Charter for Budget Responsibility

Debate between Ed Balls and David Wright

Tuesday 13th January 2015 Commons Chamber

[Ed Balls]

I will give way in a moment, but I want to deal in a bit more detail with the interesting point that has been raised. What is clear not just from the Chancellor’s speech, but from his whole chancellorship, is that—unlike the former Chancellor—he has never really gripped the actual economics of what happens in our economy. He understands slogans, but he does not understand how the economy actually works. Let me explain it.

We all know that the Chancellor flatlined the economy for two or three years after 2010. Now, although the economy has recovered, growth has returned and unemployment has come down, the fact is jobs have been created in low-paid, often insecure work. There is lower productivity in our economy, many people are trapped in part-time employment and zero-hours contracts, and, as a result, tax revenues have not come in.

According to the OBR, income tax receipts are a cumulative £68 billion lower than the Chancellor’s 2010 forecast, and national insurance contributions are a cumulative £27 billion lower than he planned. His fiscal failure in this Parliament—which he could not deny when we asked him about it earlier—has occurred not because he has failed to deliver spending cuts or because he has not raised VAT, but because of the underlying way in which the economy works. Because more people are in low-paid work and wages are stagnating, the tax revenues have not come in. It is clear from the Chancellor’s speech that he does not understand the economics of the matter, but that is the truth. I know that the former Chancellor understands it.

[David Wright (Telford) (Lab)]

Is it not also the case that many people who are in work are receiving benefits, and is that not a symptom of the low-wage economy? Given that we are discussing budget responsibility, is my right hon. Friend as concerned as I am about the fact that the Chancellor promised an unfunded tax cut at the Conservative party conference, but is talking about consolidation today?

[Ed Balls]

My hon. Friend is absolutely right. The Institute for Fiscal Studies said

“Of the main parties, Labour has…been the most cautious of the three”

because ours is the only party that has not made unfunded, uncosted commitments to more spending or lower taxes.

Budget Resolutions and Economic Situation

Debate between Ed Balls and David Wright

Thursday 21st March 2013 Commons Chamber

[Ed Balls]

Falling living standards for families in the hon. Gentleman’s constituency, rising child poverty and families in work seeing their tax credits cut—that is not theatre; that is the real world. As for the national insurance cut for small businesses, that is point 5 of Labour’s five-point plan for jobs and growth. That is the reality.

[David Wright (Telford) (Lab)]

Talking about theatre and the movement of money between financial years, is it not interesting that hospitals in Shropshire have been cancelling operations? One of the chief nurses says that is because of funding cuts in the NHS. I wonder whether it is because of the Chancellor’s fiddle.

[Ed Balls]

The OBR document is very interesting. It sets out the unusual underspend Department by Department. I do not think that we have yet heard the full truth about what has been going on in the Treasury: the pressure applied in one year to cut spending or to move it to the next year just to fiddle the borrowing figures. I think that we will discover the truth in the coming weeks. For a Government who attack businesses and make late payments to small business, they are the late payment Government.

Has the Chancellor learned nothing over the past 12 months? He used to say that he was sticking to his plan in order to secure the recovery, but then we had the double-dip recession. He used to say that he was sticking to his plan to get the deficit down, but his spending cuts and tax rises have choked off the recovery. As the OBR revealed yesterday, the deficit was basically unchanged last year and will remain unchanged this year and next. Then all he could say was that he had to stick to his plan in order to keep his treasured triple A credit rating, but he has even lost that. The only reason he will not now change course is to avoid his own political humiliation, and that is no reason to stick to a failing plan.