Autumn Statement Distributional Analysis, Universal Credit and ESA

Debate between Jeremy Quin and John McDonnell

Wednesday 16th November 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House notes with concern the £3.4 billion reductions to the work allowance element of universal credit and the £1.4 billion reductions to employment and support allowance; calls on the Government to reverse those reductions; and further calls on the Government to reintroduce detailed distributional analysis for the Autumn Statement and all further Financial Statements, as was done between 2010 and 2015.

On a solemn note, I wish to send my condolences to the family and friends of Debbie Jolly. Some Members may have known Debbie, who was a disability campaigner. Over the years, she provided briefings for many Members of the House of Commons and, through Disabled People Against Cuts, was involved in many of the various lobbies of Parliament. She passed away last week, and I would like to send our condolences to her family and all her friends. We all hoped she would survive long enough at least to see this debate. I pay tribute to her for the work she did.

I want to explain the genesis of the motion that I and my right hon. and hon. Friends have tabled for today’s debate. As we all know, the autumn statement is a week today. Traditionally, we would have held an Opposition day debate and used it to have a wide-ranging debate, second-guessing and commenting on what we predicted would be contained in the autumn statement.

This year, we want to try something different. We want to break radically with that tradition, because next week could be the last chance to head off what is shaping up to be quite a harmful disaster for many low earners and many vulnerable people in our society. For our debates today, we have taken two significant issues that are contained in the Budget plans announced earlier this year by the Chancellor’s predecessor, and which the new Chancellor has the ability and opportunity to intervene upon and, we hope, reverse. The first is the plan to cut the work allowance element of universal credit and employment and support allowance, and for the later debate we have chosen the issue of funding social care.

We believe that the Chancellor, by withdrawing the proposed cuts to ESA and universal credit, would dramatically beneficially impact upon the lives of many, many of our fellow citizens, who are, yes, low earners, but many of whom, through their disability, are also often the poorest and most vulnerable in our society. We want to see today and, yes, over the next week, whether we can assemble across the House a coalition of pressure that can decisively influence the Chancellor to think again.

I welcome the Back-Bench debate that has been secured for tomorrow, which I believe will contribute to forming that coalition; I certainly believe and hope that we can succeed in doing so. So the appeal to hon. Members today and in the coming week is to do all we can to prevail upon the Chancellor to halt the policy of cuts to universal credit and ESA contained in the Budget introduced by the former Chancellor, which are planned to come into effect on 1 April.

Before I come to the grounds for making this appeal to the Chancellor, it is important to understand the origins of the proposals, and this goes to the heart of the autumn statement process. I believe their origins lie in the mistake by the last Chancellor of imposing a fiscal framework on his colleagues that was simply impractical, given the economic circumstances that we were facing, and certainly what we are about to face. If the fiscal framework is wrongly set and, importantly, if it is so inflexible that it cannot reflect the realities and challenges of the economy, decisions on both tax and spending equally fail to reflect the economic realities and meet the new economic priorities. I believe that in this instance, the fiscal framework imposed by the former Chancellor was so inflexible, and unworkable in the end, that it totally failed to meet the economic targets he set for it. It is also vital to understand that the former Chancellor’s fiscal framework imposed on his colleagues’ Departments unrealistic constraints that are undermining their ability to achieve their own policy goals.

[Jeremy Quin (Horsham) (Con)]

The reality is that the fiscal framework did see a significant reduction in the annual deficit. That is a good thing for this country. I have not seen anything from Labour Members to suggest that they would have been able to do anything like that.

[John McDonnell]

The hon. Gentleman clearly has not been listening. We introduced a fiscal credibility target, which would have built in the flexibility that we need—and actually, which his colleagues would have benefited from as they sought to deliver the goals set out in the manifesto upon which they were elected. That is the critical problem—that this fiscal target has become unworkable. Next week, most probably, we will see that not only will it be reset, but large elements of it will be scrapped; and some of those political disputes within the Government will be seen to have been completely unnecessary if only the Chancellor, at that stage, had listened not just to us, but to some of his own colleagues.

