Budget Resolutions

John McDonnell Excerpts

Tuesday 30th October 2018 Commons Chamber

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

Four weeks ago, the Prime Minister promised to end austerity. She raised people’s hopes—the hopes of teachers that they would no longer have to rely on begging letters to parents to fund the running of their schools; the hopes of police officers that the safer neighbourhood teams would return to tackle the rise in violent crime; and the hopes of local councillors of all political parties that they would have the resources to support local families in need at a time when a record number of children are being taken into care.

Those hopes were dashed yesterday. At best, those people got what the Chancellor described as “little extras”. No wonder so many teachers, police officers, local councillors and others feel bitterly disappointed at the Prime Minister’s broken promise, because yesterday’s Budget was not the end of austerity. Even with yesterday’s Budget, two thirds of the welfare benefit cuts planned by the Government will still roll out. Outside the NHS, departmental budgets are flat, and the Resolution Foundation this morning revealed that some Departments faced a further 3% cut in their budgets by 2023. Austerity is not ending.

For most people, ending austerity is about not just halting some of the cuts planned by the Government, but lifting the burden that austerity has imposed upon them and their communities over the last hard eight years.

[Chris Philp (Croydon South) (Con)]

I thank the shadow Chancellor for giving way so early in his speech. May I refer him to page 39 of the Red Book, which shows clearly that, by fiscal year 2023-24, there will be a £30 billion fiscal loosening? He referred to the Resolution Foundation, but it says that under universal credit, more money will be paid out to recipients than under the current system.

[John McDonnell]

To be absolutely clear, the Chancellor gave the impression yesterday that there would be no departmental cuts, but the Resolution Foundation has said that, although some Departments will be protected, others will have a 3% cut as a result. I call that continuing austerity.

Ending austerity is about more than that; it is about ending and repairing some of the damage that has been inflicted on our society and, yes, has undermined some of the social fabric we rely upon. Yesterday, the Chancellor claimed that this was a “turning point”. It is, but not in the way he suggested. This is not the end of austerity, but it is the beginning of the end of the dominance of an economic theory and practice that has wreaked havoc on our communities. People no longer believe the myth that austerity was necessary. They are seeing this Government hand out £110 billion in tax cuts to the rich and corporations while their services are being cut and their children are forced into poverty.

[Dan Carden (Liverpool, Walton) (Lab)]

Liverpool’s local authority will have had 64% of its budget cut by 2020. Would not a reversal in austerity mean its budget being reinstated?

[John McDonnell]

We are currently seeing local councils—the first wave has been Conservative—virtually going into administration. That must say something about the impact of a 50% cut in local government funding over the last eight years.

People no longer accept the trickle-down economics that has gripped the Tory party for four decades.

[Mr Marcus Jones (Nuneaton) (Con)]

Will the right hon. Gentleman give way?

[John McDonnell]

I will in due course. The Parliamentary Private Secretary has done his job and handed out the briefings and questions to everyone. I respect the hon. Gentleman for his diligence and I will allow some interventions but, to be frank, people out there are fed up with parliamentary banter and want a debate that reflects the real world.

People no longer accept the trickle-down economics that has gripped the Tory party for four decades—the idea that somehow if we cut taxes for the rich and the corporations, this wealth will trickle down to everybody. They no longer accept “public sector bad, private sector good”. They no longer accept privatisation and deregulation; in fact, those are anathema to most people now. What was surprising yesterday was how lacking in self-awareness the Chancellor and his colleagues were and how out of touch they were with the reality of our people’s day-to-day lives. His speech reflected how ideologically crushed the Tories are. They are so bereft of ideas that the Chancellor yesterday, in a major parliamentary speech, was reduced to toilet gags. They are so bereft of ideas that they made a pathetic attempt to imitate Labour policies.

[Mr Marcus Jones]

I thank the right hon. Gentleman for his generosity. Is the new economic model that Labour is proposing the same one that left 500,000 more people unemployed in 1979 and 450,000 more people unemployed in 2010 than when it came to office?

[John McDonnell]

A former Local Government Minister gets to his feet in this House and does not express a word of apology for what the Government have done to local government.

For some time, I have had concerns about the nature of the whole debate on austerity. First, many—I accept not all—in the Conservative party seem to have no appreciation of what austerity has meant and continues to mean for our society. I thought at one point that that was because many Labour MPs such as me represented constituencies with a different demographic to many Conservative constituencies. I represent a working class, multicultural London constituency. Yes, it is faced with different challenges from those of leafy Surrey, for example, but most of all our constituents, wherever they are, rely on the NHS, local schools, the police and local council services, so all of us should have some idea of what the public services that support our constituents have been going through.

