Budget Resolutions and Economic Situation
(Limited Text - Ministerial Extracts only)
Read Full debate
Keir Starmer (Holborn and St Pancras) (Lab)
After 11 months in this job, it is nice, finally, to be standing opposite the person actually making decisions in this Government. The trouble is that it is those decisions that have left us with the mess we find today: the worst economic crisis of any major economy in the last 12 months; unemployment at 5% and, as the Chancellor said, forecast to rise to 6.5%; and debt at over £2 trillion. I am sure this Budget will look better on Instagram. In fact, this week’s PR video cost the taxpayer so much I was half-expecting to see a line in the OBR forecast for it, but even the Chancellor’s film crew will struggle to put a positive spin on this.
After the decisions of the last year and the decade of neglect, we needed a Budget to fix the foundations of our economy to reward our key workers, to protect the NHS and to build a more secure and prosperous economy for the future. Instead, what we got was a Budget that papered over the cracks rather than rebuilding the foundations, a Budget that shows the Government do not understand what went wrong in the last decade or what is needed in the next. The Chancellor may think that this is time for a victory lap, but I am afraid this Budget will not feel so good for the millions of key workers who are having their pay frozen, the businesses swamped by debt, the families paying more in council tax and the millions of people who are out of work or worried about losing their job. Although the Chancellor spoke for almost an hour, we heard nothing about a long-term plan to fix social care. The Chancellor may have forgotten about it, but the Labour party never will.
The British people will rightly ask, why has Britain suffered a worse economic crisis than any major economy? The answer is staring us in the face. First are the Chancellor’s decisions in the last year. This is the Chancellor who blocked a circuit break in September. Ignoring the science, he told the British people to “live with” coronavirus and “live without fear”. A few weeks later, we were forced into an even longer and more painful lockdown. Whatever spin the Chancellor tries to put on the figures today, as a result of his decisions, we have suffered deeper economic damage and much worse outcomes.
That is nothing compared with the decade of political choices that meant that Britain went into this crisis with an economy built on insecurity and inequality. The Chancellor referred to the last 10 years. As a result of those 10 years, we have an economy in which 3.6 million people are in insecure work, wages have stagnated for a decade and over 4 million children are living in poverty. Critically, we went into this crisis with 100,000 unfilled posts in the NHS and after social care had been ignored and underfunded for a decade. Government Members voted for all that. Today’s Budget does not even recognise that, let alone rectify it.
It is clear that the Chancellor is now betting on a recovery fuelled by a consumer spending blitz. In fairness, if my next door neighbour was spending tens of thousands of pounds on redecorating their flat, I would probably do the same. [Laughter.] But the central problem in our economy is deep-rooted insecurity and inequality, and this Budget is not the answer to that. The Chancellor barely mentioned inequality, let alone try to address it.
Rather than the big transformative Budget we needed, this Budget simply papers over the cracks. If this had been a Budget for the long term, it would have had a plan—a plan to protect our NHS; a plan to fix social care. I can tell the House this: a Labour Budget would have had the NHS and care homes front and centre. But this Budget is almost silent on those questions. If this had been a Budget to rebuild the foundations, it would have fixed our broken social security system. Instead, the Chancellor has been dragged, kicking and screaming, into extending the £20 uplift in universal credit, but only for a few months—once again, deferring the problem. As a result, insecurity and the threat of losing £1,000 a year still hang over 6 million families. [Interruption.] They ask what we would do. We would keep the uplift until a new, fairer system could be put in place.
If this Budget was serious about rebuilding our shattered economy, it would have included a credible plan to tackle unemployment. The Chancellor said very little about the kickstart scheme, no doubt because—
Keir Starmer
The Prime Minister says, “Rubbish.” That is no doubt because the kickstart scheme is helping only one in 100 eligible young people—rubbish is the right word, Prime Minister. In six months, it has supported just 2,000 young people, yet youth unemployment is set to reach 1 million. Like so much of this Budget, the Chancellor’s offer is nowhere near the scale of the task.
