I have made fun in the past about Labour politicians and supporters who in public trip up once the word borrowing is mentioned. An interviewer only has to ask ‘but if Labour reverses this cut it will mean more borrowing’ and the interviewee stumbles around in a way that shouts to anyone watching that Labour have a vulnerability here.
It is a vulnerability that helped lead to the disastrous decision under the interim leadership not to oppose Osborne’s cuts in tax credits, and to McDonnell’s embarrassing initial decision (now reversed) to support the charter. But now that Labour has sorted itself out on both issues, it needs to stop avoiding the borrowing question. Take this otherwise assured performance by Owen Smith on Newsnight last night (27 minutes in, HT Owen Jones).
Here is what Owen Smith should have said when asked whether reversing the cuts to tax credits would lead to more borrowing.
“The Chancellor has said he needs to cut tax credits to meet his new fiscal charter. Labour oppose this charter, because it makes no economic sense. Osborne cannot find a single economist who supports his plan. Imposing a work penalty to pay borrowing off more quickly is just counterproductive, because discouraging people from working makes the economy weaker. This was supposed to be a government that encouraged work, yet here is the Chancellor doing the opposite in order to meet a charter that only his MPs support.”
If the interviewer persists with “so you will borrow more”, say
“Labour would not need to cut tax credits because we would balance current income and spending, leaving room for the country to invest. Labour would borrow to invest, whereas Osborne is paying for the little public investment he is doing by cutting tax credits. What matters is government debt in relation to GDP, and our policy would mean that debt relative to GDP would fall under Labour.”