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

Will the right hon. Gentleman give way?

[John McDonnell]

Not at the moment, if the hon. Gentleman does not mind.

What shocked me yesterday was that the Chancellor delivered a Budget that so clearly failed to address the desperate needs of our society after eight years of austerity. Let us look at just some elements of the human cost of austerity and what the Chancellor brought forward in the Budget.

[Tom Brake (Carshalton and Wallington) (LD)]

As part of the number crunching that the right hon. Gentleman has undoubtedly been doing, has he worked out how much more would have been available for the police, prisons, schools and local government if the UK had not voted to leave the European Union two and a half years ago? Does he not believe that that reinforces the case for a people’s vote now to restore the level of growth that we saw two and a half years ago?

[John McDonnell]

I respect the right hon. Gentleman’s views on Brexit because I campaigned for remain as well, but it behoves any Liberal Democrat to come to this House with a bit of humility after serving with a Tory Administration that savaged our public services.

Let me look at some of the elements of human suffering. Health workers are having to cope with the biggest financial squeeze in the NHS’s history.

[Karen Lee (Lincoln) (Lab)]

Does my right hon. Friend agree that we must reinstate nursing bursaries if we are to see the number of nurses we need in our NHS?

[John McDonnell]

That is an essential element of the reconstruction that Labour will have to do when we come to power.

The Institute for Fiscal Studies said that a rise in health spending of 3.3% was needed just to maintain the current stretched service, and that at least 4% was needed to improve it. Instead, according to the Nuffield Trust, what we got amounts to just a 2.7% increase in overall health spending in real terms next year.

Police officers have seen 21,000 of their colleagues’ jobs cut since 2010. As a result, violent crime is on the rise. The independent police watchdog is warning that

“the lives of vulnerable people could be at risk.”

What did the police get yesterday? Some £160 million for counter-terrorism—far less than is needed—and not a penny more for neighbourhood policing. And that despite the head of counter-terrorism warning that counter-terrorism work relies on regular policing being properly funded.

Teachers’ pay has fallen by 4% since 2011 and the schools budget has been cut by £3 billion in real terms. Some 36,000 teachers have left the profession in a year —the highest since records began.

[Ms Angela Eagle (Wallasey) (Lab)]

Does my right hon. Friend agree that the cuts to education that have left 22 out of 26 Wallasey schools facing cuts and that have seen £3 million cut from their budgets, while teachers are earning £4,000 a year less and having to do more, are an absolute disgrace, and that that demonstrates that this Government give no priority whatsoever to the future of our children?

[John McDonnell]

My hon. Friend has got it exactly.

It takes something, does it not, to have headteachers marching on Downing Street? That has never been seen before. Just what did yesterday’s Budget do to tempt teachers back? What the Chancellor offered was “little extras”. It was an insult, especially when 60% of teachers are not getting a pay rise this year.

There are now 4 million children living in poverty, 500 children’s centres have closed, 500 children’s playgrounds have closed and 128,000 children are living in temporary accommodation. When children’s social care faces a funding gap of £3 billion by 2025, what did the Chancellor offer? Just £84 million for just 20 councils. That will not even scratch the surface of the problem.

[Neil O'Brien (Harborough) (Con)]

rose—

[John McDonnell]

No.

We have a record number of children coming into care. I know what coming into care means for a child: they are scarred for life. Why are they coming into care? Because there has been a 40% cut in funding to councils for early intervention to support families. Let the Government justify that.

On young people, the YMCA reports that spending on youth services has fallen by 62% since 2010. The average graduate comes out of university with a £50,000 debt. The IFS describes home ownership among young people as having collapsed completely. Tragically, with the mounting pressure, a decades-long decline in suicide among men has been reversed since 2010.

[George Freeman (Mid Norfolk) (Con)]

I am grateful to the right hon. Gentleman for mentioning suicide. I wonder whether there is anything in this Budget that he can welcome, even though I appreciate that we may differ. Does he not welcome the announcement on mental health or the announcement of a £21 million centre of excellence for public sector leaders?

[John McDonnell]

Of course we welcome more money for mental health, but what was required was £4 billion, not £2 billion; and that £2 billion was contained within the £20 billion that had already been announced, so it is not additional money. There are some things that we can work on on a cross-party basis in this House, but we have to be honest about the needs and the requirements, and we have to be straightforward in saying how they can be funded.

