Budget Resolutions

John McDonnell Excerpts

Thursday 9th March 2017 Commons Chamber

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

I hope that the good humour continues, Mr Speaker, but we will see. I admire the hon. Member for Broxbourne (Mr Walker) for his creativity at all times in raising matters.

You and I, Mr Speaker, have watched Budget debates in this Chamber for more than 20 years now. As you probably know, I have referred to the iron law of Budgets: the louder the cheers for the Chancellor on Budget day, the greater the disappointment three days later at the weekend. I am revising that iron law—this Budget did not last three days; it lasted less than three hours.

I will address some of the main policy announcements in the Budget, but I believe that overall the Chancellor’s statement evidenced a fundamental difference between the values of our two parties. What we saw yesterday was a Conservative Chancellor boasting about tax cuts to corporations and the rich while refusing to effectively tackle the crisis in social care for the elderly, refusing to properly fund the NHS, and increasing the national insurance burden on many middle and low-income self-employed earners, while at the same time breaking a clear manifesto promise.

Our values are these: we believe in a fair taxation system, in which everybody, no matter how rich and powerful they may be, pays their way; and we believe that through a fair taxation system and collective endeavour, the elderly and the disabled should be cared for, the sick should be treated and children should be educated to develop their talents to the full. That was not what we saw in yesterday’s Budget statement. In addition, we adhere to manifesto promises.

On the state of the economy, I saw from the Chancellor’s press briefings that all the talk before the Budget was about the aim of providing a positive backdrop for Brexit. That is not the real-world experience of millions of people. Yesterday the Chancellor boasted about economic growth, but what is positive about Britain being the only large developed economy in which wages fell when economic growth returned? What is positive about rising GDP if most people are worse off? What is positive about the national living wage being revised down again? What is positive about yet more downward revisions to wage forecasts?

How can anyone describe an economy as “match fit”, as the Chancellor did, when people in that economy are seeing their standard of living fall and fall again? Wages are still worth less than they were nine years ago. The disposable incomes of non-retired households are less than they were before the financial crisis. The official forecasts are clear: working people, as a result of the Government’s choices and this year’s Budget, will be worse off. According to official forecasts, they will be £500 a year worse off in 2021 than was predicted in the autumn statement. Average earnings are expected to be £200 lower by 2022 than they were before yesterday’s Budget. According to the Resolution Foundation, average earnings are set to return to their pre-crisis peak only by 2022 at best.

The Chancellor claimed in one press release that ours is an economy built on resilience; it is, to be frank, an economy built on sand. The fact that unsecured borrowing by households has shot up to levels not seen since before the financial crisis should be a warning sign to us all. Office for Budget Responsibility forecasts show unsecured household lending rising to a shocking 47% of household income by the end of the decade. For many people, such extra borrowing will be done out of desperation—as prices rise but wages fail to keep up, many people dig themselves deeper into debt just to get by. The Chancellor says that he does not want to put the economy on a credit card, but that is exactly what he and his policies are doing—forcing ordinary people into dependence on their credit card.

There is no resilience in an economy that is failing in its fundamentals. Business investment fell over the past year for the first time since the depths of the last recession. Companies are cancelling planned investments because they are so terrified of what the future holds under this Government, particularly with the risk of Brexit. They have seen seven wasted years pass without the investment or industrial strategy that they need from the Government, and they are now fearful of the Government’s plans for Brexit.

Productivity growth—the engine of prosperity—has stagnated. We now lag far behind similar economies. A typical British worker takes five days to produce what their German or French counterpart produces in four. The Chancellor, in a moment of lucidity, recognised the scale of the problem, but he failed to provide any new funding to deal with it. Worse than that, public sector investment will be £2.3 billion less over the next five years than was planned in the autumn statement.

Yes, people celebrated International Women’s Day, but while there were calls for a Budget that works for women, they have been ignored. Women are still bearing the brunt of this Tory Government’s failed austerity agenda, with 86% of cuts falling on women—that figure is unchanged since last year—and the Government have yet again ignored the hundreds of WASPI women who turned up yesterday to lobby Parliament. Things are just as bad as ever for women under this Government. Labour calls on the Government to publish urgently an analysis of the true impact on women of their Budgets and spending announcements, and to explain how they intend to reverse this disproportionate impact. Under a Labour Government, all economic policies will be gender-audited to ensure that we have an economy that works for all.

Let me turn to some of the policy announcements in the Budget, such as on self-employment. The Chancellor’s decision to push a £2 billion tax rise on to low and middle earners who are self-employed makes little sense.

