The £50bn gap between Tories and Labour

Ed Balls, MP, Shadow Chancellor (L) and George Osborne, MP, Chancellor of the Exchequer (R)

At the end of Autumn Statement week (it seems to have expanded from an hour in the Commons to five days of leaks, pre-announcements and post-announcements) we have learned something quite important.

The gap between the spending cuts or tax rises required by the Tories and Labour to hit their fiscal targets for the next parliament is a very significant £50bn.

How so?

Well the Tories are signed up to generating a surplus on the overall budget of £23bn in 2019-20.

And Labour is only committed to balancing the so-called "current" budget by then - that's day-to-day spending on public-sector wages, benefits, pensions and so on - while being prepared to finance capital investment with debt.

And since net public sector investment is forecast to be £27bn in 2019-20, a Labour government would require less austerity to the tune of £23bn plus £27bn - or £50bn.

Cuts and tax

This is a massive difference. It is equivalent to roughly half of what we spend every year on the NHS.

Would £50bn less of spending cuts and tax rises be good or bad for the UK?

Well the argument of George Osborne and the Tories is that the gap shows Labour isn't serious enough about reducing the national debt as a share of GDP, or national income - which is set to peak at 81% in 2015-16, and fall to 72.8% of GDP on the Tories' plans for deep public sector retrenchment.

What Labour's Ed Balls says is that the scale of further cuts required by the Tories is neither realistic nor in tune with the quality and scope of public services required by most British people.

What occasionally Balls seems itching to say - but cannot yet quite bring himself to do, because he thinks the public (that's us, by the way) would have more respect for a hairshirt chancellor - is that borrowing to invest will increase the UK's growth rate, and that debt as a share of GDP would therefore fall in a less painful way if he were at the helm.

And here, of course, is where we need to ask Mr Market what he thinks of all this.

Cheap borrowing

Mr Market matters because he decides what price the government pays to borrow, and whether the government will continue to benefit from the current record low interest rates.

The Tory view is that those interest rates can only be locked in if the government continues in remorseless fashion to shrink the state and net debt.

What Labour would point out is that countries in a bit of a fiscal and economic mess and currently refusing to wear the hairshirt that the European Commission thinks necessary, such as Italy and France, are also borrowing remarkably cheaply.

And here is where Mr Market may be capricious, according to my pals in the bond market.

They say the UK's creditors would probably be forgiving and tolerant of George Osborne borrowing more than he currently says he wishes to do, in that his record of reducing Whitehall spending by £35bn since taking office in 2010 has earned him his austerity proficiency badge.

But Ed Balls has never been chancellor, although he was the power behind Gordon Brown when he ran the Treasury and much of the country, both in the lean years from 1997 to 2000 and the big spending Labour years thereafter.

So Mr Balls has yet to prove, investors say, that he can shrink as well as grow the apparatus of the state.