Just looking at the fiscal forecast overview in the latest OBR report:
The key figure here is cyclically-adjusted surplus on current budget. It's a negative figure because it's a deficit.
At the time of the election the Labour plan was to cut the deficit by half by 2015 (so instead of being 5.5% of GDP it would be 2.75% of GDP). The Conservative plan was to eliminate it altogether. The Conservatives argued that cutting by half was not fast enough, Labour argued that trying to cut too fast would just reduce growth so you wouldn't get the deficit down by any more anyway and would have just had less growth and more unemployment to show for it.
The adjusted figures now suggest that the Conservatives will roughly cut the deficit by half by 2014 and that they will have cut it by approximately two thirds by 2015 rather than eliminating it altogether. BUT these figures are based on the main falls in the deficit coming in the last two years of the parliament where growth forecasts (see p 11 of the report) are 2.7% and 3.0% which would require a considerable jump up in growth considering the forecast for 2011 is 0.9% and for 2012 is 0.7%. If we do not have that return to (roughly trend) growth in the last two years of the parliament then we are likely to be stuck with similar deficit figures as that in 2013 and so the Tory plan will ultimately be around about the Labour plan - cutting the deficit by half.
Turn on thread page Beta
Labour's economic policy watch
- 04-12-2011 12:59
- Thread Starter
(Original post by dc_lawrence)
- 04-12-2011 22:28
I was comparing Labour economic policy to what the Conservatives proposed in the last budget. It's only recently that the conservatives have realised what they did wrong and started spending on infrastructure, etc. The coalition pledged to cut £81 billion in the first year, not 6.
Labour promised NO Cuts in the first year, none to infrastructure, or anything. The Conservatives jumped straight in and regretted it. There is no doubt that the cuts have had an effect on GDP, in a country where half of GDP relies on the state. But there are of course other factors explaining the current weak growth.
Labour did promise to maintain the 50% tax rate, while the conservatives are considering cutting it. Also, they did promise to raise NI, effectively the same as income tax.
And of course Old Labour are more different to today's Tories. But today's Labour government is still the most likely to represent the unions, which inevitably leads to more left wing / socialist policy, even of to get votes they have to appear more centrist.
At the election over the course of the parliament labour pledged to cut infrastructure spending by half, the coalition increased it in 2010 from that level and have yes increased it again.
(Original post by usainlightning)
- 04-12-2011 22:34
We constantly hear Ed Balls bleating on about how the coalition government is going 'too far and too fast' on spending cuts and this is hence the reason why we are not growing.
The governments plan is to eliminate the structural defecit over 4 years ( the bit of the defecit that doesn't go away with growth), which equates to £80 billion in spending cuts and about £20 billion in tax rises, whereas Labour intend to half the defecit in 4 years, so assuming our bond yields (which is fairly unlikely) were exactly the same it would mean Labour would take in total £50 billion of stimulus out of the economy instead of the governments £100 billion. Hence there is a £50 billion gap in stimulus between the two.
However, we have a £1.4 trillion economy where the government spends a colossal £692 billion a year. The government intends to borrow an almighty £122 billion this year alone, so much for an era of savage cuts. Is spending and cutting taxes in total by £50 billion over 4 years really going to solve our problems?
My view is that the government has been unlucky both in terms of imported inflation tht it can't do anything about i.e fuel prices, gas prices etc, which has hurt people's spending power and the lower than expected demand from a eurozone in tatters.
And unlike the government i do not accept that Labour's plan would condemn us to Greek style misery, because both of their economic plans are so similar.