge amount we don’t know: the precise mix of tax rises and cuts; which departments will bear the brunt of austerity; which areas of public spending will be ring-fenced.
But there is no doubt we will get more austerity. FactCheck will leave it to the reader to decide whether the differences between the parties are all that great.