Budget Resolutions and Economic Situation

Debate between Alison McGovern and Angela Smith

Wednesday 20th March 2013 Commons Chamber

[Angela Smith]

But the country is becoming less productive. In fact, productivity has declined by 2.4% over the last year, storing up massive problems for the future.

On borrowing, the Chancellor told us that national debt would be falling as a percentage of GDP by 2015-16 and that he would bring down the deficit. It is no secret now that he will miss the first target by a mile, with the OBR saying that debt will not start falling as a share of GDP until at least 2017-18. As for borrowing, it was 6.6% higher for the first 10 months of the 2012-13 financial year than for the same period in 2011-12.

[Alison McGovern]

Is my hon. Friend as worried as I am that so far the Chancellor does not have a very good record at hitting the OBR forecasts? Let us not rely on him for hope.

[Angela Smith]

I completely agree with my hon. Friend. Indeed, when it comes to growth, the Chancellor stood at the Dispatch Box in 2010 and confidently told the House that by this financial year the economy would be on the mend, with growth forecast at 2.8%, but we now know that his forecast was out by 2.5 %. Today, he had to downgrade growth for this year yet again, to 0.6%.

We have a downgraded Chancellor who has sucked demand out of the economy with his ill-thought-through VAT hike and his draconian cuts to public spending. Those cuts have gone too far, too fast. If the latest estimates are right, spending cuts have so far wiped 1.4% of growth out of the economy, and the biggest cuts are yet to come. But at least the millionaires of Sheffield and Barnsley will have extra money in their pockets this April when the 50p tax rate is abolished.

The measures that the Chancellor has introduced today will go nowhere near to addressing the problems that he has caused. Instead of plan B, we have inadequate measures that do not even go halfway towards addressing the problems facing the country. The child care package announced yesterday, for instance, is designed to help hard-pressed working families, but unfortunately it will not come into operation until after the next general election. Once again, it is jam tomorrow. There is not much on offer for the parents and families struggling with the costs of child care today.

There is no doubt that house buyers might be thankful for the help being offered today, but a quick look at the Chancellor’s record on housing does not bode well. This is the same Chancellor who, in 2011, unveiled what was termed a “radical and unashamedly ambitious” strategy to give the housing industry a “shot in the arm”. My right hon. Friend the Leader of the Opposition referred to this earlier. At the heart of that strategy was a scheme which the Chancellor claimed would help 100,000 to people to buy their own homes. To date, just 1,500 people have realised that dream. That is a 1.5% success rate, which is almost as bad as the Work programme—or as good, depending on which way we look at it.

A year later, we had what was described as the Government

“rolling its sleeves up and doing all it can”.

That included introducing a £10 billion guarantee scheme which, while welcome, has yet to deliver a single penny of support for house building. It took the Government six months to release details of the scheme, and it will not be open to receive bids until April this year. Last year, housing starts fell by 11% to below 100,000, which is less than half the number required to meet housing need, and I am not convinced that the help announced today will kick-start the stagnant housing market.

Then we come to infrastructure. The £3 billion a year—£15 billion over the next decade—is nowhere near what we need to invest in roads, schools, transport and housing if we are going to get the economy growing again and build for our economic future. If, as now seems possible, we are entering the third recession in as many years, we needed to see something much more dramatic today. However, the Chancellor has failed to deliver.

Let us take VAT as another example. The Opposition have said that he should temporarily reverse his VAT hike, because consumers need help and they need it now. Reversing the hike would have alleviated some of the pain they are feeling, and it would have helped the pound in their pocket go a little further.