Budget Resolutions and Economic Situation

Baroness Harman Excerpts

Wednesday 8th July 2015 Commons Chamber

[Ms Harriet Harman (Camberwell and Peckham) (Lab)]

The Chancellor is said to be liberated without the ties of coalition holding him back, but what we have heard today suggests his rhetoric is liberated from reality. He calls it a Budget for working people. How can he make that claim while making working people worse off with—[Interruption.]

[Mr Deputy Speaker]

Order. If Members have not the courtesy to listen, I suggest a cup of tea in the Tea Room. I wanted to hear the Chancellor, and I certainly want to hear the Leader of the Opposition.

[Ms Harman]

The Chancellor is making working people worse off by cutting tax credits and scrapping grants for the poorest students. He says he has a long-term economic plan, but what kind of economic plan is it when they are ducking it on Heathrow? He talks about the northern powerhouse, yet he has pulled the plug on rail investment, and as for one nation Britain, how can he even stand and say those words when, while cutting tax credits for working people, he has not done enough to stop tax avoidance?

More than seven years after the financial crisis, five of which were under this Tory Chancellor, the country is still dealing with the consequences and the recovery is still fragile. Today’s Budget documents show that growth has been revised down this year. Of course, however, tough decisions are needed to get the debt down, and had we been in government, we would have cut spending outside protected Departments and reduced the welfare bill, so there are measures in the Budget to which we will give serious consideration.

When in opposition, the temptation is to oppose everything the Government do—believe me, I feel that temptation—but we best serve this country by being a grown-up and constructive Opposition. We will fiercely oppose policies that hit working people and expose policies that are unworkable, but where the Government come forward with sensible ideas, we will be prepared to look at them. We will be a different kind of Opposition. In turn, I hope the Government will reflect on how they conduct themselves. The Chancellor is renowned for his political traps, games and tactics, but that is not what he should be doing. Normally, it is the Government who govern, while the Opposition play politics, but the Government are playing politics with this Budget. It is less about economic strategy and more about political tactics designed by the Chancellor to help him move next door.

The most important thing for working people is sustainable jobs in productive firms in a competitive economy, and productivity is key to the virtuous circle of increasing investment, higher skills, successful businesses and rising wages—that is the route not just to raising living standards but to getting the deficit down—but when it comes to productivity, the Chancellor’s record is poor. It is not as though people are not working hard, but the things that turn their work into high productivity—skills, investment and infrastructure—are not there for them, which is why the UK produces on average 30% less per hour than workers in Germany, France and the US and output per hour in this country is 17% below the average for the G7. That is the lowest we have been in the productivity league table since 1992. It is not enough just to publish a productivity plan later in the week; we have to do it.

Businesses are clear that infrastructure is vital to raising productivity. Whether roads, rail, airports, energy supplies, broadband or housing, a modern economy needs modern infrastructure, but the Chancellor has pulled the plug on the electrification of the railways and pulled the rug from under investment in renewable energy, and he has flunked it on airports; and people are weary of hearing the same old re-announcements on roads. They could resurface the A14 with the Treasury press releases about it—and no doubt there will be more.

To be one nation, we need every region to be productive, vibrant and powering ahead, not just some. The Chancellor has made much of his commitment to devolution, but we cannot build a productive economy on a political slogan. With last month’s cancellation of railway electrification, the great northern powerhouse is starting to look like the great northern power cut. He should tell the House today that he will reinstate the electrification of the Manchester-Leeds trans-Pennine service. Will he do that? Or are there more excuses, such as, when it comes to the railways, perhaps we have the wrong sort of Government on the track. He should also tell the House today that he will end the delay on the electrification of the midland main line, or let us hear no more boasts about one nation.

Will the Chancellor undertake to consult on his announcement on Sunday trading? He needs to consult on this fully with the British Retail Consortium, the Federation of Small Businesses, the Association of Convenience Stores, the unions whose members work in these stores and councils. He talks about empowering local government in his devolution plan and he mentions future new city deals, but over the last five years, local government has taken a disproportionate hit from his spending cuts, particularly in the north and the areas that most need economic regeneration. The 10 most deprived areas had their spending cut by 12 times the amount of the 10 least deprived areas. Local government is key to regeneration. It drives growth throughout different parts of the country, raising productivity and, crucially, rebalancing our economy, but we cannot empower local government if we impoverish it.

