George Osborne is on course to miss Alistair Darling's deficit reduction plan, which was set down in law by the last government, and panned by the Tories at the time for failing to tackle the problem with sufficient rigour.
But the chancellor will avoid any official censure after repealing an act of parliament, introduced by Darling in 2010, which called for the overall deficit to be halved in this parliament.
Osborne said at the time that the Labour target did not go far enough and set out plans in his emergency budget in June 2010 to eliminate the structural budget deficit by March 2016. This is the part of the deficit that is immune to economic growth and can only be tackled by spending cuts or tax increases.
Labour says the chancellor, who is due to borrow £212bn more than he originally planned, is on course to fail to meet two tests set by Darling in the Fiscal Responsibility Act of 2010:
• The deficit is forecast by the Office for Budget Responsibility to stand at 6.1% by the end of the 2013-14 financial year. The deficit stood at 11.1% of GDP at the end of the 2009-2010 year. This means it would have to be cut to 5.55% to meet the Labour target of halving it by March 2014.
• Osborne confirmed in his autumn statement that he was unlikely to meet his target to ensure debt is falling as a proportion of GDP by March 2016. The Darling act included this target.
Rachel Reeves, the shadow chief secretary to the Treasury, said: "David Cameron and George Osborne tore up Labour's plan to halve the deficit over four years and gambled that deeper and faster tax rises and spending cuts would secure the recovery and get the deficit down.
"But this has totally backfired as, by choking off the recovery and pushing up long-term unemployment, they are now set to borrow £212bn more than planned to pay for the costs of economic failure.
"Not only are they now breaking their own fiscal rules, but they are also set to break the commitment Labour made in law to halve the deficit by 2014. It's no wonder they repealed Labour's 2010 Fiscal Responsibility Act. The government needs to finally realise that only a steady and balanced plan that puts jobs and growth first will successfully get the deficit down and do so in a fair way."
Osborne repealed the Labour act in March 2011 when the Budget Responsibility and National Audit Act became law. This says that the Treasury's fiscal mandate, outlined by the chancellor in his emergency budget of June 2010, must be set out before parliament in a charter for budget responsibility. "The Treasury may from time to time modify the charter" subject to the approval of MPs, the act says.
Labour argues that Osborne's failure to meet the Darling deficit reduction plan means the coalition is in no position to accuse the party of taking an irresponsible approach on the deficit.
Labour has always said that its deficit reduction plan was more measured than the coalition's original plan to eliminate the structural deficit during the parliament.
Ed Balls, the shadow chancellor, argued during the Labour leadership campaign in 2010 that the coalition would suck demand out of the economy by "ripping away the foundations of growth". He also described Labour's plan as "comfortably the biggest and fastest cut in the deficit" since the post war period "without the peace dividend to fund". In a radio interview on the day of his speech on 27 August 2010 he said he thought that even the Darling plan would have cut the deficit too fast.
Osborne is likely to argue that Labour's decision to set out a fiscal mandate on the eve of a general election it expected to lose was a political move designed to ensnare the Tories. He will also argue that he repealed Labour's act because he planned originally to tackle the deficit at a faster pace.
The OBR initially forecast at the time of the emergency budget in 2010 that Labour's plans would have reduced the deficit to 5% of GDP in its original timescale, meeting the Darling plan. But the coalition plan was forecast at that time to reduce the deficit to 3.5% of GDP. That has now been revised upwards due to the lack of growth in the economy.
Labour says that figures published by the OBR show, that by the time of the next election, the coalition is due to have borrowed £212bn more than the plans set out in the 2010 spending review. This excludes the Royal Mail and Asset Purchase Transfers.
guardian.co.uk © Guardian News and Media Limited 2010
image: © EdMiliband
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