UK Politics

Johnson accuses coalition of 'distorting' Labour record

Shadow Chancellor Alan Johnson
Image caption Mr Johnson said he was worried the private sector would not be able to create jobs fast enough

Alan Johnson has accused the government of "distorting" Labour's economic record and peddling a "myth" that it has no plan to deal with the deficit.

The shadow chancellor said claims borrowing was already out of control before the 2008 banking crisis due to a spending "binge" were totally wrong.

David Cameron has accused Labour of being in denial about the deficit but Mr Johnson said this was "ridiculous".

He said no other country was cutting spending as far and fast as the UK.

In a speech in London, Mr Johnson said economic credibility would be "at the heart of everything" Labour did under the leadership of Ed Miliband.

Defending record

He defended Labour's economic record between 1997 and 2007, saying the coalition "had chosen to distort and misrepresent it in a way that goes beyond the normal cut and thrust of British politics".

It was "playground economics" to suggest profligate spending during Labour's first 10 years in power had contributed to the 2008 financial crisis and the current £150bn annual deficit.

Stimulus measures introduced at the height of the recession had helped prevent a meltdown and limited the rise in unemployment, he said, while borrowing was already falling when Labour left office.

However, he acknowledged that, under the Blair and Brown governments, the UK had become too dependent on financial services and property for its wealth and tax returns.

The City was responsible for a quarter of all corporation tax paid in 2007-8, he noted.

"A proper understanding of how reliant our tax base had become on certain sectors should have made clear that our economy was too narrowly focused," he said.

He called for the Office for Budget Responsibility to conduct an annual audit of the "resilience" of the UK's tax base as one of a number of measures to promote "economic diversity".

'Audacious myth'

The coalition has accused Labour of long-term economic mismanagement, saying the deficit started to rise in 2004 as annual growth in spending outstripped the rise in tax receipts coming into the Exchequer.

"Alan Johnson's claim that 'we were never living beyond our means' will ring as hollow as Gordon Brown's claim to have 'ended boom and bust'," Conservative deputy chairman Michael Fallon said.

"Labour doesn't have any answers for the future because they won't accept the failures of the past."

Labour were planning huge spending cuts of their own before the election but were not being prepared to spell out where they would fall, the government argues.

Ministers say their own detailed plan to eliminate the structural deficit by 2015 has helped restore market confidence in the UK and has the backing of global economic bodies like the IMF.

But Mr Johnson said Labour had in place a "robust" pre-election plan for cutting borrowing in half over four years and had since set out plans to raise taxes on the banks and make further welfare savings.

"It is ridiculous to accuse us of having no plan," he said.

In contrast, he said the coalition's approach was driven by dogma not economic necessity.

"The scale of the spending cuts - which no other country is following, including those with fiscal deficits as high or higher than our own - is in pursuit of the ideological objective of a smaller state," he said.

"We cannot allow the government to get away with their most audacious myth - that there is no alternative to their economic masochism."

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