Budget Resolutions

Bim Afolami Excerpts

Thursday 12th March 2020 Commons Chamber

[John McDonnell]

That is an extremely important point. For those of us who remember the social fund, it was a resource that many of our constituents fell back on in times of need. It did give them the support they needed, and in many ways it was administered relatively well. It got resources to the people with needs, and it did so with minimal costs.

The Government urgently need to provide the certainty that the public deserve on all these matters. Our worry is that, because this package does not at the moment appear to be comprehensive, it ultimately will not make us all safer, and it may put people at risk, as especially those in low-income groups may have to make the very difficult choice, as I have said, between health and hardship.

Although it has been reported that there has been some communication between Finance Ministers internationally, it is certainly not clear whether it is of the scale or depth of co-ordination in, for example, the crisis in 2007-08. As a result, whatever statements have been made have not had the effect of steadying markets or reassuring people more generally that, basically, there is an internationally agreed strategy to address the economic consequences of this emergency.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Does the right hon. Gentleman agree that the co-ordinated action that has taken place between the Treasury and the Bank of England could now be used as a model to show our international friends and partners how to do it, so that we can build on what we have already done?

[John McDonnell]

That is an extremely valid point. The co-ordination between the Bank of England and the Treasury is an example of what could be followed elsewhere, and it is being followed in some areas. However, the issue for me is that we can develop a United Kingdom strategy or an individual country strategy, but we are dealing with a virus that respects no borders. It is a global contagion now—a pandemic—so there needs to be international co-operation. What demonstrated the lack of international co-operation was the Fed cutting rates one week and the Bank of England cutting rates the following week, and the Fed cut had no impact whatsoever.

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[Bim Afolami]

I agree with much of what the right hon. Gentleman says, but does that not show—because this is such a new phenomenon and such a new difficulty, and every country is struggling to find a policy response to it—that we may not have used the right tools? What the Treasury, the Bank of England and all our international partners are now having to do is to figure out what the right tools are, and we have to work together to try to figure that out.

[John McDonnell]

The hon. Gentleman makes exactly the right point. Not everybody supported the cut in interest rates, but the most important statement from the Bank of England was about the mechanisms with regard to the banks and lending, and about making sure that liquidity continues.

The point I am making is that, when we are dealing with what is in effect a global crisis, individual solutions in individual countries are not as effective as global co-ordination. I will give an example. Whatever criticisms people may have had of Gordon Brown’s individual policies during the banking crisis—I was here then, and actually I was giving a running commentary from the Back Benches, which perhaps at times was not welcome—no one can question the international leadership that he showed. There was a focus on and determination in bringing people together, and he brought to this crisis a mechanism by which, through the different international bodies, world leaders met and agreed a global strategy. Whatever people think of the outcome or about the merits or demerits of quantitative easing and so on, it did send out a message, and the markets eventually stabilised. I regret that we have not seen such a political and diplomatic leadership commitment or, indeed, such managerial ability from the Prime Minister or the Chancellor as yet.

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[John McDonnell]

I fully concur with the right hon. Gentleman. The various international vehicles that we could mobilise are available to us, and we just need to do it now. It needs to be done at a senior level, in a way that sends out a message of determination across the globe to people and families, but also to the markets. We need to ensure that this medical crisis does not create the long-term recession that some are predicting as a result of its global implications. I will now move on from the coronavirus.

In addition to the coronavirus, we face other emergencies, and we must not lose sight of the two other crises that we face. One is the crisis in our public services—it is a social emergency—with the levels of poverty and inequality in our society. The other is of course the existential threat of climate change. I have to say that yesterday’s Budget failed to address the social emergency. We have discussed it on the Floor of this House before, but this social emergency sees 4.5 million of our children living in poverty, with 70% of those children living in households where an adult is in work. We have—I do not know how else to describe it—a crisis of in-work poverty that perhaps we have not seen for generations in this country.

I have to say that there was nothing in the Budget to relieve the hardships inflicted on our community by universal credit, the bedroom tax and, especially for disabled people, the brutality of the work capability assessments undertaken against them. In fact, the Government’s own table accompanying the Budget shows that the bottom 10% fare the worst as a result of tax decisions made in this Budget and the last spending round, which cannot be right. It cannot be right. It states that the bulk of the benefits are flowing to higher paid households. Yesterday some people were saying that this could have been a Labour Budget, but whoever said that was not looking hard enough at who wins and who loses in it. I believe that not one family will be lifted out of in-work poverty because of yesterday’s announcements. Yesterday we again heard the Government’s aspiration to get the national living wage to two thirds of median earnings, but that is not a real living wage; it is an aspiration for four or five years’ time. Some may also have seen the small print, which says, “if economic conditions allow”.

Worryingly, there is nothing of any substance in the Budget to tackle the long-term crises in our public services. Let us take the justice system, for example. In prisons there has been

“a sharp rise in deaths, violence, self-harm”

and suicides, which can all be

“linked to cuts”.

That is not my statement; it comes from the Institute for Government. The House of Commons Justice Committee has pointed to a £1.2 billion gap in justice funding, so the small sums in this Budget, such as £175 million for prison maintenance, just will not cut it. Not one prison officer will be safer on the landings because of this Budget, yet in some of our prisons, those people put their lives at risk on a daily basis.