Of course, the biggest challenge for this country is the climate emergency. The Chancellor just talked up his green credentials, but his Budget stops way short of what was needed or what is happening in other countries. This Budget should have included a major green stimulus, bringing forward billions of pounds of investment to create new jobs and new green infrastructure. Instead, the Government are trying to build a new coalmine, which we now learn might not even work for British Steel. If anything sums up this Government’s commitment to a green recovery and jobs for the future, it is building a coalmine that we cannot even use.
If the Government were serious about tackling insecurity and helping those most at risk from covid, this Budget would have fixed the broken system of statutory sick pay and, at the very least, filled the glaring holes in isolation payments. This is not difficult to fix. The Government should just make the £500 isolation payment available to everyone who needs it. That would be money well spent, and, a year into the pandemic, it is a disgrace that it is not made available.
If the Government were serious about fixing the broken housing market, they would have announced plans for a new generation of genuinely affordable council houses. Instead, 230,000 council homes have been lost since 2010, yet the Chancellor focused today on returning to subsidising 95% of mortgages. I know what Members are thinking: “I’ve heard that somewhere before.” Perhaps it was because the Prime Minister announced it five months ago in his conference speech? No, I do not think anybody heard that. I remember now: it is what Osborne and Cameron came up with in 2013. What did that do? It fuelled a housing bubble, pushed up prices, and made owning a home more difficult—so much for generation buy! I have been saying for weeks that this Budget will go backwards, but I did not expect the Chancellor to lift a failed policy from eight years ago.
This Budget fell far short of the transformative change that we need to turbo-charge our recovery for the decades to come. There was no credible plan to ease the burden of debt hanging over so many businesses, which is estimated at £70 billion. This Budget asks businesses to start paying that money back whether they are profitable or not. That affects millions of businesses. It will hold back growth, because businesses will have to pay back money they never wanted to borrow, instead of being able to invest in their futures and create jobs in their local areas. It is both unfair and economically illiterate.
This Budget also falls far short of what was needed to support the self-employed and freelancers, unless, of course, they are one of the Chancellor’s photographers. After a year of inaction, we will look at the details of what the Chancellor announced, but, from the figure of 600,000 that he mentioned, it certainly looks like millions will still be left out in the cold.
The Chancellor’s one nominally long-term policy was in his references to levelling up, but what does that actually look like? It is not the transformative shift in power, wealth and resources that we need to rebalance our economy. It is not the bold long-term plan that we need to upskill our economy, to tackle educational attainment or to raise life expectancy. It certainly is not a plan to focus Government resources on preventive services and early years. For the Chancellor, levelling up seems to mean moving some parts of the Treasury to Darlington, creating a few free ports, and re-announcing funding. That is not levelling up; it is giving up.
Instead of putting blind faith in free ports, the Chancellor would be better served by making sure that the Government’s Brexit deal actually works: for Britain’s manufacturers, now facing more red tape when they were promised less; for our financial services, still waiting for the Chancellor to make good on his promises; for the small businesses and fishing communities, whose goods and produce are now left unsold in warehouses; and for our artists and performers, who just want to be able to tour.
Turning to other parts of the statement, we will wait for the detail about the so-called super deduction, but it is unlikely to make up for the 10 years when the levels of investment growth have trailed so many other countries. Of course we welcome the creation of the national infrastructure bank, which is something for which we have called for years, although it would have been better if the Government had not sold off the Green Investment Bank in the first place. We also welcome the introduction of green saving bonds. I have to say what a good idea it is to introduce a new set of recovery bonds.
The trouble is that the scale of what the Chancellor announced today is nowhere near ambitious enough. The long-overdue commitments to extend furlough, business rate relief and the VAT cut on hospitality are welcome, but there is no excuse for holding the announcement of that support back until today, and of course we will look at the detail.
There are very few silver linings in this Budget. The IMF and the OECD have said that now is not the time for tax rises. We are in the middle of a once-in-300-years crisis. Our economy is still shut and our businesses are on life support, so it is right that corporation tax is not rising this year or next. In the long run, corporation tax should go up. The decade-long corporation tax experiment by this Government has failed, but no taxes should be raised in the teeth of this economic crisis, so it is extraordinary that the Chancellor is ploughing ahead with a £2 billion council tax rise affecting households across the country. Why is he doing that when every economist would tell him not to? Perhaps we find the answer in this week’s Sunday Times, which quoted a source saying that the Chancellor’s argument was:
“Let’s do it all now as far away from the election as possible.”