[Sir Desmond Swayne (New Forest West) (Con)]

I would be the first to say that we need to find new ways to reward entrepreneurs and risk takers in our tax system, but does the right hon. Gentleman accept that the difficulty is that at present there is no way of distinguishing between such a person and a professional such as a journalist who has sought an arrangement with their editor to be paid as self-employed? On the low-paid, 60% of people who are self-employed will see a reduction if we take into account the change in class 2 contributions.

[John McDonnell]

The right hon. Gentleman raises a valid point about bogus self-employment. We thought that the Chancellor might have mentioned that in his statement, but he never referred to it. That needs to be addressed, because many people are forced or manipulated into self-employment. Bogus self-employment needs to be tackled, and we have campaigned for that along with a number of organisations, including several trade unions and the Federation of Small Businesses.

We saw middle and low earners hit yesterday. Someone on £20,000 will lose about £250 a year, while someone on £40,000 will lose nearly £650 a year—those are the consequences. I do not think that those people are high earners; they are middle to low earners. They should be protected, particularly at a time when, to be honest, there is frailty in the economy, with consumer spending just dipping on the latest figures. Those at the forefront of the impact of the dip in consumer spending are largely existing sole traders and small traders—the window cleaners, drivers and others—and they will be hit. The policy is wrong, and this is also the wrong time to put their careers and jobs in jeopardy.

The justification for yesterday’s policy just does not stand up. The Government cannot demand more taxes from people without offering something in return. The Labour party are fully behind looking at how the labour market is changing—the right hon. Gentleman is right about that—and the shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), spoke last year about the principles that should guide such changes. We have regularly raised the problem of bogus self-employment.

[Norman Lamb (North Norfolk) (LD)]

Does the right hon. Gentleman share my view that a lot of the people on low pay in self-employment get no paid holiday and no paid sickness absence, and have no protection against termination of employment?

[John McDonnell]

I will tell a quick anecdote. I was on the tube a month ago when a worker got on and sat down next to me. He was in his overalls as he was on the night shift. He had worked for Tube Lines before the company went bust. He is a rail maintenance worker, which is a skilled job, but he is now employed by an agency and does not know whether he will have work tomorrow, the next day or whenever. He has no sick pay and no holiday pay, and if he does not turn up for work, he does not get paid. He has to pay an accountant to deal with the tax on his salary payments. At the same time, he can be exploited by being sold on from agency to agency. That is not real self-employment; that is the exploitation of someone who has been forced into self-employment. Such issues must be addressed. This insecurity is not just because of the gig economy, but because of what has happened in recent years, with people being forced into self-employment. Those issues were not even addressed yesterday. There is a problem of employers shirking their responsibilities by forcing staff into self-employment.

Yesterday, we got not a package of measures designed to address the problems of the modern world of work, but a single, unilateral tax hike for the self-employed. People earning over £8,000 will be hit. The Chancellor tried to disguise that by bundling the measure in with the re-announcement of abolishing class 2 national insurance payments, but yesterday’s Budget documents are clear that this is a tax hike of £2 billion, targeted at the self-employed. Increasing the taxes paid by self-employed people does not move them to parity with the employed, because they do not receive the same benefits as the employed. The Chancellor says that he is concerned about the gap between different contribution rates, but the Labour party does not believe that the burden of closing that gap should fall on some of the lowest paid workers who are also those in the most precarious position in our society.

[Mr Steve Reed (Croydon North) (Lab)]

Does my right hon. Friend agree with the Conservative Croydon councillor, James Thompson, who tweets:

“Disgusted by this so-called Conservative government hitting the self-employed”.

[John McDonnell]

I find it interesting that the response to yesterday’s statement has been anxiety right across the political spectrum. I hope that the Chancellor is listening. I hope that the Labour party and others in the House will combine with some Conservatives who are concerned and that we will force the Chancellor to think again.

The Chancellor says that he is concerned about the gap between different contribution rates. We do not believe that the burden of closing the gap should fall on some of the lowest paid workers, but that is the consequence of yesterday’s decision. The Government are making minicab drivers pay more. They are taxing Uber drivers while at the same time cutting the taxes of Uber itself. A hairdresser earning £15,000 a year will be £137 worse off as a result of yesterday’s measures. That cannot be fair—it just cannot be right.

And, yes, this is a manifesto betrayal. There was a promise in the manifesto and it read like this:

“This means that we can commit to no increases in VAT, Income Tax or National Insurance. Tax rises on working people would harm our economy, reduce living standards and cost jobs.”

