Income Tax (Charge)

Anneliese Dodds Excerpts

Thursday 4th March 2021 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Yesterday, we saw in black and white the impact of this Government’s mishandling of the coronavirus crisis, right there at the front of the Office for Budget Responsibility’s report: the UK has suffered the worst economic crisis of any major economy. The Chancellor has tried to dismiss that damning fact as a mere accounting quirk, but the OBR was clear: even when all G7 countries are measured in the same way, the UK’s economic crisis has still been the worst.

Perhaps it is understandable why the Chancellor wishes to muddy the waters on this point, because the OBR is scathing in its assessment of the reasons why we have had such a severe crisis, and he has played a leading role. In its words, the primary reason is:

“simply that the UK has experienced higher rates of infection, hospitalisations, and deaths from the virus than other countries.”

The Government were too slow into lockdown not once, but three times. The Labour party urged the Government last autumn to listen to the scientific advice and bring in a short circuit-breaker over half-term to contain the virus, but the Chancellor allegedly overruled the scientists and insisted that a lockdown was not needed. When it came, it was longer and more severe. As the OBR notes:

“The UK has spent longer in stricter lockdowns than other advanced economies”.

The fact is that the Chancellor just does not get it. He thinks that we can separate out the health crisis from the economic crisis and trade one off against the other, but failing to get on top of the public health crisis only makes the impact on jobs and businesses worse. The OBR was clear on that point:

“a greater prevalence of the virus also raises voluntary social distancing which…account for around half of the total decline in economic activity associated with the pandemic.”

It is a damning report card. Coronavirus may have closed large parts of our economy, but this Government crashed it.

Yesterday’s Budget was an opportunity for the Chancellor to make amends, to end the irresponsible decision making that has defined the past year, and to reverse the economic mismanagement that has defined the past 10 years. It should have been a Budget to rebuild the foundations, but it merely papered over the cracks. After the year that we have just had, it should have put the NHS and social care system front and centre, rewarded our key-worker heroes, and set out a plan to strengthen a system too often horribly exposed by the virus. But incredibly, the Chancellor made just a single mention of the NHS and said nothing whatever about social care. Worse still, despite saying that he would be honest with the country about the challenges that we face, he buried a planned cut of £30 billion in resource spending for the Department of Health and Social Care in the fine print of the Red Book.

We know that, when it comes to the pressures on our NHS, this coming year will look different from the last—thank goodness—but it is extraordinary to think that there will be no ongoing costs, either as a result of the pandemic or of the backlog and waiting times that have built up. More than 4.5 million people are currently on the waiting list for treatment—the highest number on record. The Government are burying their heads in the sand, and it will be our NHS staff who feel the pressure from that denial of reality. Those cuts are an appalling reward for workers who have given absolutely everything over the past year to help our country through this crisis. It is hard to think of a greater long-term challenge than that of social care and yet, despite being almost two years on from the Prime Minister saying that he had a plan to fix the crisis in social care once and for all, this Chancellor and this Government had absolutely nothing to say about it.

As for health, so for education: the Government have planned zero additional covid-related spending for schools this coming year. It is extraordinary to believe that there will be no extra costs for our schools as they try to support a generation of schoolchildren who have missed such a chunk of their education.

That sums up this Budget: nothing to say on the biggest issues the country is facing; out of touch with what people are going through right now; and absolutely no plan for what to do next.

Let us take the jobs crisis. The Department for Work and Pensions should be straining every sinew to help get people into work, yet the kickstart programme that the Secretary of State oversees is helping just one in every 100 eligible young people. The restart programme for the long-term unemployed has not even begun and will not be operating at full capacity until this time next year, by which time unemployment is expected to have hit over 2 million. This Budget should have been a moment to get a grip on these failing schemes, to supercharge them so that they were doing everything possible to help those who have lost their jobs, and to give people a genuine jobs promise, as Labour has urged. But what did we get? We got tinkering around the edges with traineeships and apprenticeships, when we know that £330 million of apprenticeship levy funding is still sitting unspent, and a two-year programme to pilot the use of new technologies to help people find work. That is not a plan. That does not come near the scale of the response needed to help the 1.7 million people who were already out of work, or the hundreds of thousands more who risk losing their jobs in the months to come. Can the Secretary of State honestly look me in the eye and say that this amounts to a plan for jobs?

