FOR all the personal animus between Theresa May and George Osborne, Treasury Chief Secretary Liz Truss’s comments over John McDonnell’s emergency budget for public services call confirm the government’s obsession with austerity.
May sacked the former chancellor, who succumbed to the lure of Moscow gold by choosing to leave Parliament to edit Alexander Lebedev’s Evening Standard, but she shares his pro-City of London partisanship.
Truss revealed too that the government remains true to Osborne’s discredited priorities of tax breaks for big business and the wealthy and tighter belts for everyone else.
The Labour shadow chancellor underlined the necessity to invest in public services and economic development, pointing out the undeniable reality that “now is the time to borrow while interest rates are so low.”
Truss’s response was straight out of the Osborne songbook, echoing the failed chancellor’s disregard for logic and truth.
“The shadow chancellor … would borrow billions more and hike up taxes to record levels. The costs would rack up and up, putting economic growth at risk and hitting ordinary working people in the pocket,” she declared.
Which taxes would reach record levels under a McDonnell chancellorship?
Certainly not corporation tax or income tax for the highest-paid 5 per cent of the population. Higher rates were applied for both taxes over decades by both major parties.
The only tax reaching record levels in recent times is VAT, which was raised to 20 per cent by the aforementioned Osborne despite a pre-election pledge not to.
Far from putting economic growth at risk, McDonnell intends to boost manufacturing industry, especially green energy, and restore public services to create high-quality, better-paid jobs.
Truss must have a brass neck to expect her warning of “ordinary working people” being hit in the pocket to be taken seriously.
Apart from the VAT rise, which hits lower-income families disproportionately, her government’s economic approach centres on holding down workers’ wages below the rate of inflation.
Millions of public service workers have seen their salaries frozen by an across-the-board 1 per cent maximum annual pay rise while their private-sector counterparts are told to accept pay restraint or risk losing their jobs.
The net result, as shadow Treasury minister Anneliese Dodds noted, is that Britain is the only growing economy where people’s living standards haven’t improved.
Osborne’s sleight-of-hand in rebranding the minimum wage as the national living wage — while, incidentally, restricting its scope — hasn’t altered that situation.
McDonnell’s commitment to increasing the national living wage would improve life for many low-paid workers and reduce their need to access welfare benefits.
The shadow chancellor is clearly determined, with his demand for an emergency budget for public services, to spark an open and public debate over the different economic priorities of Labour and the Tories.
One party thinks it acceptable to hand over £76 billion in tax breaks to the wealthy elite while continuing to hold down workers’ wages and the other backs spending an extra £17bn a year on the NHS, education and local government and ending the public-sector pay cap.
Labour has been meticulous in explaining where cash to finance its spending plans will come from.
Government plans are offered solely on trust since, as Dodds says, “the only numbers in the Tory manifesto were the page numbers.”
Given the widespread and growing public anger over the Tories’ austerity policies, this is a debate that Labour should and must win.