Balancing the books to deliver fairness and prosperity

Today I am giving my first major speech as Shadow Chief Secretary to the Treasury, addressing head on the challenge of deficit reduction and fiscal responsibility.

Compared to the issues that fire us up as politicians and campaigners – like reducing poverty and expanding economic opportunities – deficit reduction is perhaps a dry subject. But it’s precisely because we on the centre left believe that active government, along with good schools, hospitals and other public services, can transform lives and make our country fairer and more prosperous, that we must ensure we pass the test of fiscal credibility.

And it’s hard to resist the conclusion that it’s because the Conservative-led government cares so little about public services that it is shockingly casual and complacent about wasting scarce resources.

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

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

And we’ve seen incredible sums ploughed into pet projects. More than £100 million spent on installing elected police commissioners could have paid for 3,000 new police constables. £600 million added to the free schools budget in November could pay for the extra 100,000 primary school places we so desperately need. Half of the £1.8 billion set aside for the costs of NHS reorganisation would keep 6,000 nurses in post for three years.

But the biggest waste of all is the cost of its failed economic policy. As Ed Balls warned a year and a half ago, focusing exclusively on further and faster tax rises and spending cuts without a plan for jobs and growth meant that business and consumer confidence collapsed, firms postponed investments and stopped taking on workers, and Britain’s growth faltered.

Not only are there huge social costs to this experiment. There are huge consequences for the public finances too. Rising unemployment and a stagnant economy means spending is higher and tax revenues lower. So George Osborne is now on course to borrow £158 billion more than he planned.

This is a government failing on its own terms. For Labour, unlike the Tories, deficit reduction is not an end in itself. But fiscal credibility and sound public finances are the absolute precondition for all that we want to achieve, across every other area of policy.

There are three key elements to our alternative 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, Labour’s five point plan for jobs and growth is a temporary and targeted stimulus to restore confidence, strengthen investment and raise employment – to get the growth we need to bring in the tax revenues and bring down the welfare bill. It’s not an exception or postponement of our plan to reduce the deficit – it’s an essential and integral part of it.

Second, the reality is, even with growth back on track, Labour’s approach to deficit reduction would involve tough decisions on spending cuts, tax rises and public sector pay restraint. But we can make different choices within tight fiscal constraints: choices based on our values and priorities: protecting the living standards of struggling families; prioritising employment, productivity and growth; a ruthless insistence on value for money; and ensuring that, at a time when everyone is paying a tough price for the failings of a few, those who gained most in the good times cannot evade or avoid their responsibility to make a fair contribution.

Finally, Ed Miliband has kickstarted an important debate about the new economy this country needs to build. And in fact, fiscal sustainability, and the reform and rebalancing of our economy, go hand in hand – because a fairer and more balanced economy would mean a more reliable and resilient tax base, as well as fairer outcomes and more resilient families and communities.

So this is not a matter of matching or mimicking the Conservative-led government. Far from it. The government’s approach to deficit reduction has been increasingly exposed as empty without the focus on jobs and growth that is needed. And Labour has a distinctive approach to deficit reduction and fiscal responsibility in which our values and priorities shine through.

Rachel Reeves MP is the Shadow Chief Secretary to the Treasury