Budget Resolutions and Economic Situation

Alison McGovern Excerpts

Monday 13th July 2015 Commons Chamber

[Alison McGovern (Wirral South) (Lab)]

Before I begin, I would like to say to the hon. Members for Paisley and Renfrewshire North (Gavin Newlands), for Erewash (Maggie Throup), for Southampton, Itchen (Royston Smith), for Chippenham (Michelle Donelan) and for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) that they have each made great first contributions to this place. It was a pleasure to hear them. My hon. Friend the Member for Wirral West (Margaret Greenwood) also made her first contribution today. She will find that representing the brilliant, funny, kind and generous people of the Wirral is a sincere pleasure and a great honour. She is just like them and we are very proud to have her here.

The Budget needed to do two things: to address the deficit that our country still faces, and to make work pay. I shall address my concluding remarks on this debate to those two principles. I am afraid that on both those issues—on the deficit and on making work pay—the Chancellor has given the British people a con.

On the first of those principles, I remember being on the Back Benches in 2010, knowing that Alistair Darling’s Budget of March that year had seen the economy grow. This Chancellor argued that the emergency Budget in June that year was necessary because the deficit had to be closed—not to be reduced by half by the end of that Parliament, as it would have been under the existing plans, but to be fully closed by 2015. However, as the hon. Member for Taunton Deane (Rebecca Pow) said, the deficit is still too high. I would invite and encourage her to get in touch with the Chancellor of the Exchequer to remind him of the promises he made to the British people and to ask him this simple question: what went wrong? What happened? Even after five years of over-promising and under-delivering, the Chancellor has done it yet again.

In fact, as the OBR says on page 15 of the “Economic and fiscal outlook”,

“the budget balance improves…less quickly”

than the Government forecasted in March. If for whatever unfortunate reason for our country the Chancellor were no longer in post in 2019, one wonders whether he would have had the unique honour of presiding only over deficits for each year in which he was Chancellor of the Exchequer and never over a surplus. That is now looking to be a distinct possibility. I wonder what the Chancellor would have said in 2010 if he had known that that was going to be the case. Could he have predicted, I wonder, his failure over his promises?

Secondly, on making work pay, I was 17 when the national minimum wage came in and I was in my second-ever job. A year earlier, at 16, I had my first job and I well recall the payslip; I was paid about £2 an hour. I worked alongside adults—over 18—who were paid the same amount. When the minimum wage came in, it was paid at £3.60 an hour. That national minimum wage had a profound impact on my working life and on the working lives of the people around me.

Last week’s Budget was a kind of back-handed compliment to the Labour Members who introduced the national minimum wage back then. They were so persuasive that it seems they persuaded even the Tory party. It was a compliment to the living wage campaigners who seem to have been so persuasive that they persuaded even the Chancellor, and to the trade unions who seem to have been so persuasive on the need for a pay rise that they persuaded the Chancellor even while the Government were still hell-bent on attacking them.

We should ask ourselves this question. Does the Budget really make work pay? Emphatically not! Tax credits have profoundly improved the ability for work to pay, especially for families that have the extra cost of having children. The damage done to tax credits will see families up and down our country lose out. The Chancellor calls his new “national living wage” just that. He uses the language of a “living wage” all the time while not living up to that promise. Of course an increase in the national minimum wage should be welcomed and is good, but it is not, as Members have mentioned, a living wage as normally understood.

Let us look at the detail of whether this Budget makes work pay. First, as part of its analysis, the Treasury has often produced a distributional outlook showing the impact of Budget measures on different groups—who gets what by decile of income. Not so this time; the Treasury chose not to do it. It is too complicated, it said. Thankfully, however, the IFS did just that, and we have all seen the graph of doom it produced, demonstrating unequivocally that those with the least lose the most. That is the truth of this Budget.

Let us turn to table 1.8 on page 40 of the Red Book to see what the Treasury says about the impact of its changes on families. It gives examples that it describes as “illustrative”, all of which involve people who are working for 35 hours a week, including a lone parent with one child. I do not know many lone parents in my constituency who are easily able to work for 35 hours a week. Indeed, many are on contracts involving fewer hours, and could not rely on being able to work for 35 hours a week even if they wanted to. The examples assume growth in the personal allowance—of which we have seen little evidence—in future years. They also assume wage growth, and we wonder whether that is certain at all. All those examples, which suggest that people will be better off, are accurate if, and only if, we can believe a word that the Chancellor says. I hope I have demonstrated that that is not an assumption that British families can make.

Secondly, we need to make work pay in each and every part of our country. Let us look away from the micro for a second, and turn to the macro. Ultimately, we can improve real wages only by increasing the earnings potential of firms in our economy and the working people within them.

The Chancellor could have taken actions in three areas to meet the so-called productivity challenge—in fact, “productivity” is just a jargonistic term for making work pay—but, unfortunately, he did too little in those three areas, which are childcare, infrastructure and skills. On childcare, he looked again to the Labour party for inspiration after the election, stealing our 25-hours policy—[Laughter.] It has not passed me by that my party lost the election, but even if, at times, the public were not listening, the Chancellor clearly was, because he stole our 25-hours childcare policy. Sadly, however, he has delayed its implementation, offering people no real help now.

On infrastructure, I thought that the Chancellor wanted to rebalance the economy, but he has done nothing of the sort. He has cancelled northern rail electrification, and has offered literally no infrastructure improvements to the north-east of England, the region that most requires assistance at this time.

On skills, the Government’s apprenticeships policy sounds broadly right to me, but when I look at their record, I see that they have increased the number of older workers on apprenticeship schemes that are merely rebadged old training schemes. I encourage newer Conservative Members who believe that their Government have presided over a great apprenticeships record to look at the position a little more closely.

Many people who are already in work need to be helped to acquire better skills. Our country has become world-class at generating low-paid jobs from which too few people ever move on. The CBI, that bastion of socialism, has said that we have a skills crisis that the Budget will not fix. In the care sector, for example, staff often start work on low pay and remain on low pay. We need a much bigger strategy than the one that the Government have presented.

The Chancellor should have set out to do two things. He should have addressed his own failure on the deficit and reduced our stock of debt as he promised that he would, and he should have made work pay for ordinary British people and given them a real chance to get on. In fact, the Chancellor has a terrible record on both, and he is trying to con the British people. However, it is worse than that, because the Budget reveals the Chancellor’s real priorities. If we compare and contrast the impact on the north of England with the impact on the south, we see his priorities. If we compare and contrast the steps that he has taken on inheritance tax with those that he has taken on childcare, we see his priorities. Compare and contrast the impact on those with least in our country who lose most, with on those at the top who gain. There we have his priorities. If he thinks we in the Labour party will let him get away with it, he should think again.