The Telegraph on 27 January reported:
“Raising taxes now means they can be reduced ahead of the next election, Rishi Sunak tells Tory MPs”.
The Mail in September reported that the Chancellor was to hike taxes and then lower them before the next election. Let me be crystal clear: the proper basis for making tax decisions is the economic cycle, not the electoral cycle.
Behind the spin, the videos and the photo ops, we all know that the Chancellor does not believe in an active and enterprising Government. We know he is itching to get back to his free market principles and to pull away support as quickly as he can. One day, these restrictions will end. One day we will all be able to take our masks off, and so will the Chancellor, and then we will see who he really is. This Budget sets it up perfectly, because this is a Budget that did not even attempt to rebuild the foundations of our economy or to secure the country’s long-term prosperity. Instead, it did the job the Chancellor always intended: a quick fix, papering over the cracks.
The Conservatives spent a decade weakening the foundations of our economy. Now they pretend they can rebuild it, but the truth is that they will not confront what went wrong in the past and they have no plan for the future.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
I should thank the Chancellor for advance sight of his statement but, of course, much of it—against the usual protocol—has already been leaked to the media. It is perhaps worth stating that what is contained in the Budget should be announced in this House and should not be pre-announced in the media.
The Budget comes at a critical moment—a moment when people right across these islands can have faith that the end of the pandemic is finally in sight. Just as millions of people are now being injected with the hope of the vaccine, this Budget should have injected the economy with the stimulus package that it desperately needs.
The Institute for Public Policy Research advised the Government to “boost...like Biden”, to generate an investment-led recovery. Instead, the Chancellor has produced a Budget that offers people the bare minimum— a Budget that completely fails to take responsibility for the bollocks that they have made of Brexit. Indeed, when we look at the Office for Budget Responsibility forecasts and the years 2023, 2024 and 2025, we see a forecast of 1.7%, 1.6% and 1.7% growth. Where is the ambition? This is a Budget that has a poverty of ambition.
When we contrast the response of the US Administration in that fiscal stimulus of President Biden and put that in a historical context, what we see, over the course of the last decade, is that US GDP growth has been 10% greater than that of the UK, and it is that failure to deliver growth that is imperilling our national finances. It is that lack of ability to deliver growth that holds back tax receipts. It is that lack of ability to deliver growth that constrains the opportunities for people, that holds back the growth in productivity, that holds back the growth in wages, that leaves so many of our people living in poverty.
Between the lines of the statement today, there were also the surest of signals. The conversion of this Prime Minister and this Chancellor to increase public spending was only ever temporary. Today, we have a Tory Chancellor returning to type. He is clearly itching to turn off the state spending taps. This Budget is carefully laying the ground for more Tory austerity, a decade more of Conservative cuts, because the Tories do not regret—[Interruption.] I can see the Chancellor shaking his head, but he had the opportunity today to continue the £20 uplift to universal credit and make it permanent—and not just make that permanent to give some hope for those who depend on universal credit, but to extend it to legacy benefits. What did we get instead? We got a commitment to contain it—to leave it in place—for a further six months. In other words, when the restrictions on lockdown have come off, the £20 uplift to universal credit comes off as well. Where is the compassion and dignity for those who need that support? They will continue to need that support right after we come out of this crisis. That is the Tory party that has reverted to type.
Of course, the Tories do not regret the austerity that they have inflicted over the last decade. They are nostalgic for it. We are told by the Chancellor that there have to be cuts to spending. We are told that there have to be tax increases, but we know that he is deliberately setting out a false choice, because we heard nothing today about the need not just here, but right around the world to create the circumstances for investment-led growth. Where is the agenda that the UK is going to take to the G7 to make sure that we work collectively to deliver a better future for everybody out of this pandemic? Every credible economist knows that to protect and secure the public finances, we must create the circumstances for recovery for growth and that this has to be investment-led.
