Oral Answers to Questions

John McDonnell Excerpts

Tuesday 24th October 2017 Commons Chamber

[Mr Hammond]

I refer my right hon. Friend to the analysis of the Opposition party’s proposals, if we can call them that, done by the Conservative party at the time of the general election. The Government’s policy is to sell assets when there is no longer a policy reason to retain them and to reinvest the proceeds of such sales in policy priorities. Nationalising assets would increase public sector net debt, which would increase our debt interest bill and divert public spending away from more valuable areas. It would also mean that the future investment needs of any nationalised industries would have to compete for capital with our public services.

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

I listened very carefully to the Chancellor’s response to the hon. Member for Aberdeen North (Kirsty Blackman) and my hon. Friend the Member for Ilford North (Wes Streeting) on the issue of no deal. May I tell him that his response was crushingly disappointing? Expressions of hope of a deal are just not good enough. The Chancellor knows the economic perils our country faces if there is no deal: he described it, rightly, as a worst-case scenario. May I urge him, in the interests of our country, to have the courage of his convictions, and stand up and face down his opponents in Cabinet and confirm today that, like us, he will not support or vote for a no-deal Brexit?

[Mr Hammond]

As the right hon. Gentleman very well knows, our clear objective and priority is to achieve a deal with the European Union. Our preference would be for a deal that gives a comprehensive trade, investment and security partnership between the UK and the European Union in the future. As part of such a deal, we will seek an implementation phase that gives British businesses, and indeed Government agencies, proper time to prepare for the new circumstances they will face.

[John McDonnell]

If the right hon. Gentleman cannot stand up to his opponents on a no-deal Brexit, can he at least stand up to them on the transition period? Business leaders yesterday made it clear that they need certainty now on a sensible transition period, yet the Prime Minister yesterday sowed more confusion in her statement, giving the impression that the transition is to be negotiated only after we have settled on what, as she describes it, the “future partnership” with Europe will be. Businesses cannot wait: they need to plan now; jobs are in jeopardy now. If the Prime Minister is not willing to stand up to the reckless Brexiteers in her party, will the Chancellor? Will the Chancellor make it clear, in a way that the Prime Minister failed to do yesterday and as business leaders have been calling for, that we need the principles of any transition confirmed by the end of this year?

[Mr Hammond]

The right hon. Gentleman is correct to say that this matter is urgent and pressing, which is why we were so pleased that last week at the European Council the 27 agreed to start internal preparatory discussions for an implementation period. I am confident that we will be able to give businesses the confidence and certainty they need.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 18th July 2017 Commons Chamber

[Elizabeth Truss]

My hon. Friend is absolutely right. Is it not amazing that not one Labour Member has welcomed the fact that we have the lowest unemployment since 1975, or that we have lower youth unemployment? In fact, the Opposition model their policies on countries such as Greece, which has exceptionally high youth unemployment, and they take for granted the progress that we have made over the past seven years.

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

First, let me welcome any increase in jobs in our society, but when it comes to commenting on wages, does not the Chief Secretary to the Treasury agree that it ill becomes a multi-millionaire earning £145,000 a year, admittedly in a temporary job, and living in two grace-and-favour properties at the taxpayer’s expense to attack public sector workers—our hospital cleaners, nurses, teachers and firefighters—as being “overpaid”? Public sector workers’ pay has fallen on average by £4,000 in the first six years of this Government. One in five NHS staff are forced to take a second job, and teachers are facing a further cut to their salaries of £3,000 by 2020. Does she not think that the Chancellor should just do the right thing and apologise?

[Elizabeth Truss]

Yet again, the right hon. Gentleman is not giving the House the full picture of what is happening with public sector wages. Last year, teachers’ pay went up by 3.3%. More than half of nurses and other NHS workers saw a pay rise of over 3%, and the armed services saw a pay rise of 2.4%. The cleaner he talked about was employed not by the public sector but by Serco. The right hon. Gentleman needs to get his facts right.