[Grahame Morris (Easington) (Lab)]

My right hon. Friend is being a little unfair; some people have done very well from austerity. A thousand of the richest people in the United Kingdom have seen their personal wealth increase by £274 billion over the past five years.

[John McDonnell]

The facts speak for themselves.

To make a real difference to the lives of young people, the Chancellor needed to address the housing crisis, deal with the toppling mountain of student loans, and restore work allowances for single people and couples without children. Instead we got piecemeal, unambitious housing announcements and re-announcements, nothing on student finances, and nothing on universal credit recipients who are single and without children.

[Marsha De Cordova (Battersea) (Lab)]

The Chancellor’s meagre contributions to universal credit will do nothing to reverse the social security cuts for disabled people. Does my right hon. Friend agree that for the millions of disabled people, austerity is far from over?

[John McDonnell]

I will come on to the plight of disabled people, who seem to have been a particular target for this Government, given how they have withdrawn funding and services.

On older people, there were more than 31,000 excess winter deaths among the over-65s in 2017, and well over 150,000 elderly people are in arrears in their social care payments. The Local Government Association, which works on a cross-party basis, said that £1.5 billion was needed by 2020 just to fill the funding gap in adult social care. The £650 million that was announced yesterday is less than half of that.

What comes out of the analysis is this. The burden of austerity has fallen disproportionately on who? On the shoulders of women. Yesterday, that did not just continue; it got worse. The share of the Government’s tax and benefit changes impacting on women increased from 86% to 87%—another year with an increase. The 1950s women, who have been treated so unjustly, have been overlooked once again.

The victims of possibly the harshest cruelty inflicted by this Government are disabled people. A UN inquiry into the rights of persons with disabilities found this Government guilty of “grave and systematic violations” of their human rights. When have any UK Government been charged with that by a UN body? Never. To be frank, we know—

[Chris Philp]

rose—

[John McDonnell]

I have given way to the hon. Gentleman once.

Many have taken their own lives as a result of the welfare reforms imposed upon them since 2010, and the Government—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting the right hon. Gentleman. The hon. Member for Croydon South (Chris Philp) has made his point with force and alacrity, but he should not witter from a sedentary position, engaged in an animated conversation with a Member on the opposite Benches. The same goes for Members on both sides of the House. The shadow Chancellor has addressed the House, as in my experience he invariably does, with considerable courtesy. Whatever people think of what is being said, they should extend courtesy to the Front-Bench speakers, as they should to Back-Bench speakers.

[John McDonnell]

I understand the hon. Member for Croydon South (Chris Philp); he gets excited at times, but as someone who has been excited myself at times, I completely understand.

The Government have been repeatedly forced by the courts to change how they are treating disabled people. They do not seem to have learned their lesson yet, so yesterday we saw no restoration of disability premiums, no end to the cruel social security freeze, and no end to dehumanising and unreliable work capability assessments.

The Government are also putting the livelihoods of future generations at risk. A few weeks ago the world’s leading authority on climate change said that avoiding dangerous climate change would require “rapid, far-reaching and unprecedented” action. What did we get yesterday? We got no mention of climate change, no reversal of cuts to renewable energy, and no significant environmental policy.

[Neil O'Brien]

I am curious: the other day the Government voted through a £650 million scheme to improve energy efficiency and home insulation; why did the Labour party vote against it?

[John McDonnell]

Because it was not on a scale that would have had sufficient impact. I welcome interventions, but I think we should have a rule that when Members intervene they should describe their background, in this case as advisor to George Osborne, who cut back on the solar energy industry, who undermined wind power in this country, and who set us back so that we will never meet our climate change targets.

The impact—[Interruption.] Calm down, calm down—George Osborne used to say that to me, and I said “I’ll calm down when you resign,” and he did. The impact on the self-employed and small businesses has been equally stark. Some 51,000 high street stores closed last year. Wages for the self-employed have collapsed to around the same level as 20 years ago.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Does my right hon. Friend agree that it was a disgrace that yesterday we heard that the Government are going to save the high street by turning our shops into residential properties and risking the very fundamentals of how the high street operates?

[John McDonnell]

My hon. Friend is right. Yesterday we needed serious action to address the bias against high streets, which has led to so many empty shops. Instead we got legislation that will help turn shops into flats.

