Designing our own shackles?

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Perhaps it’s some sort of strange strain of the Stockholm Syndrome which has affected the Labour Party, and in particular its Shadow Chancellor. They know that they are captives or hostages, but end up developing an empathy with their captors which an objective observer would find it hard to understand.

The Office for Budget Responsibility was established by George Osborne in 2010, with the intention of setting a rigid discipline for public finances which would ensure that subsequent governments stuck to one particular version of financial orthodoxy. It was the same orthodoxy, with the core idea that government finances are just like those of a household so that governments can only spend what they raise in tax, which led to Osborne’s successive austerity budgets – and thus to the poor state of many of our public services today. Politically, the sub-plot was to ensure that a future Labour Government would be bound by the same constraints and thus unable to implement anything like a traditional Labour platform. They never expected that any Conservative government would run foul of its restrictions, but then no-one ever expected the ascent of Liz Truss. Not even Liz Truss.

In its political objective, it has succeeded beyond Osborne’s wildest dreams. Not only have Labour bought in, hook line and sinker, to the concept and the underlying financial orthodoxy, it was announced this week that Labour in government will actually strengthen and reinforce the system, making it even harder to escape the rigidity it imposes. Reeves’ delight in presenting this policy is a bit like a slave being pleased at being given the right to design and decorate his own shackles. It’s addressing the wrong problem: the issue isn’t that the shackles aren’t pretty or effective enough, it is that they keep the slave enslaved. The OBR doesn't need to be strengthened, it needs to be either abolished or else given a different remit.

The fiscal rule to which she intends to adhere is entirely arbitrary, as is the particular number attached to the inflation target, but the result of that rule, coupled with accepting the budgets for future years which have been set by the current government, is that cuts to public services have already been built-in to future forecasts. They may not have been explicitly identified, but they are there for anyone who looks to see. The combination of ruling out tax increases, sticking to a rule which requires current expenditure to be paid for out of tax, and increased expenditure in some areas makes cuts elsewhere almost inevitable. The only get-out is for the growth genie to emerge suddenly from the lamp and miraculously increase government revenue. The whole edifice of Labour policy depends on an assumption that by doing very little other than being a bit more competent, investment in the UK will magically increase. It’s an outcome that few serious economists believe is likely.

The comparison with the Stockholm Syndrome is based on an assumption that Reeves and Labour are the captives here, and have developed an empathy with the Tory captors who set the rules. There is an alternative theory though – Labour could be captors as well, just like the Tories. They really, truly believe this guff, and their manifesto is an invitation to the captives – the population as a whole – to participate in the design of our own shackles by voting for a different bunch of captors. In that scenario, it’s the voters who end up suffering from that strange version of the Stockholm Syndrome. History tries to tell us that some slave-owners were more ‘benevolent’ than others. It’s a disputed interpretation of history to say the least. And the bottom line was that the enslaved were still slaves.