Reeves: “We must ensure we pass the test of fiscal credibility”

Rachel Reeves will echo Ed Balls and Ed Miliband's recent calls for "fiscal credibility" being key to Labour "earning people's trust back" in a speech tomorrow.


Rachel Reeves will echo Ed Balls and Ed Miliband’s recent calls for “fiscal credibility” being key to Labour “earning people’s trust back” in her first major speech as shadow chief secretary to the Treasury tomorrow.

Addressing the Institute for Public Policy Policy Research (IPPR) in central London tomorrow morning, as well as setting out Labour’s alternative approach, Reeves will accuse the government of failing on jobs and growth, and of “failing on its own terms” of cutting borrowing and eliminating the deficit in this Parliament.

On the need to pass the credibility test and set out “new fiscal rules”, she will warn:

“It’s precisely because we on the centre left believe in the power of public services and active government to transform lives, and make our country fairer and more prosperous, that we must ensure we pass the test of fiscal credibility.

“That’s why, as Ed Balls announced at the Labour Party conference last year, before the election, we will be committing to new fiscal rules that will get our current budget back to balance and our national debt on a downward path.

“If we don’t get this right, it doesn’t matter what we say about anything else. Because earning people’s trust that we will be responsible custodians of public money is the precondition for gaining the right to be heard on any other issue.

“Sound public finances will always be the indispensable platform for delivering our programme in government: for better public services; for rising living standards; and for building a more responsible, more equitable, more sustainable capitalism…

“Being trusted with the nation’s finances, and building a stronger fairer Britain, are imperatives that are not only compatible; they are also inseparable.”

Looking ahead to the budget, she will say:

“There are three key elements to our approach: targeted action to get the recovery back on track, tough decisions to control spending and fill the tax gap, and reform to entrench fiscal sustainability.

“First, on, jobs and growth – the missing pillar of Osborne’s plan. We’ve seen what happens if you try to get rid of the deficit without getting the economy moving. And so it’s because we want to see the deficit reduced that we are urging the Chancellor to adopt measures to support businesses and get people into work in his budget…

“The point is not just that you need jobs and growth as well as a credible deficit reduction plan. The point is that a plan to reduce the deficit without a strategy for jobs and growth is not a credible plan at all.”

And in pointing out the wastefulness of some departments, she will reveal:

“We’ve uncovered extraordinary examples of questionable spending in Whitehall:

£900 spent on cosmetics by the Ministry of Justice;

£69,000 spent on music and piano stores by the Ministry of Defence;

£72,000 spent on away days by the Department for Energy and Climate Change;

£192,000 spent on first class train tickets by the Department for the Environment.

“Jon Trickett has exposed the false economies of rushed redundancy programmes, with £90 million paid out to departing civil servants in just the last quarter, at the same time as over £30 million is spent on temporary and agency staff to fill the gaps.

“And we’ve seen incredible sums ploughed into pet policy projects:

More than a hundred million pounds spent on installing elected police commissioners – money that could have paid for 3,000 new police constables;

£600 million added to the free schools budget in November – money that could pay for the extra 100,000 primary school places we so desperately need; and

£1.8 billion set aside for costs of NHS reorganisation – less than half of which would keep 6,000 nurses in post for three years.

“That is the approach we are taking across every department, and every budget.”

She reserves her greatest scorn, however, for the Tory/Liberal government’s abject failure to reduce borrowing and the absurdity of paying out more in benefits while receiving less in tax, saying of Osborne that it is “a damning indictment of his failed experiment”:

“They said they’d cut government borrowing, but they’re borrowing £158 billion more than they planned. They said they’d balance the books by the end of this parliament, now they’ve had to admit they won’t. They said they’d live or die by the judgements of the credit ratings agencies – but even they are now sounding the alarm bell.

“It went wrong because, as Ed Balls warned in his Bloomberg speech a year and a half ago, deficit reduction requires three pillars: spending reductions, yes; tax increases, yes; but if you cut spending and raise taxes too far and too fast and don’t secure and sustain employment and growth, you cannot get your deficit down, because your tax take falls and your benefits bill goes up.

