Budget Statement

Baroness Kramer Excerpts

Wednesday 23rd March 2016 Grand Committee

[Baroness Kramer (LD)]

My Lords, in his Budget speech the Chancellor said that he would eliminate the Liberal Democrats—by midnight. Instead, he managed a direct hit on the Conservative Party. I think he has confirmed his reputation as a man who always misses his targets. The story of this Budget is of missed targets and the utterly unacceptable cuts in public spending on the working poor and disabled people that the Chancellor chose to cover up his failures.

Can we now have an absolute assurance that the Chancellor’s agreement to throw out the £4.3 billion of cuts to PIP will not lead to cuts in other parts of welfare? I notice the phrase “no further welfare cuts”. That needs some confirmation and definition. Will the blow fall on the pensions part of DWP? The new Secretary of State did not address that. Will it mean that public services as a whole have to find the £4.3 billion in cuts? Are we all meant just to forget the £4.3 billion in cuts? In which case the Budget is shot. I wonder if the Minister could offer some clarity.

In the coalition years, the Government worked successfully with the support of a broad majority of the British people to gradually eliminate the structural deficit, better known as the cyclically adjusted current budget—intentionally excluding both cyclical support and capital spending. This is the target that the financial markets require to assure fiscal discipline and fiscal stability. Even with the OBR’s March downgrades in the economic forecast, this measure goes into surplus in 2018. I have no idea how the changes—the mystery £4.3 billion—have impacted that outcome, but I hope the Minister will be able to tell us. Cuts or tax increases beyond balancing the CACB are an ideological choice; they are not required for fiscal discipline or fiscal stability.

Will the Minister finally accept that the Government’s decision to change the whole character of the fiscal target and to require a fiscal surplus in 2020 based on the new, far more austere definition including capital spending was a mistake and should be rapidly abandoned? The contortions in the Budget to hit the self-inflicted target—shifting taxes and capital expenditure quite blatantly between years to manipulate the numbers for 2019-20—are extraordinary. Did the Government think we would not see them? Does the Minister agree that it was utter arrogance for the Chancellor to bind his own hands in a time of global uncertainty by putting his fiscal rule into law?

It was also fundamental in the coalition years that we should be “all in it together”. That is why cuts for the wealthiest, such as cuts to capital gains tax and further cuts in corporation tax, were off the table during the coalition and, while there were cuts to benefits to the working poor, my Liberal Democrat colleagues in government constantly restrained the Chancellor, as is now evident. The Chancellor carries on using the language of “all in it together” but he does not seem to understand the meaning.

Numerous noble Lords will have read the letter of the right honourable Member for Chingford and Woodford Green. I share his outrage about the cuts to disability benefits but, more importantly, the British people share it, too. Those who voted Conservative in the last election thought they were getting a continuation of coalition policies; they did not understand they were getting a hard swing to the right.

We cannot keep slashing the budget for public services and still deliver a civilised society. The UK’s demographic profile now includes so many older people, living longer and in need of healthcare and social care, despite working more years. Ordinary people are still feeling the pressure. The Institute for Fiscal Studies confirms that,

“we should expect much of the recent fall in inequality to be undone over the next five years”,

and this is especially true for those of working age, whose incomes are still below pre-crisis levels, and the young, who have suffered the most.

Some of the worst sufferers have been our public servants—teachers, nurses, doctors, police. Surely as we reach a CACB surplus, we should increase pay for them. They will leave their professions if they know that, every day, they can be paid more and treated better in the private sector. The junior doctors are not alone; it is a straw in the wind and a warning that should be recognised.

Yet as this Budget stands now, we have a £4.3 billion hole which must be filled from somewhere. The Budget includes £3.5 billion in mystery cuts to un-ring-fenced government departments. There is a further £2 billion cut to departmental budgets to fund pension contributions —that, by the way, is a huge blow to the NHS. It is in effect a cut of £650 million from what is supposed to have been protected funding to a department which needs every penny of its promised additional £8 billion if it is to survive. The schools budget does not even rise with inflation, and none of that litany that I have just given includes the plight of local government.

I fully support the cut in business rates for small businesses. My Liberal Democrat colleagues in government fought for the review of business rates and I welcome its conclusions and implementation. But the Budget seems to anticipate that the whole cut, which we estimate will be £2 billion—perhaps the Government will tell us that it is higher—will fall on local government services: the street cleaning, rubbish collection, transport and especially the social care that people rely on for a decent community. Is that true? Is this yet another £2 billion cut to local authority budgets, already slashed in previous years?

I have so many questions. Does the sugar tax come with a proper anti-obesity strategy? Otherwise, it will deliver little. Why are the Government not taking advantage of minimal interest rates to raise their ambition and speed the timing of investment in broadband, housing, renewable energy and lifelong learning—all those foundations of economic growth? Why are the Government being so timid in taxing multinationals, closing loopholes rather than restructuring corporation tax? And who is the lifetime ISA meant to help? It works properly for people who can save £4,000 a year, but there are precious few younger people who have that kind of money.

But, frankly, all that is overshadowed. We need to see a revised Budget. The coalition worked so hard to restore confidence in the British Government’s ability to manage the economy and that is being thrown out of the window. The Government may be mollified by winning the vote in the Commons yesterday, largely—by the way—thanks to so many missing Labour votes, but the public and the markets are tougher and wiser. Especially at a time when we face questions around Brexit, it is crucial that the competence of the British Government in managing the economy is unquestioned.

Pushing through a Budget with a £4 billion black hole, £3.5 billion in mystery cuts, and £2 billion in unexpected pension provisions, including a £650 million blow to the NHS and goodness knows what damage to local authorities, is not the behaviour of a responsible and capable Government. I repeat: we need a new Budget. When will we see it?