Charter for Budget Responsibility

Jim Cunningham Excerpts

Tuesday 13th January 2015 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

The Chancellor said that he was not going to balance the budget on the backs of the poor. Yet since 2010 there have been 24 tax rises that have meant that ordinary families are paying £450 a year more in VAT. Households will be £974 a year worse off by the time of the next general election because of tax and benefit changes alone since 2010. The Chancellor cut the 50p rate to 45p, which gave an extra £3 billion not to the poorest but to the richest 1% in the country, meaning that someone earning £1 million will receive a tax cut of over £42,000 a year. The Chancellor has opposed a mansion tax to improve the NHS, but he has hit the poorest and the most vulnerable in our society with the bedroom tax. Not on the backs of the poor? I think not. All in this together? I think not.

In fact, the Conservatives have pencilled in spending cuts to public services in the next period that are 30% greater than those they have already introduced. The hon. Member for Wolverhampton South West (Paul Uppal) said that Labour wanted to take the country back to the 1930s. He should check the figures. In fact, it is his own party that will see the level of public spending as a proportion of GDP reduced precisely to the level it last was during the great depression, the way out of which was not to cut more taxes but to make sure that the economy grew. The Government have now announced £7 billion of unfunded tax cuts. We would like all our parties’ manifesto commitments to be scrutinised by the Office for Budget Responsibility, but the Chancellor has set his face against that. That is hardly surprising, because his failure is significant.

[Mr Jim Cunningham (Coventry South) (Lab)]

Will my hon. Friend give way on that point?

[Barry Gardiner]

I am sorry, but I cannot because of the time limit. I am conscious that other Members want to speak.

In 2010, the Prime Minister told the CBI:

“In five years’ time, we will have balanced the books.”

Some might say, “Surely that was before the general election—before he saw the books”, but it was not: it was on 25 October of that year, well after the general election. The Conservatives have broken that promise, and borrowing in 2015 is set to be over £75 billion. The Chancellor is now borrowing £200 billion more than was planned in 2010.

This failure to deliver on the central goal is fundamentally linked to the Government’s failure to tackle the cost of living crisis. Wages continue to stagnate for very many workers. Too many of the jobs that are being created are low paid and insecure; they are not jobs in high-paid, high-productivity sectors. As a result, our public finances have been weakened. Low and stagnant pay means that tax receipts are £68 billion lower, while receipts from national insurance contributions are £27.3 billion lower across the same period. Low pay combines with higher housing costs and failure to deliver benefit reform to drive social security costs higher. This Government are now set to spend £25 billion more on social security than they planned five years ago. The Government who came in to reform social security because it cost too much are spending £25 billion more than they said they would.

In the 2014 Budget statement, the Chancellor said that he wanted a vote on an absolute surplus. The country understands that there are few, but significant, levers that one can use to sort out the deficit: one can vary spending, vary taxes, and vary borrowing. However, varying spending and taxes can vary the level of tax receipts the Treasury gets in, and that level determines how much one needs to borrow to balance the books. The Chancellor said that

“in this Budget all decisions are paid for. Taxes are lower but so, too, is spending”.—[Official Report, 19 March 2014; Vol. 577, c. 784.]

He should have gone on to say: “But so too are tax receipts, and social security spending is up.”

The Government have failed on their fiscal mandate, but we should look at not just the Red Book but the green book, because growth cannot be built by eroding our natural environment—

--- Later in debate ---

[Mr William Bain (Glasgow North East) (Lab)]

Nothing says more about why we need change in 16 weeks’ time than the Government’s cynical attempt in this debate to divide Parliament and the country by tactical tricks and wheezes as a cover for their failure on the deficit and their inaction on the other big challenges that face our country: wages, productivity, inequality and banking reform.

This is a debate that the Chancellor has been plotting for months as his election battleground, but just last week we saw his attack on the fiscal policies of the Labour party collapse within hours. In 2010, he pledged to eliminate the deficit within five years, but now, having borrowed £200 billion more than he planned, he presents a watered-down charter for budget responsibility in a desperate attempt to ensnare the Opposition on tactics. This is a Chancellor who makes billions of pounds of unfunded tax commitments but refuses to allow the impartial OBR to cost all parties’ election spending promises. Today, his guile has deserted him and his economic failure has rebounded on him. From iron Chancellor to boomerang Chancellor in just five years: Britain surely deserves better than this.

When the OBR slashes its forecasts for receipts from income tax and national insurance contributions as comprehensively as it did in December, we have the proof that the Government are taking the country down the wrong path. In December, the OBR downgraded its forecasts for income tax receipts and national insurance contribution receipts for this and the next four fiscal years by a staggering £39 billion and £53 billion respectively, compared with its forecasts from March 2014. The bulk of that shift was down to much lower than predicted wage growth. That shows that our economy under this Government is simply not generating the scale and number of higher wage, higher skilled jobs that modern Britain needs to succeed in the world. That failure on skills and prosperity is led by a Chancellor who has been the worst for the nation’s pay packets since the 1870s.

[Mr Jim Cunningham (Coventry South) (Lab)]

When we look at the general trend over the past five years, we can see that the Chancellor thought that the problem was confined to Britain. He has consistently made excuses every time his targets have not been met because the Tories cannot face up to the fact that the crisis started internationally, particularly in America, but unless they face up to that, they will never get the economy right. They will tinker with it, but they will not get it right and as a consequence the cost of living has gone up and wage values have gone down by 6%.

[Mr Bain]

My hon. Friend makes an incredibly powerful point. The historic weakness of wage growth under this Government, the disastrous levels of productivity, the growth of insecure work, the failure of the Government to meet their targets on export-led growth and the fact this is a country in which the number of apprenticeships fell, rather than rose, in 2013-14 are not factors that any Chancellor who wants to get the deficit down should ignore. Tackling them will be central to any credible plan to get our deficit down and to move forward the living standards of millions of ordinary people in this country.

The reason for this Government’s failure on wages and tax receipts was explained to me by a constituent I met on her doorstep in Ruchazie last Saturday morning. It is important that the voices and experiences of ordinary people are brought into this debate. Her husband works as a security guard and earns barely above the minimum wage. He does not earn a living wage. She told me that life is tougher for her family than it was five years ago. They are working harder, but they have less to show for it. They do the right thing and get up early and go to work, but they have never felt so insecure. They keep going, but they speak for millions of people in this country who have suffered the same fate. In just 16 weeks, they will have the opportunity for change.

Like the Prime Minister chickening out of televised debates, the Chancellor is ducking out of an independent evaluation of our spending proposals because, like the Prime Minister, he knows that he would be the loser. All the Government have left are weeks of cynical tactics rather than a vision of hope for our country, but political stunts are no substitute for a national strategy for increasing our nation’s productivity, increasing the minimum wage over the next few years, restoring the promise of our young people with a credible plan for skills and rising apprenticeships, and making a plan for a fairer economy with rising living standards. If the Government find that task beyond them, they should get ready to move aside because others are ready to offer hope in place of fear in just 16 weeks’ time.