As we look forward to the months ahead, we need to deliver a vision of a better future and we need leadership to do this. So, for the people of Scotland this Budget comes at a critical moment of choice. Post-Brexit and post-pandemic, Scotland now has a choice of two futures: the long-term damage of Brexit and more Tory austerity cuts, or the opportunity to protect our place in Europe and to build a strong, fair and green recovery with independence. This May, every citizen will cast their democratic decision on who they trust to rebuild our society and our economy in the wake of the pandemic. It will be a clear choice: Scotland’s future in Scotland’s hands, or in the hands of the Tories and this Prime Minister and Chancellor. Let’s just say that we are looking forward to the verdict of the Scottish people.
Let me turn to the immediate priorities that this Budget should have dealt with. I am sorry to say that the Chancellor stood up today and doubled down on exactly the same mistakes that he has been making throughout the pandemic. Temporary extensions and temporary support can only ever mean a temporary reprieve for those millions who have been crippled by uncertainty for months. The Chancellor’s temporary timelines for pandemic financial support completely contradict his own Government’s policy. On the one hand, the UK Government rightly tell people that they will follow data not dates when it comes to public health, but when it comes to financial support, Tory policy is defined by dates, deadlines and cliff edges.
Businesses and workers on furlough needed certainty last March and last autumn, and they need it now. Frankly, Chancellor, to expect businesses that have been closed to make increasing contributions to furlough is simply unacceptable when they do not have the cash flow to pay for it. More temporary extensions and the tapering off of furlough fall well short of what businesses need. The Chancellor should make the commitment that full furlough support at 80% wage support will remain available to businesses as long as restrictions remain in place—no deadlines, no dates, no ifs and no buts. That is one clear commitment that would immediately stabilise support for every struggling sector.
The cut-off date for entry into job retention schemes should also be revised, ensuring that support is available to the growing numbers who have started new jobs since the end of last October. We welcome the VAT cut, but it should have been retained at 5% for much longer, and it should be extended to businesses such as hair and beauty businesses, which also need the support. While we welcome the ongoing support for rates relief, it does not go as far as the Scottish Government have in providing 100% rates relief for the calendar year across the retail, hospitality, leisure and aviation sectors.
One of my biggest criticisms of this Budget is that it completely fails to recognise the sheer scale of the other pandemic our communities are suffering—the poverty pandemic. After a decade of underinvestment and Tory cuts, the last year has deepened the UK’s poverty crisis and widened gaps in inequality. Yes, many have been in a position to save and build up financial deposits during these lockdowns, but Chancellor, millions more are literally struggling to survive. Some 14.2 million UK adults are now categorised as having low financial resilience. That is an increase of 3.5 million since the beginning of the pandemic. Let me take an example from my own constituency. In January 2020, the community food bank in south Skye and Lochalsh delivered 25 food parcels in one month. In December 2020, that same food bank was delivering 200 bags of food per week.
Last year, this Government were forced into providing a £20 uplift for universal credit. It was literally a lifeline for millions. It was needed then, and it is needed now. Six million people are now claiming universal credit—a 98% increase since the pandemic began. Today, this Tory Chancellor is telling those 6 million people not to get too comfortable with that lifeline, and that in a matter of months it will be gone. Where is the compassion, Chancellor? Where is the support for people? Does he really think that this is good enough and that it is acceptable that so many people—so many families and so many children—have been left in poverty? He can avert his eyes and look away because he does not want to know the harsh reality. The Chancellor does not understand what it is like to be poor in Boris Johnson’s Brexit Britain. Chancellor, do the right thing. This should never be temporary; it should be permanent, and let us make sure, out of this Budget, that that policy is changed. Making the £20 universal credit uplift permanent must also extend to legacy benefits. And Chancellor, while you are at it, finally abolish the cruel benefit cap and end the two-child limit.
The Chancellor should also be using this Budget to support those most impacted throughout the pandemic. The Women’s Budget Group found that women were twice as likely to be key workers as men but are far less likely to be eligible for statutory sick pay. It also found that young women were disproportionately likely to work in the sectors that were hardest hit by previous lockdowns. The Chancellor could support these women by finally introducing a real living wage and a liveable sick pay for all.
