Today the old chancellor, Alistair Darling, has been trying to hold the Labour line on the deficit – his proposal was that the governmnet should aim to halve it over four years. Deficit deniers such as Ed Balls, who thinks we should keep adding to our bills at the current rate of £150 billion a year for another couple of years, and Ken Livingstone, who is totally wedded to the evil Tory cuts fantasy story, keep trying to pull Labour in the other direction. History will record that Darling was a man of honour.
Economic recovery is underway, unemployment has stabilized, and financial sector health has improved. The government’s strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability. The plan greatly reduces the risk of a costly loss of confidence in public finances and supports a balanced recovery. Fiscal tightening will dampen short-term growth but not stop it as other sectors of the economy emerge as drivers of recovery, supported by continued monetary stimulus.
The new Labour party line of the deficit will be a key test for Ed Miliband.