McDonnell pledges fiscal rules shake-up
John McDonnell has pledged that services returned to public ownership by Labour will be counted among the UK’s government assets that are targeted under new fiscal rules that the party will introduce.
John McDonnell said Labour will reset the fiscal rules so that assets such as rail, energy, water and mail, are considered, along with other public sector assets on the nation’s overall financial balance sheet.
The Shadow Chancellor said the shake-up would ensure that the public assets created by the National Transformation Fund investment were “recognised both as a cost and as a benefit”
Labour’s new fiscal rule is based on research and proposals by Richard Hughes, former Head of Fiscal at HM Treasury, in a recent paper for Resolution Foundation.
Speaking in Liverpool and reiterating Labour’s existing target for current budget balance, in his first major speech of the election campaign, McDonnell said:
“Our fiscal rule for the next Parliament will exclude borrowing for investment from our borrowing targets.
“It will mandate us to deliver an improvement in the overall balance sheet by the end of the Parliament.
“So that when we invest in the infrastructure our country desperately needs it’s recognised both as a cost and as a benefit.
“Yes – adding to the government’s debt, but also adding to the government’s assets and strengthening our public sector to deal with the future.”
Speaking in his home city of Liverpool, John McDonnell added:
“With the rents on our new council homes and the electricity produced by our public sector energy agencies set against the cost of servicing the debt issued to build them. On this at least there’s nothing radical, just common sense.
“What families and businesses do every day when weighing up an investment.
“After the corruption and lies of the Tories we need government – and those who want to be in government – to be transparent as possible.
“So today is just the start we’ll lay out our full tax and spending plans as we go along and in our fully-costed manifesto. Underpinned by a cutting-edge fiscal rule that enables us to borrow for productive investment.”
Notes to Editors:
- Resolution Foundation’s proposals for a balance sheet target can be found at:
- Seeking public worth https://www.resolutionfoundation.org/app/uploads/2019/09/Seeking-public-value.pdf
- Totally (net) worth it https://www.resolutionfoundation.org/app/uploads/2019/10/Totally-net-worth-it.pdf
- Labour’s fiscal rule will include a target to improve Public Sector Net Worth over the course of the Parliament
- John McDonnell also announced an increase in the size of the National Transformation Fund:
- It will include a Green Transformation Fund and a Social Transformation Fund.
- The NTF will be overseen by a unit of HM Treasury based in the north of England.
- A Green Transformation Fund of £250bn over ten years to invest in the areas we need to transition to a sustainable economy, energy and transport in particular.
- Some specific projects will be announced between now and the General Election but those already announced include retrofitting homes, offshore wind and Crossrail for the North
- A proportion will be earmarked for Local Transformation Funds to be spent under the auspices of regional boards (see below)
- A Social Transformation Fund of £150bn over five years to repair the damage done to the infrastructure of the country by years of austerity and neglect. This would include capital investment for schools, hospitals, etc and again elements will be announced before the election.
- Labour will establish regional offices of government in each of the nine regions of England. The Offices will be staffed by civil servants from relevant departments, including Treasury, BEIS, MHCLG, Transport, and Education.
- Their responsibilities will include setting priorities for regional development banks, feeding into the Sustainable Investment Board, regional spatial planning and industrial strategies, and identifying and delivering projects to be funded from the Local Transformation Funds.
- Strategic governance of the Offices will be the responsibility of an Executive Board made up of county and city leaders in the area. Twice a year the Board will be held accountable by a General Assembly open to local councillors, LEPs/businesses and unions in the region.
- The overall figures will include Barnett consequential for devolved governments.