The charter and some notes

Why Labour voted against George Osbourne's charter:

"1. It commits every government to running a budget surplus in normal times from 2019 onwards. However since 2010, Osborne has missed his own deficit targets and changing the law won't help him to do any better."  << It is true that targets haven't been working, and it is also comprehendible that the targets aren't being reached quicker because of stifled government investment. The US has had a QE policy, giving more money to be lended out for investment and their recovery seems less fragile than ours which seems to be teetering waiting to swallow itself back up again. Just look at job losses in the North, employment falling in the North East where desperately investment is needed. The government consistently says that they don't want to borrow, and compare it to a microeconomic level household money cycle which it is not, but for instance, to put it in this way which they might understand: if you spend more than you can afford (or a company pays on your behalf) by borrowing so you can train a skill for a better job, or get a car which enables you to get to a better job, then over time you will recoup the costs, or the company which paid for you to train will benefit from better output. It isnt rocket science. And anyway, George is willing to miss targets on the deficit if it is in the form of tax breaks for the rich.

2. Effectively it is a big political stunt from George Osborne so that he has an excuse to keep making ideologically-driven cuts.  << They are ideological, as we can tell by the above economic arguments against them and the fact the chancellor is choosing to cut welfare rather than tax higher earners more and introduce a Tobin tax, etc.

3. But it's a dangerous stunt because if the Charter is followed to the letter it binds the hands of future governments, making it illegal to borrow money for investment in infrastructure or housing even at times when investment would lead to faster economic growth.  << we may yet regret it. It depends on what are 'normal times'... could the government invest in a bailout for the steel industry for example? It will become an excuse not to interfere, even where state interference may be the best option. This is the crux of the ideology in the cuts and the bill which passed: 'government should be as light handed as possible'. Its an ideology seen in some economic spheres based entirely on impossible assumptions of free markets and government/market failure. The best simple examples in microeconomics - social costs (climate change for an example) which are not accounted for by individuals/companies, and monopolies, oligopolies, natural monopolies (railways for example).

4. In fact, the best way to reduce the deficit now is to invest to grow our economy. It’s for this reason that most economists disagreed with George Osborne's cuts  << see above, and note even the IMF have said the cuts are too much.

5. It could also force a government to keep making cuts, irrespective of the impact they have on public services and working families.  << this is the role of government too. The Conservatives claim they are the only choice because of the economy - but there are choices on this, and they are not doing a great job on the rest of their responsibilities. Note the tax credit cuts they misled everyone about, saying they wouldn't do what they are now doing. Look at Redcar and the steel industry crisis...

A final note from Labour's McDonnell:

"It is crucial that we reduce the deficit, and Labour takes this mission seriously, but it must never be on the backs of the most vulnerable, or at the cost of the key public services we all rely on.
"
They are not deficit deniers, but the Tories are leading their assault on the poor full throttle, with Boris Johnson trying to reign it in (albeit with words not actions).