On the Government’s own economic metrics, the fiscal framework has failed. I remind the hon. Member for Horsham (Jeremy Quin) that the former Chancellor’s target was to eliminate the deficit by 2015. The deficit remained at over £45 billion in the first six months of this financial year. I remind the House that his target was to reduce the debt. The debt now stands at £1.7 trillion and has increased over the past six years, according to the latest estimate, by £740 billion. I believe that the biggest failure was to ignore the needs of the real economy and use the fiscal framework to constrain investment. The failure to invest on the scale needed to modernise our economy resulted in stagnating productivity.

In the face of all the evidence that the fiscal framework was not working and not achieving its target, the decision to set a target for the framework not just to eliminate the deficit, but to produce a multibillion-pound surplus by 2019-20 demonstrated to many of us how far the former Chancellor’s politics was overriding sound economics. The result of his setting targets even more removed from reality was that he imposed on his own colleagues the task of scrambling round to find a scale of cuts that, in many instances, undermined what chance they had to implement the policies on which they were elected and their long-standing ambitions, some of which could have secured cross-party support.

That was no more evident than at the Department for Work and Pensions. For the Treasury to demand cuts to universal credit that would take, on average, £2,100 out of the incomes of people who were doing all that was asked of them—working all they could to come off benefits, bringing up their families, contributing to society—flew in the face of all that the universal credit system was meant to be about. The same can be said of the cuts of nearly £30 a week to employment and support allowance. That is an extremely significant cut to the incomes of disabled people who are also doing all that has been asked of them—seeking work to lift them off benefits, and overcoming their disabilities and conditions.

Charter for Budget Responsibility

Debate between Jeremy Quin and John McDonnell

Wednesday 20th July 2016 Commons Chamber

[John McDonnell]

I will come on to the way in which the fiscal rule implementation has harmed the economy and prevented economic growth, resulting in the slowest recovery from recession in our history, but I shall now press on. I listened—

[Jeremy Quin (Horsham) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

It would be helpful if I could just finish this sentence.

I listened to the Prime Minister’s answers at questions today, which unfortunately suggested that she will largely be sticking to the fiscal approach that has failed so badly. So the uncertainty continues, and until this Government make their plans clear, Britain will be on hold.

[Jeremy Quin]

On the speed of the recovery, we are coming out of the deepest recession that we have perhaps ever known, and I am sure that the hon. Gentleman would recognise the fact that we have recovered far faster than many of our major industrial competitors.

[John McDonnell]

This is the slowest recovery in our history. The last time a date was put on it was 1066. The way in which we are recovering is on the basis of increased household debt, low incomes and insecure jobs. I do not think that any Government should be proud of that record.

Budget Resolutions and Economic Situation

Debate between Jeremy Quin and John McDonnell

Thursday 17th March 2016 Commons Chamber

[John McDonnell]

Let me assure Members that I will give way, but let me proceed a bit further.

As I have said, perhaps the fall in productivity is unsurprising, because productivity is linked to business investment, which should be driving the recovery, but which plunged in the last quarter.

[Jeremy Quin (Horsham) (Con)]

rose—

[John McDonnell]

I will give way in a moment. I can tell the House what happened to business investment forecasts—they were revised down again in this Parliament. None of this should be a surprise for the Chancellor, but it seems that it is. At the autumn statement, he said that he wanted a plan

“that actually produces better results than were forecast.” ”.—[Official Report, 25 November 2015; Vol. 602, c. 1385.]

[John McDonnell]

I will come back to the hon. Gentleman. The Secretary of State for Work and Pensions said this last week about the autumn statement:

“If you can’t forecast more than two months, how in heaven’s name can you forecast the next four or five years.”

That is what we all want to know.

[Jeremy Quin]

Productivity, to which the shadow Chancellor is referring, is also linked to employment. Does he welcome the extra 2.3 million people in work since 2010?

[John McDonnell]

Of course we welcome that employment growth, but we are concerned about the insecurity of that employment. The number of zero-hours contracts has gone up by another 100,000 over the past month, and the insecurity of that employment, unfortunately, is affecting people’s long-term investment plans as well.

Yesterday the Chancellor pointed repeatedly to global economic headwinds as an explanation for his failure. His problem is that we have known about them for a while. Many of us were warning him last summer about the challenges facing the global economy. I spoke about them in this place, as did others on the Labour Benches, but rather than adapting his proposals to deal with the global reality, the Chancellor has charged headlong into another failure of his own making. He has failed to heed our warnings and the warnings of others, he has failed to invest in the key infrastructure that our economy needs, and as a result he has failed to boost Britain’s productivity figures.

