Budget surplus announcement is simply not good enough
3 min read
Labour Shadow Cabinet member Jon Ashworth MP calls for the Chancellor to explain his announcement about the Treasury missing their budget surplus target.
Amidst the Tory drama of the last 10 days you would be excused for missing a major announcement from Chancellor George Osborne – that he no longer thinks he’ll be able to meet his self-imposed budget surplus target by the end of the Parliament.
In any other week this would be huge news, but Osborne chose to slip the news out quietly on Friday, while Michael Gove launched his leadership campaign to the assembled press.
This isn’t the first fiscal target he’s set to miss. Neither is it the second. In March’s Budget the independent Office for Budget Responsibility confirmed the Tory Government was set to breach its own welfare cap and that it would miss its supplementary debt target to get the debt-to-GDP ratio falling in 2015-16. Now the Chancellor has been forced to pre-empt the OBR’s own forecasts and admit he’s no longer on course to meet the only remaining target – a budget surplus in 2019-20.
Let’s be clear - this is an inflexible and self-imposed fiscal target. After six years in office we’re accustomed to the Chancellor’s fiscal failure. But serious questions remain about what George Osborne has actually announced and what this will mean for the public finances.
The Charter for Budget Responsibility – which sets out the detail of the Government’s fiscal rules – states that the target applies unless there is a “significant negative shock” to the economy, which is defined as real GDP growth of less than one per cent on a rolling four quarter-on four quarter basis. The Charter goes on to say that if this shock occurs “for the period outside normal times from 2015-16” then the Treasury will need to “review the appropriateness of its fiscal targets for the period until the public finances return to surplus.” It adds that any changes to the targets must be approved by a vote in the House of Commons.
In his speech on Friday the Chancellor simply said that the Tory Government needed to be “realistic about achieving a surplus by the end of the decade."
So the question is whether George Osborne has technically abandoned his surplus target or whether he is simply stating that he does not think he is on course to meet it given the anticipated shock from Brexit to the economy. Does he think the Tory Government should continue to target a surplus over a longer time period? If not, what does the Chancellor believe the Government should target when it comes to the public finances? Will there now be a review of the Government’s fiscal targets and what is the timetable for this? Will any changes be approved by Parliament?
It’s simply not good enough for George Osborne to make such an announcement with no proper explanation of what it means for the public finances and our wider economy. The public deserves answers but all we see from the Tories is a Party completely focused on themselves.
Jon Ashworth is a member of the Shadow Cabinet and the Labour MP for Leicester South
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