We then had a huge media presentation about an online tax being introduced: it was said that £400 million will be found from this online tax in a few years’ time. At the weekend the Tax Justice Network said the top five tech companies have avoided £5 billion-worth of tax.

My second concern about the austerity debate is that if we understand and appreciate what people have been forced to go through with austerity, only callous complacency could drive us to inflict those policies on people. Yesterday the Chancellor’s speech, with references to “Labour’s recession,” demonstrated that he is trapped in a time warp of a political propaganda exercise by the Tories of a decade ago. [Interruption.] I thought they would like that one. Let us be clear: the financial crash was the result of greed and speculation, and a lack of regulation that goes right back to the 1980s. Austerity was always a bad idea.

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

Like my right hon. Friend, I heard the Chancellor try to blame the last Labour Government for the recession, but in actual fact the previous Chancellor said a couple of months ago that it was not the Labour Government’s fault; it was the whole system’s fault, starting with Lehman Brothers in America. We should get the facts right.

[John McDonnell]

I always said George Osborne would get it right one day.

The consensus among economists, and the evidence of recent history, is absolutely clear. The worst possible response to a recession is for a Government to cut their own spending. In a recession, the Government should be there to support businesses and households. Instead, at the moment when Government support was most needed to help people back on their feet, Conservative Chancellors chose to impose the most severe spending cuts in generations. They did not have to, and they should not have done.

The Tories were warned that austerity would lead to slower growth and lower wages, and it has. The economic experts the Tories chose to ignore were proved right. Growth since the financial crisis, under Conservative Chancellors, has been the slowest after any recession in modern times. Real weekly average earnings are still lower today than they were in 2010. The Resolution Foundation reports this morning that real wages will not have fully recovered until 2024.

Ten years after the crash, we should be clear about the causes of the financial crisis. The Chancellor seemed confused on that point yesterday. It was not the deficit that caused the crisis; it was the crisis that caused the deficit. It was a crisis—[Interruption.] They don’t like to hear the truth. It was a crisis that resulted from the casino economy that the Tories helped construct right from the 1980s and supported every step of the way.

[Victoria Prentis (Banbury) (Con)]

The right hon. Gentleman asked us to give our personal history: I was a proud public sector employee for 17 years and I take issue with the way that Labour wrecked the economy and spent money we did not have. Would he like to tell us how he proposes to pay for his current funding system?

[John McDonnell]

Here is an answer: it is called a fair taxation system.

It was the ideology of neoliberalism that said markets were always right, that regulation was simply a barrier to growth, and that, ultimately, greed was good. The financial system this ideology helped design collapsed 10 years ago, and it was Conservative Chancellors who took the political decision to force working people, not the bankers, to pay the price for it.

[Several hon. Members rose—]

[John McDonnell]

Mr Speaker, you will admit that I have been generous in the number of times I have given way, and I suggest that, as you have a large number of Members wishing to speak, particularly on the Labour Benches, I should press on.

The result has been a period of stagnation unprecedented in modern British history: a period of falling wages, crumbling public services, and insecurity in an economy visibly failing across great swathes of the country. And because the cuts are still, even now, grinding on, the stagnation will continue, as the official forecasts say: investment forecasts have been revised downwards across the Office for Budget Responsibility’s forecast period, real wages will barely recover, and growth will remain far below its long-run trend.

The Chancellor cannot use Brexit as an excuse for those dismal figures. The OBR presented its forecasts on the basis of what it called a “relatively smooth exit” from the EU next year, but the Tories are bungling the Brexit negotiations—it is so bad that there is now an impact on the economy. Investment is being delayed and has even been cancelled. Britain already has the lowest rate of business investment in the G7, and even that has fallen this year. It is the uncertainty the Tories have introduced into the whole process that is so terrifying businesspeople. They just want to know where they stand, but the uncertainty was made even worse yesterday. The Chancellor has taken to threatening to revoke his own Budget in the event of a no-deal Brexit, yet on the very morning of the Budget, his Prime Minister was contradicting him. How can any company looking to invest in Britain not wonder where we are heading?

