Cautious Johnson dodges detail
By Ian Dunt and Alex Stevenson
Labour’s new shadow chancellor Alan Johnson has opted to avoid a decisive break with the party’s approach to spending cuts, in his first major speech in the job.
Mr Johnson used his speech in London this morning to make clear he and new Labour leader Ed Miliband remained committed to former chancellor Alistair Darling’s plan to halve the deficit within four years.
He signalled a shift in the balance between increasing taxation and spending cuts, however, calling for “specific, targeted tax changes” to do “more of the work”.
Comment: Johnson fails to convince in first outing
Mr Johnson backed the increase in capital gains tax announced in the emergency Budget and said there was a case for freezing the basic rate limit in 2013/14.
He called on ministers to force banks to “make a greater contribution” in order to raise £7.5 billion by the end of the parliament.
Doing so could help the government halve its implied cut in capital spending of 33%, Mr Johnson suggested.
The shadow chancellor supports major capital infrastructure projects as a way of driving down unemployment while public spending is cut.
“The coalition’s austerity strategy amounts to a huge risk with growth and jobs,” he concluded.
“By going hell for leather on cuts, at a time when the private sector cannot be expected to pick up the slack, they run the risk of leaving us with higher unemployment, deprived communities and a diminished society.
“And it will make getting the deficit down harder. Taking a slower, less damaging route as we propose provides a credible plan, securing growth and protecting public services.”
Michael Fallon, deputy chairman of the Conservative party, suggested Mr Johnson’s arguments were not economically literate yesterday.
“Alan Johnson clearly hasn’t got beyond page one of his economics primer. The only thing he has suggested so far to deal with the deficit is a tax on banks,” he said.
“Now he says he can’t do that without international agreement. And even if he does raise taxes, the money will go on more spending rather than paying off Labour’s debts. Labour has failed the first test of economic credibility.”
Mr Johnson partially answered those criticisms today, concentrating his criticisms on the general impact of spending cuts.
“Tough choices do have to be made… but without growth, attempts to cut the deficit will be self defeating,” he said.
“A rising dole queue means a bigger welfare bill. And less tax coming in. The Tory plan is a huge gamble with growth and jobs.”
Co-Chair of the Liberal Democrat parliamentary Treasury committee Stephen Williams said: “Alan Johnson is again failing to face up to the enormity of the deficit left to us by the Labour government.
“His aim to half the deficit still leaves us with crippling interest payments at the expense of future public spending.
“He has called for more tax rises rather than cuts, but he fails to say where these should come from.”
The opposition has been noticeably silent on economic issues since Mr Johnson was made shadow chancellor earlier this month.
Rumours that Ed Miliband was preparing to adopt a 1:1 ratio of tax rises to spending cuts, as he tries to formulate a distinct narrative on deficit reduction, appear to have been proven unfounded by today’s speech.
Key to the new Labour leader’s success will be an agenda that does not strike centrist voters as irresponsible but is still capable of uniting those opposed to the government’s plan, observers say.