That was not me or Labour MPs, but the Tory manifesto. The Government have been trying to muddy the waters by talking about a Bill they brought forward in 2015. That Bill sought to cap class 1 contributions—Labour supported it—but it did not even allude to the idea that any other classes would see increases. To quote the current Chief Secretary to the Treasury speaking in Committee:

“we do not have further proposals other than those that we previously set out”.––[Official Report, National Insurance Contributions (Rate Ceilings) Public Bill Committee, 27 October 2015; c. 16.]

Some have tried to portray yesterday’s announcement as progressive, but what is progressive about raising taxes for low-paid drivers while the Government go ahead with cuts to capital gains tax for a tiny few? What is progressive about raising taxes for low-paid self-employed cleaners while the wealthiest families in the country get an inheritance tax cut? What is progressive about raising taxes for plumbers while multinational corporations see their tax bills slashed year after year? What is not fair is £70 billion of tax giveaways for the wealthiest and the corporations while taxes are hiked for middle and low earners. Just because the higher paid will pay a bit more, that does not make it right for the Government to clobber those on low incomes to plug a gap in their finances.

Interestingly, the Government have promised a review, but the tax hike is already scheduled. It may be that there is jam tomorrow on benefits, if one chooses to believe the Government, but who would believe them after they have broken a clear manifesto promise? The Government could not have made their interests more clear in hiking taxes for the self-employed while slashing taxes for the corporations. I quote the Federation of Small Businesses:

“Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go”—

I agree.

Meanwhile, the Government’s small, incremental reforms to business rates fall far short of the radical long-term reform that is needed. They are just trying delaying tactics. Business rates are a ticking time bomb that threatens to destroy many of our town centres. To be frank, this is a Government of the giant corporations and tax avoiders. It is not a Government for workers, not a Government for the self-employed and not a Government for small businesses.

Let me turn to the social care system and yesterday’s announcements. Our social care system is in crisis. I have an anecdote about a constituent I visited last week. She is a young woman who looks after her father, who has had seven strokes, and a mother with dementia. She is trying to hold down a job, but cannot get the care. As a result, she has cut her hours, rendering the income into her family and for her own children extremely tight. It is a difficult situation. That one example from my constituency exemplifies what is happening right across the country. People are suffering in that way in virtually every constituency.

According to the King’s Fund, social care needs £2 billion now just to cope with the emergency. The Chancellor failed to grasp the scale of the crisis. The money announced yesterday amounts to less than a third of what is needed. What I resented yesterday was that it had been trailed in the media that £2 billion was coming, but we were not told until the last minute that it would be over three years. That is nowhere near enough to meet the crisis that people are enduring at the moment. There are now more than a million people, mainly older people and frail people, who are desperate for social care but still cannot get it as a result of the failure to address the emergency we are facing.

[Mr Peter Bone (Wellingborough) (Con)]

The right hon. Gentleman is, as usual, making a very clever speech. I understand that the Budget debate is a political moment, but does he think that at some time down the road both sides can work together, not on this model but on a new model for social care?

[John McDonnell]

I always respect the hon. Gentleman’s interventions because he seeks to find solutions.

[Ms Angela Eagle (Wallasey) (Lab)]

Death tax.

[John McDonnell]

Exactly. It is exactly as my hon. Friend says from a sedentary position. The Labour party tried the bipartisan approach. Hon. Members worked in good faith to seek a long-term resolution to this matter. They looked at a range of options, but halfway through the discussions we were, to be frank, betrayed. Instead of a bipartisan approach, it became a political campaign of the worst order. That was a betrayal of confidence. It will take a lot, to be frank, to regain that confidence to enable us to take a bipartisan approach. We are willing to have discussions with anybody anywhere, but the treatment last time went beyond political knockabout. It was an undermining and a betrayal not just of the Labour party but of frail elderly people and their families who desperately need a solution.

Families are imploding as a result of the lack of social care, because of the burden they are suffering. The Women’s Budget Group conducted an analysis of the Budget last year and this year. It identified two groups of people who have been hit hardest by austerity measures: younger women with children, and older women. Initially, I could not understand why, but the WBG explained that unfortunately in our culture the burden of care still falls on women. Retired women fill the gap when social care is no longer provided. We are always willing to talk to anyone to find a practical solution, but it is against the backdrop of betrayal and bad faith in the past.

[Norman Lamb]

I welcome the right hon. Gentleman’s commitment to talk to anyone to try to find solutions. He may be aware that we have launched an initiative with Labour, Conservative and Liberal Democrat MPs to try to establish an NHS and care convention. Will he back that bid? It is essential that we set up a process to establish a long-term settlement.

