Jeremy Corbyn would saddle the country with huge debts
Speaking at Manchester Airport, Mr Javid announced three new fiscal guidelines to replace the financial corset imposed after the 2008 crash. He trumpeted them as “new rules for a new economic era” that would prevent unfunded giveaways while allowing for “sustainable” investment on infrastructure. His announcement came shortly before Labour’s John McDonnell unveiled his spending plans for the next ten years. The shadow chancellor pledged to splash the cash “on a scale never seen before in this country” as he delivered an election speech in Liverpool.
But Paul Johnson, the director of the respected Institute for Fiscal Studies, said the “absolutely enormous increase” in public spending would likely stall because there simply would not be enough workers available to upgrade schools, hospitals and council houses.
He said the proposals would be “physically impossible” to implement and that Labour’s borrowing plans could see “national debt at a high level relative to where it was anytime since the mid-Seventies”.
Mr McDonnell set out Labour’s economic blueprint by announcing a proposed five-year £150billion Social Transformation Fund.
Chancellor of the Exchequer Sajid Javid
That cash would be spent to “repair the damage done to the infrastructure of the country by years of austerity and neglect”.
Labour has previously announced a separate 10-year £250billion Green Transformation Fund.
But Mr Johnson poured cold water on the proposals as he questioned how Labour could spend so much cash so quickly.
Before continuing his tour of the United Kingdom, including visits to businesses in Scotland and Northern Ireland, he told Radio 4’s Today programme: “The real question, in the short run, is would it be possible sensibly to spend this scale of money?
“Moving to a world in which you’re doubling spending in a year or two, I suspect, is physically impossible.
“Do we really have tens, if not hundreds, of thousands of construction workers, lying idle at the moment, who would be able next week or next year or even in a couple of years to start doing this? I think the answer is almost certainly no.”
Mr Johnson said it “obviously takes a long time to sort out things” when it comes to major public spending projects. He said: “If anyone has ever had to sort out an extension to the house or something, they know that getting the building started isn’t something that happens next week.”
The IFS said Labour’s plans would mean an extra £55billion of investment per year over the next five years.
In his speech, Mr Javid said his new fiscal rules will allow Britain to invest in public services “but without squandering the hard work of the British people”.
“Like anyone who budgets, whether it’s a household or small business or large business, I know that we must keep track of what we’re spending and what we bring in,” he said. “We can’t run an overdraft forever on day-to-day spending, so I can confirm that our first rule will be to have a balanced current budget.
“What we spend cannot exceed what we bring in. Now, while we must retain spending if we want growth to continue and get stronger in the future, then we need to invest in it, taking the opportunity offered by historically low borrowing rates.”
Adam Marshall, the boss of the British Chambers of Commerce, said: “The rules proposed by Sajid Javid could allow for more transformational infrastructure investment, while retaining control over spending.
“This would help the UK raise its dismal investment rate – and build foundations for growth that will be there long after today’s politicians have gone.”