For well over two years, the Government have spent more time negotiating with themselves than with our European partners. With the date for leaving the EU just five months away, time is running out to present a deal that would respect the result of the referendum and win the support of the House. Instead, as the Tories continue to indulge in their squabbling, the economy and the whole country are being confronted with the grim prospect of a no-deal car crash. I have asked the Chancellor before to rule out a no-deal Brexit. A responsible Chancellor simply would not support such a thing, and would not, as he has done before, idly threaten to mutate this country into some form of tax haven off the coast of Europe. Let us put it on record that austerity is not ending. In the weeks and months ahead, people will recognise that the Prime Minister’s promise has been broken. There are rumours that this was possibly a pre-election Budget with pre-election tax giveaways. If the Conservatives are contemplating a general election, let me say on behalf of the Labour party: bring it on.

--- Later in debate ---

[Sir Robert Syms (Poole) (Con)]

I have been in the House long enough to remember lots of Labour Budgets, and I remember the claim that boom and bust had been abolished—only to be followed by the biggest bust that we have had in our history. It must have been a big bust, because only that would have made the Conservative party and the Liberal Democrats work together. We normally fight like ferrets in a sack, but in the context of 2010, a real crisis had to be dealt with.

If we look at what has occurred over the long term, we can see that we have made a great success of it. First, we have reduced the deficit from 10% to about 1%. That is a good thing, because if we borrow lots of money, we pay interest, which means that taxpayers’ money goes to pay bondholders and shareholders, not on the things that people want. I think that a compassionate Government is one who balance the books, because that means they can devote resources to the priorities that people have.

We have managed to do that without crashing the economy. Despite the calls that were often made about the economy going into recession, we have had eight years of a growing economy, which is actually pretty good. On top of that, we have created 3 million jobs. We all know that the best way to deal with poverty, to give people life chances and an opportunity to train, and the best thing for families is employment. If there is a challenge now it is to get wage levels and take-home pay up. When we compare our performance on employment with the EU and most of our neighbours, we can see that we have done a pretty good job. I am pleased there are signs that pay is picking up and that British workers will be paid more.

There is a lot of good to be said about the Budget yesterday. I do not think that Budgets in themselves make much of a difference. What makes a difference is long-term economic success and planning. If we look at Germany and other countries, we can see that they have pretty sane policies year after year—over seven, 10 or 15 years—which grow the economy gradually. Certainly since 2010, we have made pretty good progress, and there is more progress to be made as we exit from the European Union.

I welcome what the Chancellor has done on public spending. We all know that there are pressures with an ageing population and with mental health, and the Government have started to address some of those pressures. They have been able to do so because of careful management of the public finances. I also welcome the additional spending on defence. I am one of those who have always felt we have cut defence too much, perhaps because of the economic crisis. I think that Britain, as a world power and as a member of the United Nations Security Council, does need to spend sufficient resources on defence, so the £2 billion announced in the Budget is to be welcomed.

I think we have made good progress, and all that the Government need to do now is to keep that progress up year on year. We have a decent balance in this Budget because not only have we been able to spend more on public services—with the proviso that we need reform, and the proviso that we need productivity to rise because spending money will not necessarily in itself produce better outcomes—but we have managed to reduce taxation. Since 2010, we have doubled the allowance to £12,500 for those who pay tax, which is pretty good, and it massively increases the incentive for people to get into work. It is no accident that we have record employment, because we have made raising the tax allowances to help people get a job a very critical part of our employment strategy. It is also quite right for the upper rate of tax to go up as well, because that lifts all the tax bands for many middle earners. The fact of the matter is that, as a country, we tax people too much too early, and we need to increase incentives. There has to be a balance between incentives and extra spending, and on this occasion we have got that right.

We have a key task over the next few months in getting a good deal on Brexit. I note that the shadow Chancellor criticised the Government for contemplating leaving without a deal, yet as far as I know the Labour party are going to vote against the deal, so there seems to be a slight double standard.

[John McDonnell]

What deal?

[Sir Robert Syms]

Well, we shall see what comes back in the next few months.

The reality is that the Government have actually managed the economy well, and because of that, despite the level of uncertainty, we are still creating jobs and we are still growing. The interesting point is that, despite the soft patch earlier this year, the third quarter growth figures show that we are now growing more than the EU, so we are starting to pick up again.

I am confident that we have a good team at the Treasury and that they are listening to what colleagues are saying about their constituency concerns. I think we have had a really decent Budget, which has balanced sensible spending with reform and a sensible reduction of taxation. We are also maintaining a sensible management of the economy, certainly in the plans to have a 1% deficit, which is a massive reduction. I hope that we over-perform, and that if we do, we can reduce that further. The reality is that this Government have done well, and the country is doing well. We need not run down the country; the country’s best years are still ahead of us.