[John McDonnell]

That is a process of bringing MPs together as individuals, not as party representatives—let us be absolutely clear about that. We look forward to any proposals that come forward for consideration from any source. If we can find a practical way forward, we certainly will.

The most important thing is that we have an emergency at the moment. We need £2 billion now, not over three years, because people are suffering now. Families are imploding. I felt a sense of relief when it was trailed that we were going to get £2 billion. I then felt extreme disappointment when we were then told it would be £2 billion over three years. That was never mentioned in the press releases before the announcement.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Does my right hon. Gentleman agree that the January figures for those waiting more than four hours for accident and emergency, which at 86% are the worst on record, are another example of how our health and social care systems are at crisis point?

[John McDonnell]

As always, my hon. Friend has pre-empted my remarks. Not only did the Government fail to address social care yesterday, but they failed to address in any way the crisis in our NHS. It was completely ignored.

Ahead of the autumn statement, Labour and others were warning that the NHS was in crisis. It was in crisis before the winter, but the Chancellor could not find a single penny for the NHS in the autumn statement. The Royal College of Nursing now says that the NHS is in its worst crisis ever. Ahead of the Budget, the British Medical Association called for another £10 billion for the NHS. As my hon. Friend has just said, A&E waiting times have today got worse again—more people are waiting longer. It is astonishing that there was a complete failure on the part of the Chancellor in the Budget to recognise the scale of the crisis that our hospitals and doctors face. It is a crisis that the Government created by cuts.

Instead, we have a £100 million fund to enable GPs to triage in accident and emergency. The capital spend will build rooms for GPs in hospitals with no GPs to staff them, because no revenue funding is associated with the proposal.

[Keith Vaz (Leicester East) (Lab)]

The issue is not just the immediate crisis in the NHS, but the preventable future crises that will come from long-term conditions such as diabetes. There seems to be no planning for the future. Does the shadow Chancellor agree that we have missed an opportunity to invest in prevention to save the taxpayer an enormous amount of money in future?

[John McDonnell]

I congratulate my right hon. Friend on his campaign, which he has stuck with for a number of years. I remember him saying that some years ago under a previous Secretary of State. Assurances were given about investment in preventive medicine and so on, but then what happened? We had an unnecessary £3 billion reorganisation imposed from the top and the money was lost. I regret that my right hon. Friend has had to continue his campaign. We need investment in preventive health, but we also need emergency funding now for the NHS.

This shows the difference in values. Labour says we need investment in the NHS, but the Government believe we need tax giveaways of £70 billion over the next five years to those who need it least. People are suffering in the NHS and they need social care. People are dying because of the Government’s decisions. They have failed to address them, but have also prioritised tax cuts for big corporations and the wealthiest few rather than investment in our NHS.

On education and skills, the Chancellor claimed in his speech that the Budget was for the young and for skills. He waxed lyrical about the need to provide decent chances in life for all. We share those sentiments—extra funding for training is welcome—but the £500 million of additional skills funding is nowhere near enough to undo the damage of seven years under this Government. Adult skills funding has fallen by 54% since 2010, which is a cut of £1.36 billion. That £500 million does not even come close to reversing the damage already done.

The Chancellor is providing £1 billion for the vanity project of free schools. That is more money for the ludicrous throwback of grammar schools. Thousands of Whitehall hours have been wasted on schemes for a tiny handful of privileged children, leaving the rest to fail. It is the same old Tories, isn’t it? There are real-terms funding cuts for the state schools that 95% of our children use. They are the first cuts since the last Conservative Government. Fifties throwbacks and fantasies are not how we should run a modern education system.

Finally, the Chancellor never spoke the word “Brexit” in his speech yesterday. Shocking. The Chancellor was silent on the greatest challenge facing this country. The word “Brexit” never passed his lips once during his speech. As Britain prepares to begin the process of leaving the European Union, the Chancellor had nothing to say on the matter. It should be clear why. I do not think he agrees with the position of his Government. The Prime Minister claims that no deal is better than a bad deal, which is absurd—no deal would be the worst possible deal. The Chancellor knows that very well. He knows it is a risk, because the warnings come not just from Labour but from manufacturers, business leaders, employers organisations, trade unions and a wide range of civil society organisations. They come from economists and international organisations as well. The Chancellor is being told from every part of our economy that to crash out of the European Union without a trade deal will be disastrous. We will be cut off from investment and our biggest trading partner. We will be cut off from the skills of EU nationals, who have made so much of a contribution to our economy and society. It is a disgrace that those EU nationals live with insecurity still because the Government will not give them the assurances they need, but that is where the Conservative party is setting its course.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Given that Brexit is the greatest economic challenge facing the country, I agree that it was shocking that there was so little mention of it in the statement and the Red Book. Does my right hon. Friend agree that it was also shocking that there was a complete absence of any commitments on regional funding, which we are set to lose in places like Wales as a result of leaving the European Union? The Government have repeatedly failed to guarantee that we will not be a penny worse off as a result of leaving the EU.