A key part of modernising infrastructure is building homes, but we have the biggest housing crisis for a generation. Home ownership is falling; we are building only half the homes we need; and the cost of renting or buying is soaring out of reach, especially in London and the south-east. We want people to be able to own their own homes—we want as many people as possible to fulfil that aspiration—but any credible housing policy must ease, rather than deepen, the housing crisis and enable more people to own their own homes. Although it is right to help people pass on their homes to their children, more important than inheritance tax relief for homes worth millions is helping millions more people own their own homes.

What businesses wanted from the Budget was substantial measures to improve the skills of the workforce. The Chancellor made further announcements on that today, but what he has said in the past he has not delivered. The number of young people starting apprenticeships is stagnating, not going up, while new apprenticeships are skewed towards lower levels, and businesses are crying out for higher skills levels. Anyway, much of the Government’s so-called apprenticeships programme is just a rebadging of existing in-work training. Businesses need to have the confidence to invest and they say they need longer-term certainty in the tax relief regime, but the Chancellor chops and changes tax reliefs, cutting them back one day so that he can boast about putting them up the next, and that is exactly what he has done again today.

With the higher productivity that we get from investment in infrastructure, people and industry, we get the sustainable jobs and rising wages that bring down the welfare bill. Indeed, one of the reasons why the national minimum wage was introduced by the Labour Government in the first place was to tackle the rising cost of in-work benefits. The Chancellor now claims that he wants a high-wage economy with lower welfare bills. Well, we all want that, but he is putting the cart before the horse. At the heart of his Budget is his announcement—heavily trailed in the press, but curiously not mentioned in the election campaign—to cut tax credits for working people. However, doing that without an across-the-board, effective plan for higher pay at the same time will make working people worse off. He is saying he will cut welfare, and wages will magically go up; we say get wages up first and the welfare bill will come down.

We heard the announcement about the national minimum wage and the living wage, but what—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. There are too many conversations and too many comments being made. I want to hear the Leader of the Opposition; you should also want to hear the Leader of the Opposition.

[Ms Harman]

Clearly, what hon. Members do not understand and have not worked out yet is that, even with the higher national living wage that the Chancellor has announced, it will not be enough for a family to live on because of the cuts in tax credits. That is the actual situation.

When it comes to tax cuts, we support the rise in the higher rate threshold and in the personal allowance, but we will look at the detail to make sure the Chancellor is not up to his usual trick of giving with one hand and taking away with the other. When it comes to tax, the burden of deficit reduction should be borne by those with the broadest shoulders. Instead, he has chosen to put the heaviest burden on low-paid working people. He is claiming to have found £12 billion in welfare cuts but is aiming to get only half that amount from tax avoidance, and most of that is from our tax avoidance policies.

On welfare, we back measures to get people into work to achieve full employment and thereby get the social security bill down, and in our manifesto we committed to a benefit cap. However, the Chancellor promised to protect the most vulnerable and disabled from his welfare cuts, and if he goes to break those promises, we will oppose him every step of the way.

The Chancellor has now accepted a slowdown in his original pace of cuts. We will look at the details, but we will want to be sure that all this amounts to is not just hitting working families one year later. We have said we support pay restraint in the public sector, but it should be based on a fair process that is not casually disregarded but is fair to those on lower incomes. In 2010, the Chancellor made that promise to the lowest-paid workers in the public sector, and he did not keep it.

On the NHS, people will take Conservative promises with a pinch of salt when they come from a Government who have cut funding for GP services, cancer services and mental health services.

The Chancellor has talked about the surplus, which no one would disagree with when economic circumstances allow. We will look at the detail of the Chancellor’s proposed new fiscal rule, but simply legislating for it has more to do with politics than economics. Anyone can legislate for a surplus; the question is whether it can be delivered, and he has signally failed to keep his promises on that in the past.

The Chancellor claims that this is a Budget for working people, but it does not put working people first; it ducks the big decisions on infrastructure and fails to give businesses the productivity boost they need. In the light of the measures set out in the Budget, let us look at what the Office for Budget Responsibility says about productivity. It says that his Budget will not improve productivity. True to form, what this Chancellor says and what he does are two very different things. That is why it is down to us to ensure that when he says it is fair, it is fair, and that when he comes up with some new proposal, he consults in good faith to make sure it is workable.

Before the Chancellor makes more promises, he has to deliver on those he has already made. He says that he stands up for working people; what he does is make them worse off. He says he has a long-term economic plan; what he does is duck the big infrastructure projects. He talks one nation, but many of the measures announced today will make this country more divided. The hopes of millions of working people are more important than his hopes of being the future Tory leader. This Chancellor is personally ambitious, but when the economic recovery is still fragile, he should be ambitious not just for himself, but for the country.