Budget Resolutions and Economic Situation

Debate between Chuka Umunna and Paul Scully

Tuesday 14th July 2015 Commons Chamber

[Mr Umunna]

That is quite right. The problem with Conservative Members is that they just lump everyone into the same bracket. Anyone who is in receipt of support is told, “It’s your fault. You’re not working.” The thing about tax credits is that they help to make work pay, but that seems to be lost on Government Members—

[Paul Scully (Sutton and Cheam) (Con)]

rose—

[Mr Umunna]

Although perhaps it will not be lost on the hon. Member for Sutton and Cheam (Paul Scully). Let us see.

[Paul Scully]

The hon. Gentleman mentioned welfare changes. Does he agree with his interim leader that Labour should support a number of the welfare changes that we are proposing?

[Mr Umunna]

We are very clear that, in principle, we accept the benefit cap. In respect of the overall changes to tax credits, I have just made a comprehensive argument to illustrate the problem with those. This is not just about the overall tax changes. I will come on to talk about the withdrawal of support for students in poorer households, which the hon. Gentleman is going to vote for, and about other matters. It is for all those reasons that we cannot give our overall support to this Budget.

Ultimately, the best way to cut the deficit and the debt is to ensure that we have better-paid jobs, which will increase tax receipts and reduce people’s need for extra support from the state. We are among the countries with the highest incidence of low-paid work in the developed world. We come fifth in the rankings of the OECD economies in that respect. We have to change that by rebalancing and restructuring our economy through the active prosecution of industrial strategies—a term that the Business Secretary seems to have a problem with. Now is not the time to junk the approach that started under the last Labour Government and that his Liberal Democrat predecessor sought to continue. Now is the time to move up a gear on industrial strategy if we are to achieve the necessary rebalancing. I say this because, in fairness to the Government, they started with good intentions and sought to rebalance the economy, with their Liberal Democrat partners, from 2010.

I am happy to acknowledge—and have done so publicly—that rebalancing was something that the Major Government failed to do and that we failed sufficiently to address in office, in spite of our many achievements. Our economy was one with too few savings; it was also too concentrated in too few sectors and regions of the UK, and it was based too strongly on cheap credit. The problem is that the current recovery has those same weaknesses that have plagued British recoveries for decades: productivity growth has been absent, as the Business Secretary mentioned; our export performance remains lacklustre; output depends on private consumption; household debt is rising; regional imbalances persist; and investment in innovation and research and development lags behind that of our competitors. I am not at all convinced that the Budget will reverse those weaknesses.