We know that after a decade of Tory decisions, child poverty has risen to alarming levels. The Joseph Rowntree Foundation and baby bank charity Little Village found that 4.2 million children are living in poverty, including 1.3 million babies and children under the age of five. This is supposed to be a civilised society. It is supposed to be a caring society. The Chancellor has just congratulated himself on his Budget. Chancellor, where is the plan to get these 4.2 million children and their families out of poverty? Where is the plan to get these young children and babies out of poverty? Where is the sense of responsibility from a Government? What we can see is a Chancellor who is not even prepared to engage; he is looking away—and no wonder, because this Chancellor should be embarrassed by what he has done. This Government need to wake up to the scale of the child poverty crisis, and they could start by matching the Scottish Government’s game-changing £10 child payment.
While we are on the subject of fighting poverty, let me say how disappointed I was by the failure of the Labour shadow Chancellor at the weekend to state her party’s clear support for making the universal credit uplift permanent. In the space of a week, Labour told us that its position on wasting billions on Trident nuclear weapons on the Clyde is non-negotiable but cannot even say what its position is on keeping this lifeline for struggling families. We know we are living in strange times when George Galloway pledges his support for the Tories and the Labour party sits on the fence when it comes to Tory cuts. We would nearly feel sorry for the new Scottish Labour leader, severed at the knees by his Westminster bosses before he even gets started.
Not only does this Budget signal the return of Conservative cuts; it also confirms that the Chancellor continues to snub the excluded. In time, when people reflect back on this period, it will be a damning indictment of this Tory Government that they were prepared to coolly ignore 3 million of their own citizens during a pandemic.
Ian Blackford
Well, well, well, Prime Minister—try telling that to the 3 million people who have had no financial support from your Government over the course of the last year. You should be utterly ashamed of the dereliction of responsibility from a Government who are supposed to provide leadership to all their people. So much for putting your arms around all the people of the United Kingdom! Three million people have been ignored and abandoned by a Prime Minister and a Chancellor who could not care less.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
Nonsense—all nonsense.
Ian Blackford
Well, the hon. Lady should listen to those who have not had financial support.
On the BBC on Sunday, the Chancellor said that his Government had reacted “generously and comprehensively”. Chancellor, tell that to the 3 million freelancers and self-employed who have been left behind without a penny. Not a penny, Prime Minister, of support. A quick search of Hansard shows that the 3 million excluded have been raised in the House around a thousand times since last March. Their plight has been ignored by Ministers on 1,000 occasions in the House and it is a disgrace that the Chancellor has chosen to ignore them today.
I acknowledge and welcome the fact that the newly self-employed have now finally been covered by the scheme, but a whole community of people remains ignored and forgotten by the Chancellor. Yes, 600,000 will now be included, but what about the other 2.4 million who have been discarded, written off and ignored by the Chancellor and the Prime Minister?
The Budget’s failure to stand by and support those who have suffered most during the crisis goes to the very heart of the economic choices made. It should have been the Budget that kickstarted a strong, fair and green recovery. That is precisely why the SNP has been calling for a substantial stimulus package—5% of GDP; at least a £98 billion package of investment, which would give us the opportunity to emerge from the pandemic with investment-led growth. That would follow President Biden’s lead and provide a fiscal stimulus that boosted business, protected jobs and stimulated sustained economic growth. Instead, the Budget falls painfully short of that level of ambition. Instead, the Chancellor wants to drag us back to business as usual, back to the same old failed economics of a decade ago.
There is plenty of evidence that Tory austerity cuts are already making a comeback. In November, the UK spending review set out plans to reduce non-covid-related spending by up to £13 billion a year. There is already a public sector pay freeze, including for those key workers who have protected us through the crisis. That is the thanks from this Government.
There has already been a reduction by Westminster in Scotland’s capital budget. The Tory choice to impose austerity is also holding back opportunities to truly build back better beyond the pandemic. A huge number of those opportunities are in the green economy, whether in energy, housing, transport or waste. I acknowledge the £27 million announced for the energy transition zone in Aberdeen, which matches financial commitments that the Scottish Government made in June 2020, but it still falls well short of the wider £62 million energy transition package from Holyrood. Let us not forget that the North sea oil industry has contributed a massive £350 billion to the Exchequer in the last few decades.
The Tories have reneged on promises to support carbon capture schemes in the past, so the Chancellor will forgive oil and gas sector workers in the north-east of Scotland who have developed a healthy scepticism about Tory promises. Chancellor, to really stimulate the green economy, you need finally to reform contract for difference to deliver support for wave and tidal generation and guarantee that Scottish suppliers will be used.