[John McDonnell]

In a past life, as chief executive of the Association of London Government, I was responsible for managing European funds for London, including the European regional development fund, the European social fund and a range of other funds. I know what contribution those funds make. I also know how much investment they prise in from elsewhere, what match funding is required and how to build transnational partners into the creative development of ideas. All that will be lost to us because the Government will not give the assurances we need.

[Ms Angela Eagle]

In the Liverpool city region, we are meant to welcome £30 million a year over the next 30 years, which is £900 million. We have lost more than £1 billion in direct funding cuts to our five local authorities. Half a billion pounds in European funding has been granted for the last two rounds, but there is no guarantee of anything in future. Does my right hon. Friend agree that that is a problem for our regional development and funding in trying to grow our economies from the bottom up?

[John McDonnell]

I know how hard my hon. Friend has fought on these issues, and I congratulate her. She has a grassroots understanding of the consequences of that lack of funding, and of the implications for her region and city. The consequences of the lack of investment are staggering, but it also undermines confidence in the private sector to match fund and invest. That is what we are seeing, even at the first stage, and yet, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) said, we heard in the Chancellor’s statement not a word of assurance to anybody, whether council leaders, business investors or workers. I found that disgraceful.

It is interesting that, prior to the Budget, the Chancellor and allies floated the idea that he was garnering a £60 billion fighting fund to deal with Brexit. It is not a fighting fund; it is a failure fund. He is having to put aside cash to deal with the consequences of what he knows will be a Tory Brexit failure. That is what the failure fund is for.

[Keith Vaz]

On Brexit, I wonder whether my right hon. Friend shares my concern that no provision has been given to the Home Office for processing the applications of 3.2 million EU citizens. The Home Office has suffered enormous cuts over the past few years and will simply be unable to deal with the applications that will be made. Currently, there is a seven-month wait to get a certificate to remain. Does he believe that provision should have been made for that?

[John McDonnell]

It is not just that provision should be made, but that the cuts have established that situation. Whatever system is introduced, that organisation will not be fit for purpose because of a lack of investment over the recent period, which my right hon. Friend has consistently pointed out.

We understand the vote in the referendum. People voted to leave, but we repeat time and again that they did not vote to trash their jobs, their livelihoods or the economy. A responsible Government would ensure that jobs and the economy were protected. A responsible Budget ahead of article 50 would have shown how the Government would protect both. The Chancellor had a responsibility and failed to deliver on it.

The Chancellor has dared to talk elsewhere about the difficult decisions he had to make. It is not he who is making the difficult decisions; it is the NHS manager in a hospital deciding whether someone will have a bed or a trolley; a police commissioner deciding which streets will be patrolled; or a council leader deciding which children’s centre will be closed. They are the ones with difficult decisions, not the Chancellor. He is passing the buck to others for his cuts.

I think that the Chancellor lives in a world in which he is completely insulated from the consequences of his decisions. He can sit in No. 11 and delete lines from his spreadsheet without a thought for the consequences. For him, it is all in a day’s work, and it is the rest of our society who must deal with the results. We have had seven long years of austerity from this Conservative Government, and the spending cuts have dragged our economy and society to the brink.

The suffering has been immense, and it is not the Chancellor or his colleagues who have been on the receiving end. It is their victims: those parents who cannot get a school place at the moment, those young people who cannot get a decent home because of a housing shortage, those families who cannot get care for their parents. We have seen public services shredded and basic standards in public life torn up, and for what? So that this Government can add three quarters of a trillion pounds to the national debt. After seven years of austerity, and two years after it was supposed to have ended, what can we look forward to? Continual cuts in public services for the rest of the decade.

This was a Budget of complacency. We need a Government who will introduce a fair taxation system, who will use public resources for long-term, patient investment in our economy, who will tackle tax evasion and avoidance at the same time, and who will grow our economy but, as we build a prosperous economy, will ensure that that prosperity is shared by all rather than being given away in tax cuts for the rich and the corporations. Yesterday’s Budget was not just complacent; it was arrogant, and it was cruel.