“It’s time the government took responsibility for their own actions and their choice to cut spending and put up taxes too far and too fast that choked off our recovery more than a year ago…

“With growth stalling, unemployment rising, and businesses struggling, the government has to pay out more in benefits while taking in less in tax.

“Just look at what happened to the OBR’s projections for the public finances over the 12 months between the chancellor’s spending review in autumn 2010 and the autumn statement in 2011:

£17.8 billion wiped off VAT revenues;

£51.2 billion off income tax revenues;

£30.9 billion off corporation tax revenues; and

• An additional £34.7 billion in unplanned spending on tax credits and social security benefits.

“And it’s because rising unemployment and a stagnant economy means spending is higher and tax revenues lower, that George Osborne is now on course to borrow £158 billion pounds more than he planned – a damning indictment of his failed experiment.

“The chancellor might claim to be on track when today’s public sector finances figures come out, but he is only on track for targets which have already been revised up by a staggering £158 billion.”

See also:

Osborne’s austerity obsession is betraying a generation of young peopleWilliam Bain MP, February 16th 2012

Osborne’s austerity is failing at the one thing it’s supposed to doAlex Hern, February 14th 2012

New growth figures point to 2012/3 deficit 50 per cent bigger than originally projectedDaniel Elton, February 9th 2012

Krugman savages the “austerity debacle”Shamik Das, January 30th 2012

No turning back: Balls stays firm on cuts, pay, and the deficitShamik Das, January 18th 2012

Memo to Osborne: Jobs and growth will cut the deficit. Please listenCormac Hollingsworth, January 17th 2012

Balls throws down the gauntlet: “We are going to have to keep all these cuts”Shamik Das, January 14th 2012

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19 Responses to “Reeves: “We must ensure we pass the test of fiscal credibility””

  1. Lucy Reese

    C’mon Rachel, we want a real alternative to the rampant neo-lib agenda pursued by the ConDems and Nu Lab. Tackle the housing crisis, make the rich pay tax and help young people find work or stay on in education without crippling themselves with debts. Listen to the people and not the Daily Mail. Take on supermarkets and the energy providers. Show that you’re on the side of the workers.

    Dare to be different and stop trying to be like the Tories but a little bit nicer

  2. Natan Doron

    A preview of my speech tomorrow: “@leftfootfwd: "We must ensure we pass the test of fiscal credibility”:

  3. Sarah Buckley

    Labour will commit to 'credible fiscal rules' and critique Whitehall waste, via @RachelReevesMP tomorrow at @IPPR

  4. Andy Charlwood

    RT: “@HarryLangford: RT @RachelReevesMP: A preview of my speech tomorrow: < Great message!”>> THIS squared

  5. Paul Williams

    RT @leftfootfwd: Reeves: “We must ensure we pass the test of fiscal credibility”

  6. mary murphy

    Left Foot Forward – Reeves: “We must ensure we pass the test of fiscal credibility”

  7. Jane laura black

    “@RachelReevesMP: Sets out speech tomorrow: “@leftfootfwd: "We must ensure we pass the test of fiscal credibility”:”

  8. Anthony Painter

    [email protected] with a strong intervention on restoring fiscal credibility.

  9. Martin McIvor

    [email protected] with a strong intervention on restoring fiscal credibility.

  10. Michael

    Main points from Rachel Reeves keynote speech to IPPR I Left Foot Forward – – Some good, interesting stats here.

  11. Samuel Gebreselassie

    From last night: @RachelReevesMP: “We must ensure we pass the test of fiscal credibility”: by @ShamikDas #economy

  12. Politics live blog: Tuesday 21 February | Politics |

    […] Rachel Reeves, the shadow chief secretary to the Treasury, gives a speech to the IPPR thinktank. As Shamik Das explains in a post at Left Foot Forward, she will stress the need for Labour to "pass …1.30pm: David Cameron meets the Spanish prime minister Mariano Rajoy in Downing Street.1.30pm: Boris […]

  13. Jayne Hill

    From last night: @RachelReevesMP: “We must ensure we pass the test of fiscal credibility”: by @ShamikDas #economy

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