On domestic violence, according to Women’s Aid, 10 domestic abuse victims are turned away from women’s refuges every day because of a lack of space. This Budget needed to commit £173 million to ensure that no survivor is turned away. It has not done that, and without that funding, the measures in the Domestic Abuse Bill simply cannot be delivered. Not one women’s refuge can feel assured that it will get the funding it needs from this Budget.

The National Education Union said that class sizes are rising, subjects are being dropped, and inadequate pay is making the education staffing crisis worse, but there will be few teachers from whom the pressure will be lifted as a result of this Budget.

On housing, the sums earmarked for rough sleeping are totally inadequate, and we know that at least £1 billion is needed to reverse cuts in homelessness services. Yesterday, the Chancellor said that he would end homelessness, but we heard that from the Prime Minister who, when he was Mayor of London, said that rough sleeping would be ended in London by the 2012 Olympics. Rough sleeping doubled during the Prime Minister’s second term as Mayor.

It goes on: not one library will be reopened as a result of yesterday’s Budget. Not one youth centre will reopen; not one Sure Start centre.

[Bim Afolami]

Forgive me if I have misunderstood the right hon. Gentleman, but I think that £13 million is going into community libraries across the country, and that will make a big difference. Will he address that point?

[John McDonnell]

I just say to the hon. Gentleman that that sum is minuscule in comparison with the cuts that have gone on. This will not be some immense revitalisation of our library services—far from it. Indeed, a lot of that will be swallowed up by the deficits that local authorities have developed by trying to maintain their existing services. I doubt there will be any new libraries; this might perhaps allow some existing libraries to keep their heads above water, but even that is difficult to envisage.

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[Bim Afolami (Hitchin and Harpenden) (Con)]

I welcome this Budget, particularly the fiscal stance adopted by the Chancellor and the Treasury. It is a well-targeted fiscal stimulus for productive capacity in the British economy and for dealing with the demand and supply difficulties we have with coronavirus, and I welcome it. In particular, as I said in intervening during the shadow Chancellor’s speech, I welcome the careful co-ordination between the Bank of England and the Treasury. That should be happening across the world and other countries should follow this Government’s lead.

There has been significantly increased investment in this Budget. Many people are saying, “Gosh, we’re spending all this money—where has it come from?” It is a very clever Budget, in my judgment, because it is less profligate than it appears. Yes, borrowing has increased, but if we look at where the money comes from and at the debt interest payments that the Government will make over the next few years in servicing the debt, we see that the debt interest to revenue ratio is dropping from 4:1 to 3:1. We are leaving corporation tax at 19%, and that will also give the Government more money in the years to come. More importantly than any of that, our growth is holding up—it is one of the highest in the OECD—because of the careful management of the economy under this Government over the last few years. This is a prudent Budget, with prudent investment for the future.

This Budget deals with three big challenges: it starts to deal with our historical challenges, it deals with our present challenge of coronavirus and it starts to deal with our future challenges. On our historical challenges, I was reading—it is not common, always, in this House—Lord Hennessy’s book “Winds of Change”. In that book on the early 1960s, which I urge all Members to read, he quotes a Cabinet paper written by Harold Macmillan in December 1962. In it, the former Prime Minister said that the two biggest challenges for the British economy were productivity and the regional imbalance between north and south. I mention that because these are very difficult, long-term problems that this Government are determined to tackle, and I welcome the measures in this Budget to do so.

Those measures include, in the modern day—the Government did not do this in quite the same way in the ’60s—our investment in R&D, with the fastest growth that this country has ever seen, and our investment in infrastructure, which has already been well trailed by many Members. In particular—this has not been much talked about—there is our skills fund. Investing in human capital is just as important, if not more important, than investing in physical capital, and that is what this Budget does.

Those are our historical challenges—now on to the present challenges. Our most immediate present challenge is obviously the coronavirus pandemic. The Government have stood entirely behind this country, and they are leading the country through what is obviously a very difficult time. It is important for the House to appreciate how significant economically the coronavirus really could be. It means everything from reduced goods imports from China and reduced spending by Chinese visitors to other countries to damage to supply chains outside China and disruption to demand not just in the United Kingdom but in our other trading partners—whether Europe, the west, Asia, Africa and across the world. The impact of coronavirus economically could be quite significant, and this Government, with the big bold bazooka that the Treasury has wielded—I am sure I read that somewhere—have shown their absolute determination to make sure that this country is in the best possible position.

We also have future challenges that this Budget starts to deal with, particularly on business rates. The measures we have taken on business rates are partly temporary to deal with the immediate difficulties for small and medium-sized businesses in the retail sector. However, the review that we are going to have to complete by the end of this year is really the best opportunity this House and this country have had for a very long time finally to reform what I believe to be one of the worst taxes in our tax system. We have a chance to do that now, and we should grasp this nettle. If we can achieve that, I think that retailers, and indeed businesses all across this country, will thank us for generations.

An American psychologist called Joseph Luft invented the phrase that was popularised by Donald Rumsfeld during the Iraq war, when he spoke of “known knowns”, “known unknowns”, and “unknown unknowns”. In politics we often deal with known knowns, and known unknowns, but at the moment, with coronavirus and the difficulties across the globe, we are dealing with unknown unknowns. I am confident that the Budget sets us in the right place to deal with those as best we can.

[Several hon. Members rose—]