23 September 2019

John McDonnell’s Labour Party conference speech left a worrying impression of retreat from his previous commitments to properly costing and funding policy proposals, writes Martin Wheatley.

John McDonnell has previously taken trouble to present Labour as fiscally responsible. Since 2015, Labour has developed ambitious and radical plans for public services and investment. According to the party’s own sums, the proposals set out in the 2017 manifesto would have added nearly £50 billion to public spending – around a 6% increase.

While there was some scepticism about the accuracy of that figure, the shadow chancellor at least asserted the need for accurately costed plans and clarity about the additional tax which would fund them. Alongside the manifesto, he published a document, Funding Britain’s Future, with proposals for extra spending and taxation itemised and balanced. He has shown interest in making sure money is spent effectively too, suggesting a return to public service agreements like those drawn up under Gordon Brown. However, McDonnell no longer seems so determined to stick to that message of fiscal responsibility. 

Fiscal discipline now seems to be out of fashion for Conservatives and Labour 

Sajid Javid’s recent spending announcement made substantial spending commitments ahead of revised forecasts for the economy, spending and revenue – with Brexit making the future more than usually uncertain. This is obviously a risk, but Labour now seems to have decided to leapfrog that move away from fiscal discipline.  

The party conference has seen a rash of spending pledges, including on social care and prescription charges. Viewed in isolation, all have their policy merits. But there is no sign that Labour is now interested in presenting itself, like 2017, as a party with a responsible, costed programme. McDonnell’s speech said nothing coherent or quantifiable about Labour’s approach to tax and spending. 

Moreover, he made commitments on the minimum wage and reducing working hours. Again, while these are policies which have merit in their own terms, they will have big impacts in the public sector. For example, they would both significantly add to the cost of free universal social care. 

The shadow chancellor risks setting a Labour government up to fail 

Choosing to increase spending, taxation and maybe borrowing too is a legitimate policy choice for a party of the left which aspires to government. But, even if taxes and borrowing can be increased significantly, there will never be enough money – certainly in the short term – to pay for all legitimate aspirations. However radical Labour chooses to be, if it is to be successful in achieving its goals then it needs to pay attention to prioritisation and to spending money well.  

There is a risk that ambitious policy ideas, and commitments to spend more money, won’t achieve their intended benefits for the public if only sketchy thought is put into how they will be implemented. This is especially the case if much, if not all, of the extra spending gets swallowed up in improved terms and conditions for public sector workers. 

Perhaps this week – which could be one of the most eventual in UK politics – was not the moment for a shadow chancellor to use the conference floor to set out detailed ideas about public spending management. If he wanted some inspiration, then we published some of our own proposals last week.

If Labour is to be a successful government, then it needs to apply itself to the painful but necessary business of managing spending effectively.