Is Ed Miliband constrained by budget responsibility lock?

So how constraining on Labour is its self-imposed "Budget Responsibility Lock"?

Well the first part of it, that there are no commitments in the manifesto that require additional borrowing, is binding up until May 7 - in the sense that Labour is not offering goodies to voters without saying what services or benefits will be cut or which taxes will be increased to pay for those goodies.

Ed Miliband was at pains to contrast this putative prudence with Tories' promise to increase NHS spending by £8bn or their pledge to increase the 40% tax threshold and the tax-free threshold - which would also cost around £8bn - without saying where the £16bn odd would come from.

So in that sense Labour has subjected itself to discipline which the Tories have decided they don't need (largely because they think voters will give them the benefit of the doubt, based on the cuts they've delivered in the current parliament).

Theory

But to state the bloomin' obvious, this first element in the lock can only keep Labour fiscally honest until the election. After that, and if in power, they could in theory launch on a grateful or ungrateful nation any number of initiatives that would not be funded by tax rises or commensurate spending cuts.

So Ed Miliband has forsworn offering us unaffordable bribes to get elected. But it is the other parts of the lock that would be important to keep a Labour government - if such arrives after May 7 - fiscally constrained (which may or may not be a good thing, by the way).

What are they?

Well again the first one - that the deficit will be cut every year - would on current forecasts for economic growth allow quite a bit of additional spending: the overall deficit would still fall as a share of GDP so long as overall spending increased marginally slower than GDP, all else being equal; and it would also fall in absolute terms so long as economic growth generated an increment to tax revenues marginally greater than the spending increment. So this rule again wouldn't tie the hands of Ed Balls desperately tightly, if he became chancellor.

Commitment

That leaves the third and most important pins and levers in the lock, that Labour would "get national debt falling and a surplus on the current budget as soon as possible in the next parliament".

Now as it happens the current government expects the national debt to fall as a share of GDP, by a smidgeon, this year - from a record 80.4% of GDP to 80.2% of GDP - in large part because it plans to sell more shares in semi-nationalised Lloyds Bank and other banking assets acquired by the Treasury during the 2007-8 banking crisis.

Since Labour has already committed to the spending targets for 2015-16, and since it presumably would also sell those banking assets if market conditions permit, Ed Balls could meet his target of cutting the debt within months of taking office.

In other words, it is probably the very last bit of the lock - of achieving a surplus on the current budget "as soon as possible" before 2020 - which matters most.

Cuts

But even there, Ed Balls has retained considerable fiscal flexibility.

Because, according to the Institute for Fiscal Studies, the scale of tax rises or spending cuts he would need to make falls dramatically the later in the parliament he balances the current budget.

Now to remind you, the current budget is all day-to-day spending, excluding investment.

And the IFS says that if it were balanced in 2017-18 - which is when the Tories and Lib Dems are committed to balance it - Labour would need to make £18bn of cuts.

But that would fall to £6bn of cuts, if balance was deferred to 2018-19, and zero cuts if balance was postponed till the last year of the next parliament.

Which will doubtless prompt the Tories to argue that Ed Balls isn't committed to serious public service reform at all.

To which he would say three things:

1. that he is serious when he says he wants a surplus as early as is practicable;

2. that it would be foolish to set an arbitrary date for achieving that surplus, given we can't know today whether there will be an external shock to the economy - such as another eurozone crisis - which would make it foolish to impose severe austerity in the face of a collapse in private-sector confidence and spending; and

3. that whatever happens, he will impose cuts on all departments other than the protected ones, of health, education and overseas development.

In other words Ed Miliband and Ed Balls have opted for a policy of constrained discretion rather than absolute constraint.

And that will come at a political price, which is that those of their critics who see them as irredeemably spendthrift will believe that the Budget Responsibility Lock will be picked the moment the political going gets tough.

Hairshirt

Now of course the Tories and LibDems will attempt to characterise Labour as less serious about cutting the deficit than they claim to be. But the biggest difference is arguably that those two government parties have pledged to generate a surplus on the current budget by 2017-18.

After 2017-18, the LibDems' fiscal approach is identical to Labour's.

By contrast, the Tories would be more hairshirt.

They are committed to balancing the overall budget in all "normal" years. That means, for example, Labour could borrow £32bn to finance investment in 2019-20 (the amount pencilled in for the current government's plans) whereas the Tories could not borrow that sum.

Which may seem a big deal. But there are at least as many credible economists arguing for Labour's approach of borrowing to invest - which they see as stimulating growth, and thus making a higher absolute level of debt more affordable - as for the Tories' preference for reducing the record national debt a bit sooner and a bit faster.