It now looks as though David Cameron’s promise to balance the books by next year will be at least £75bn wide of the mark. So it has become clear to me and my shadow cabinet colleagues that the settlements we will need to make following the general election will be the toughest faced by an incoming Labour government for a generation.
Three years of failure on growth and living standards has meant failure on deficit reduction as well, with George Osborne borrowing £190bn more than he originally intended in his 2010 spending review.
This chancellor has had his five years to eradicate the deficit – but we are determined to finish that task on which he has failed.
The next Labour government will get the current budget into surplus and national debt falling as soon as possible in the next parliament.
That is why, in December, Ed Miliband and Ed Balls asked me to carry out Labour’s zero-based review – a root and branch look at every pound of government spending.
Since then I have completed the first round process analysing every departmental budget and exploring public service reform and redesign in detail with every shadow team.
Earlier today I set out some of my initial findings at the ICAEW.
Labour will restore a strategic long-term approach to public spending plans.
When the chancellor carried out a three-year spending review from 2011-12, it rapidly fell to pieces with salami-slicing and shifting money to meet political year-end goals. Eventually, coalition pressures led to last summer’s 12-month spending review – which was a one-off budget settlement in all but name.
So the next Labour government will do things differently. Ed Balls and I have concluded that a Labour Treasury will put an end to the one year spending reviews recently introduced by George Osborne. We will instead set out spending review plans on a multiyear basis.
And we would go further and expect departments in turn to provide public bodies and organisations under their stewardship with the same longer-term certainties, so they can make better decisions and plan for the savings they will need to make.
We have to reduce the litany of false economies and illusory ‘savings’ that end up costing more in the long run, and I shall be talking about this at Progress’ annual conference tomorrow.
At the Ministry of Justice, for example, the decision to close 14 prisons created a shortage of capacity and forced ministers to change tack and commission new ‘Titan’ prison projects which appear unfunded and could, in fact, worsen reoffending.
And the list of expensive U-turns does not end there. In 2010, at the Department for Transport, ministers cancelled the A14 upgrade, claiming it was ‘unaffordable’ at £1.3bn, only to revive the same scheme three years later at a cost of £1.5bn.
Then, of course, there is the ‘bedroom tax’, a totemic symbol of this government’s incompetence and unfairness. It has caused great hardship but, rather than saving money, it merely shifts costs from local authority housing benefit and into the more expensive private rented sector element of housing benefit.
We cannot go on like this. Short-termism is now a chronic disease eating away at the heart of our public services. Ministers repeat their ‘long-term-economic-plan’ mantra with such frequency that they are deluding themselves into a belief that simply uttering these words will magically make them come true.
This is why we have also concluded that the Treasury must improve its partnerships with other departments, and look at the real world outcomes which do not neatly fit into a single department of state portfolio. The previous government created public service agreements as a way to prevent problems falling between the gaps but there were too many of them in number. Today, it is clear the coalition is lacking an adequate accountability mechanism as the goal of deficit eradication goes further into the distance.
So the next Labour government will concentrate efforts on a core set of interdepartmental priorities which are focused on outcomes. In the coming months we will agree how these arrangements will be implemented. This will be a key part of maintaining a long-term focus and delivering firm commitments on sustainable savings.
All government departments in the next Labour government will have to face fundamental questions as never before.
I am not heading into this expecting popularity. Quite the opposite.
We will not be able to undo the cuts that have been felt in recent years. A more limited pot of money will have to be spent on a smaller number of priorities. Lower priorities will get less.
We are not arguing with the government about the scale of the challenge. But we do differ significantly on the best way to confront it.
But if you believe that as a society we achieve more by coming together and pooling resources for services from which we all benefit, then we have a responsibility to prove to taxpayers this can be done efficiently and effectively.
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Chris Leslie MP is shadow chief secretary to the Treasury. He tweets @ChrisLeslieMP