The Chancellor and the Government need to give Ofgem a strategy objective to support the delivery of net zero. Transitioning to net zero is an economic imperative, but it is also a moral imperative. Last week, the United Nations Secretary-General warned that
“2021 is a make or break year to confront the global climate emergency.”
I genuinely say to all hon. Members that COP26 in Glasgow this November offers the chance to unite around an ambitious agenda to tackle the climate crisis.
It is possible for us to look forward to those opportunities only because of the actions of those who have protected us through the last 12 months. Our NHS has been on the frontline in the fight against covid-19. Our workers have been nothing short of heroes with their efforts to save people’s lives and provide care. If we are truly grateful for those efforts, we must secure the financial future of the NHS by introducing long-term investment and rewarding those who work for it. A good start would be matching the Scottish Government’s £500 thank-you payments and making them free from tax and benefit deductions. That also means matching Scotland’s current per head funding for the NHS, which would deliver an extra £35 billion for the NHS in England and £4 billion for NHS Scotland in Barnett consequentials. That, Chancellor, would be a fitting tribute to the institutions and the people who have bravely led us through the worst days of this pandemic.
This is the second Budget delivered by the Chancellor, and it is also very noticeable how little reference he made to Brexit compared with the first. Brexit is now the mess that the Tories and the Labour party dare not speak of, and it is little wonder why. The bad Brexit deal that the Prime Minister forced through the House in the final days of December is already proving more disastrous than predicted, and Scottish businesses, from fishing to farming, are losing millions of pounds every day as a direct result of red tape. This threatens to get worse, with grace periods and some food exports ending in April. Instead of taking responsibility for the Brexit mess they have made, the Tories have washed their hands and walked away.
The same is true for this Budget, which fails even to recognise that the very survival of thousands of food and drink exporters is now at stake. In December, the EU put in place a compensation package for those countries most affected by Brexit. Ireland alone got €1 billion. Chancellor, where in this Budget is a similar compensation package for Scottish businesses that are losing out every single day? Where in this Budget is a guarantee that the so-called shared prosperity fund will match the loss of EU structural funds? Today’s Budget gives no commitment, no clarity and no compensation. It only adds to the ever-growing list of broken Brexit promises.
Of course, the real agenda behind the Brexit betrayal is now emerging. For a year now the Tories have been in panic, privately planning for an independence referendum that they publicly say will not happen. The purpose of the internal market Bill, the Union unit and, now, the so-called levelling-up fund is crystal clear: they are all an attack on devolution.
The Chancellor is undermining our Parliament and centralising resources and decision making at Westminster. It is a naked power grab to bypass the devolved Parliaments and take control of funding in devolved areas. Oh, the irony: take back control. They are taking back control from our Scottish Parliament. That is not only the opinion of the SNP; it is the verdict of the former First Minister of Wales—[Interruption.] We hear Tory MPs representing Scotland chuntering away. They are supporting this power grab against the people of Scotland and, frankly, they should be ashamed of themselves. They are showing themselves up for what they have always been: the anti-Scottish Tory party.
Carwyn Jones said that the failure to apply Barnett to the new levelling-up fund would
“divert money away from Wales, Scotland and NI and give a greater proportion to England.”
Of course, the Prime Minister has form, because he talked about doing that in days gone by.
These attacks on devolution show what is now fundamentally at stake. As I said at the beginning of this speech, post Brexit and post pandemic, Scotland has a choice of two futures. At the heart of that choice is a simple question: who is best placed to lead Scotland’s recovery and build a better future? Is it Westminster Governments we did not vote for or independent Scottish Governments, of whatever party, chosen by us and with Scotland’s best interests at heart?
As we look ahead, we have every confidence in what is possible if we take our future into our own hands. We have the resources. We have the wealth. We have the talent. As an independent country, we can decide how best to use all those resources, all that wealth and all that talent. We will be the decision makers. We will be able to chart our own course and build our own future. The Tories can try to deny democracy all they like, but the inalienable right to self-determination cannot and will not be subject to a Westminster veto. There is no Boris veto on Scottish independence. We keep faith in the right and the power of the people to bring about democratic change. That choice is in the hands of Scotland’s people. It is they, and they alone, who will now decide that future.