Moreover, where will the new jobs come from? With the hosting of COP26 this year and the eyes of the world upon us, the UK has an enormous opportunity to show how an active Government making smart investments can help us emerge from the economic crisis and meet our net zero ambitions at the same time. Labour has called for £30 billion of investment to be accelerated into the next 18 months to support the creation of 400,000 new green jobs, but, unbelievably, yesterday’s Budget took us backwards. The Government have actually cut half a billion pounds of capital investment from their plans for the coming year, and the green homes grant, the flagship programme of the Chancellor’s summer statement last year, seems to have disappeared from the face of the earth, after more than 75% of its funding was cut and it was found to have been costing jobs.

We needed a plan both to create the jobs of the future and to put in place employment programmes worthy of their name, to help get people into work. We got neither. So instead, the OBR predicts that we are on course to see unemployment rise to 6.5%, with more than 2 million people out of work. What is the Secretary of State choosing to do, just at the moment that the furlough scheme is set to end and joblessness peaks? She is going to cut £20 a week from social security, right when people need it most. She is going to take our out-of-work support back to the lowest level since the 1990s—to cut the lifeline. Is she happy with the Chancellor’s decision to extend the uplift to universal credit by only six months? Does she believe that that is in the best interests of people in this country, both in and out of work, who rely on that money? Is she happy with the decision to give those on working tax credit a lump sum of £500 and then nothing further? I ask, because she has previously said that there were big downsides to a one-off payment, and that previous experience is that,

“a steady sum of money would probably be more beneficial to claimants and customers”.

While we are focusing on the holes that the right hon. Lady’s Government have torn in our safety net, can she explain why her Government have chosen to cut statutory sick pay in real terms next year? It was already at one of the lowest levels in Europe, and her colleague the Health Secretary has already admitted he could not live on it. It has quite clearly acted as a major barrier to people’s self-isolating when required, as the Government tacitly admitted by bringing in a whole new payments system, with its own problems. So why on earth would the Government cut that support back even further in the middle of a pandemic?

Sadly, that is of a piece with the Government’s failure to understand what so many people are going through right now. The cut to universal credit that looms in six months’ time is just one part of a triple hammer blow that the Government are hitting families with this year. They have also frozen the pay of our key workers for everyone earning above £18,000—a real-terms pay cut—and they are forcing councils across the country to hike council tax by up to 5%.

The Labour party is clear on this: this Budget was not the time for tax rises. That view is shared by a range of economic experts, from the International Monetary Fund and the OECD internationally, to the CBI here in the UK. A triple hammer blow of tax rises and pay freezes now and a social security cut later in the year is not only incredibly unfair on families who have gone through so much, but economically illiterate. It means that those families will be forced to tighten their belts, to spend less in small businesses and on their high streets, and the recovery will take longer. Of course, that has all taken place while we have seen waste and mismanagement from the Government on an industrial scale—from £22 billion on a test and trace system that has not worked for months, to procurement rules being suspended, and those who have political connections being 10 times more likely to win contracts than those who have not.

Despite that profligacy for some, there is the prospect of further pain to come for others, with the Chancellor’s decisions yesterday combining with others since the start of the pandemic to mean £14 billion-worth of cuts to planned public service spending starting next year, rising to £16.5 billion after that.