The Economy

Debate between Jeremy Quin and John McDonnell

Wednesday 18th November 2015 Commons Chamber

[John McDonnell]

At a time when we are seeking to grow the economy, it seems bizarre to do so by reducing aggregate demand within a local area, which could in many respects bring about a localised recession.

[Jeremy Quin (Horsham) (Con)]

The hon. Gentleman has just agreed with the argument made by the right hon. Member for Delyn (Mr Hanson), so does he not accept that the same argument could be deployed for never cutting the deficit under any circumstances ever?

[John McDonnell]

The whole point of this debate is about political choices. To be frank, we have said to the Chancellor on a cross-party basis in debate after debate that this was the wrong political choice and that he should therefore look elsewhere. I am not asking for the detail of how he is resolving it—we will wait to hear that next week—but I am urging Ministers at least to give us the assurance that nobody will lose out. Families want that assurance now, because of the insecurity that they face.

--- Later in debate ---

[John McDonnell]

Of course we welcome any increase in employment or reduction in unemployment. The problem is that the economy is unsustainable because it is based on rising house prices, borrowing and debt. My fear is that the jobs that have been gained in the past year may be lost in the forthcoming crisis, if we do not take avoidance action.

Andrew Haldane, the chief economist at the Bank of England, has warned that the third wave of the financial crisis, which is breaking out in the emerging markets, centred on China, could have an impact on Britain. Why? Because Britain is the country with the largest exposure to Chinese debt, at $500 billion. Any upset in the rest of the world will, thanks to our extraordinarily large financial system, rapidly make its way here. That is exactly how the last crisis happened, when failures to repay mis-sold mortgages by some people in American society turned into the failure of the entire banking system in this country.

We cannot know what will happen over the next few years. The Chancellor has warned repeatedly of trouble ahead, but surely these challenges are better faced if we have a more balanced and resilient economy that provides real security for all of us. Instead, we have a single-minded fixation on a single target: the 2020 surplus, which no credible economist supports. By clinging on to that so tenaciously, it appears that the Chancellor is putting the needs of his political career ahead of the prosperity of the country.

[Jeremy Quin]

The hon. Gentleman refers to the balance of trade. Part of the impact of that is that our country has been growing. Dividends have gone up 30%. Those who are investing in the UK are taking more money out of the UK because it is growing. We could be investing in places such as China, which are growing faster. Would he ban investment in China? Is that what he is saying? Should that be the result of his concerns?

[John McDonnell]

Part of the problem is that growth has not been high enough. In addition, we have sold off so many of our assets that money is pumping out of this country, rather than being invested in it. We are not making home-grown investments in our own economy, so the money is flowing abroad. That is causing our balance of payments deficit. In addition, our trade, particularly in manufacturing, has unfortunately not picked up on the scale it should have done.

Let me press on, because a large number of Members want to speak. We know, from the drip-feed of announcements, that the Chancellor intends to make swingeing and potentially devastating cuts to Government Departments and welfare spending. Let me make it clear that austerity is a political choice, not an economic necessity. The record of this Government shows that the Chancellor’s political choices are having a devastating impact on people across the United Kingdom. In many cases, his cuts are falling on the heads of those who are least able to afford them. [Interruption.] The Exchequer Secretary is asking for examples, so let us look at local government.

Since 2010, councils have dealt with a 40% real-terms cut in their core Government grant. In adult social care alone, funding reductions and demographic pressures have resulted in a £5 billion funding gap. Where are the cuts falling? According to the Institute for Fiscal Studies, the 10 most deprived local authority areas have lost £782 per household, while the 10 wealthiest areas have lost just £48 per household. Choices have consequences for people’s incomes and lives and the services upon which they rely. As a consequence of the Chancellor’s choices, ordinary people are being left worse off. He has made those choices and still failed to meet his self-imposed fiscal targets, so I pose this question: are the choices that are being made right, moral and fair? If the answer to any of these questions is no, it is self-evident he needs to rethink, and rethink fast.