Osborne’s plans should be a wake-up call for Labour

We have heard from some commentatorsthat this was a budget intended to be an unremarkable event, coming ahead of a European Union referendum and more importantly a leadership contest between George Osborne and Boris Johnson. But behind the chancellor’s short-term and contorted attempts, as he said, to ‘fix our plans to fit the figures’ the battleground for the next election may well have been revealed. 2020 will again be fought on who is best to deal with the public spending challenge – familiar terrain on which we have lost too often.

The Office for Budget Responsibility put this plainly in its budget report: ‘the government needs a much bigger cut in current departmental spending in 2020-21 – £8.1bn compared to £1.8bn in 2019-20 – to achieve the surplus it wants’. So campaigners in the run-up to the next general election will be struck by a distinct sense of deja vu. In all likelihood, a deficit will still be lingering and there will be ongoing public anxieties about who should manage spending and borrowing into the 2020s. Of course, if Osborne had focused more on Britain’s productivity and rebalancing the economy, sustainable growth would endow the country with improved public finances.

Yet we now know there will be uncomfortable spending cuts for the next three years – not least a £2bn raid on the pensions of teachers, nurses and police officers – to be then followed by even deeper cuts than people might anticipate. As the OBR says, when it comes to its fiscal approach, ‘the government has loosened policy in the short term and then tightened it significantly in 2019-20 and 2020-21’, adding that, ‘The 1.5 per cent of GDP tightening of the structural fiscal position in 2019-20 would be the sharpest since 2010-11’.

This will jar with people’s expectations. And bear in mind that this bleak outlook could be made even worse if Britain were to leave the European Union. Brexit campaigners have been forced to acknowledge that, using the analogy of the ‘Nike tick’, a contraction would occur in the years following such a major change in the United Kingdom’s economic alliances.

So there was some big news in the budget after all, and it defies electoral expectations. The spending challenge could actually be more, not less, acute at the time of the next election.

What is the lesson Labour should take from this as an alternative party of government? We obviously cannot afford to rerun our unsuccessful approach again and again. Difficult times ahead make it even more important for us to prove our ability to win the public’s confidence at managing the economy.

We cannot ignore the tough choices that the public expect an alternative government to take. But we can explain how we would make different choices. The appallingly crass decision by Osborne to choose a capital gains tax ‘tycoon tax cut’ funded by a similar cut in disability independence payments exposes their warped logic.

Aneurin Bevan said that ‘the language of priorities is the religion of socialism’ and we must now heed his call. Batting off every difficult question about spending and pretending that no difficult choices are needed gives the impression we won’t confront reality. If our local councillors are grown-up enough to make difficult choices on spending, Labour at a national level must demonstrate that we are able to do so as well.

We could reduce NHS costs with preventative healthcare; make firms who are being regulated bear the costs of their own regulation; collect overdue debts owed to the government worth over £2bn. We need to ask questions about the necessity of so many Whitehall departments; about why fraud and error rates in welfare are not falling; about the possibility of foreign litigants being charged more for using our courts.

Setting out a robust plan for the difficult choices and spending reprioritisation would help prepare Labour for that election challenge in 2020. We have learned that it is not enough to merely rail against Tory failure. The public want an alternative administration they can trust to make mature decisions, confront realities and have fairer values when making spending priorities. This is now the challenge Labour must confront.

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Chris Leslie MP is chair of the parliamentary Labour party backbench Treasury committee. He tweets @ChrisLeslieMP