The Chancellor promised “openness” and “honesty” at this Budget. Well, let me ask the Secretary of State for some openness and honesty now. Where are those cuts going to fall? Will they be felt in fewer police officers, fewer further education opportunities for young people, poorer quality social care for the elderly? What action will the Government take to protect people when their income tax personal allowance is frozen next year, especially once the right hon. Lady’s Department has taken away £20 a year from social security, when many of those in the public sector will have seen their pay frozen, when many other people’s wages are continuing to stagnate, and when council tax has, of course, increased? Will her Government be ready to look at this issue again in the next Budget if required? Why are her Government scheduling the freezing of the personal allowance to take place before increases in corporation tax?

People have a right to know what is waiting over the horizon, because it looks an awful lot like what has come before. It looks an awful lot like a return to a failed economic model that saw us end up with 3.6 million people in insecure work, 4 million children living in poverty, and one in four families with less than £100 in savings. That economic model failed even by its own measures. Severe and repeated cuts to our public services did not result in the Government meeting a single one of their legally binding fiscal targets. They did not stop national debt rising and nearly doubling before the pandemic hit.

We cannot go back to that broken model, with its crumbling foundations. The British people will not accept it. That is why the Budget should have been a moment to lay the foundations for the long term, with a relentless focus on supporting new jobs across the entire UK, supporting our high streets to thrive, protecting family finances, and backing our key worker heroes, but here the Government were singularly lacking in ambition. Labour had called on the Government to support the creation of 100,000 new businesses over the next five years, to harness the UK’s entrepreneurial spirit and set us on the path for growth. Instead, we got a so-called super allowance for investment.

We all want to see more investment in this country, not least because the Conservatives took us into this crisis with the lowest level in the whole of the G7, but the fact is that the new allowance is just the necessary consequence of the Conservative party finally acknowledging that its 10-year experiment with slashing corporation tax until we were an international outlier has failed. Two years ago, the Prime Minister said that

“every time corporation tax has been cut in this country it has produced more revenue”.

Yesterday’s Red Book told a more accurate story, predicting that the new rate would bring in £17.2 billion a year by the end of the forecast period. That is a damning indictment of a core tenet of Conservative economic policy making for the last 10 years. The fact is that by moving the rate back up in two years’ time, aligning us with our international peers, as Labour has long called for, the Chancellor has created a cliff edge that might otherwise have prompted firms to delay investment and further damage the recovery. Action to incentivise and protect investment right now is essential; it is not innovative.

The Chancellor’s grand plan for our future recovery had two further planks, of course: the levelling-up fund and freeports. On the first, we have once again seen the Government’s true colours. They have ridden roughshod over the principle of devolution by taking away control from Wales and Scotland to determine how money can best be spent in their nations, and devised a rating system that miraculously sees the Chancellor’s own constituency, and that of the Communities Secretary, placed at the front of the queue for funding. What people right across this country need is investment in their communities, based on local need, guaranteeing local opportunities and jobs and involving local businesses in the supply chain—not largesse handed out at the whim of Conservative Ministers in Whitehall.

Eight freeports do not add up to a grand plan for our economic future. They are not the silver bullet that the Chancellor would like them to be. There is a strong chance that they do not create new economic activity overall, but instead just move it around, which might be good news for those within a freeport area, but could be bad news for those who live nearby and see local economic activity drain away, and with it jobs and opportunities. We risk more regional economic inequality, which has already risen after 10 years of Conservative Government. On the subject of inequality, yet again the Government failed to provide an equality impact assessment alongside the Budget.

The British people deserve better than this. They deserved a Budget to put our country on the road to recovery; a Budget to rebuild the foundations of our economy; a Budget with the NHS and social care at its heart; a Budget that protected the finances of families across the country who have sacrificed so much over the last 12 months; and a Budget with a relentless focus on jobs, getting people back into work and supporting the jobs of the future—not a Budget from a Chancellor without a plan who has learned nothing from the last year, nor the last decade, and who did nothing more than paper over the cracks, with nothing more to offer than the same tired policies that have led to us suffering the worst economic crisis of any major economy.