[John McDonnell]

That is true—the Government privatised the jobs.

I note that the Chief Secretary did not dispute the fact that the Chancellor said that staff were overpaid. The Chancellor tried to justify his attack on public sector workers by trying the classic divide and rule between public and private sector workers, citing public sector pensions. Is the Chief Secretary aware that those supposedly generous pensions across several professions pay on average the princely sum of just £5,000 a year, and that low pay has forced many public sector workers to opt out of their pension scheme? Eleven per cent. of those in the NHS have opted out; if that figure continues to rise, the whole scheme could be undermined. Will the Chief Secretary recognise the damage that the Chancellor is causing and lift the pay cap so that public sector staff can have some hope of a fair wage settlement—and, yes, a decent future pension?

[Elizabeth Truss]

The right hon. Gentleman still has not acknowledged the truth of the figures that I cited—the 3% pay rise for over half of nurses and the 3.3% rise for teachers. He simply will not look at the facts. The reality is that public sector workers are, rightly, paid in line with the private sector to allow the public and private sectors to flourish so that we can create wealth in this country. In addition, public sector workers have a 10% premium on their wages in pension contributions, and that is in the Office for Budget Responsibility report.

Public Sector Pay Cap

John McDonnell Excerpts

Wednesday 5th July 2017 Commons Chamber

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

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement outlining the Government’s policies with regard to the public sector pay cap.

[The Chief Secretary to the Treasury (Elizabeth Truss)]

We all recognise that public sector workers do a fantastic job. Over the past seven years, we have seen major improvements in our public services. Crime is down, with a greater proportion of police on the frontline. More children are achieving higher standards at school and going on to apprenticeships and university. Our NHS is looking after more people than at any time in its history.

Government pay policy is designed to be fair to public sector workers, who work so hard to deliver these strong public services, but we must also ensure that we are able to provide those public services on a sustainable basis for the future. In many services, workers have received pay additional to the 1% national increase. Teachers had an average pay rise of 3.3% in 2015-16. More than half of nurses and other NHS staff had an average increase of over 3% in 2016. Military service personnel also saw an average additional increase of 2.4%. Salaries in the public sector remain comparable to those in the private sector. In addition, many people benefit from higher pension entitlements. They also benefit from the rise in the personal allowance, worth £1,000 to a basic-rate taxpayer.

We are currently completing the pay review process for 2017-18. We have accepted the pay review body recommendations made for doctors, the NHS and the armed forces. We will be looking very carefully at the recommendations on the remainder and making determinations in the usual way. As the Chancellor said on Monday, our policy on public sector pay has always been designed to strike the right balance of being fair to our public sector workers and fair to those who pay for them. That approach has not changed, and the Government will continually assess that balance.

[John McDonnell]

I welcome the right hon. Lady to her post, but when we ask a question of the Chancellor, we would expect the Chancellor to respond to that question. We simply wanted clarity on whether the pay cap is still in force. That is all we asked for.

The response that we have seen today confirmed what most commentators are now saying: this is not a Government; it is a Cabinet of absolute chaos. Let me explain that the existing Government policy, as set out in the comprehensive spending review 2015, due to be ratified today in the Supply and Appropriation (Main Estimates) Bill, is still a 1% pay cap, and this is the diktat to which the various pay review bodies are still working. In fact, they are written to and told that their proposals have to reflect

“the Government’s policy on public sector pay awards”.

Yet over the last week we have seen, to be frank, absolute confusion in government—total disarray. The question we are posing is, “Who actually speaks for the Government on this issue?” On the day of the Queen’s Speech, No. 10 was briefing out the end of austerity and the relaxing of the pay cap, only to be contradicted by an incandescent briefing from No. 11. Daily fearful of a putsch, No. 10 then backs down. For the Prime Minister it must be tough, living next to a disruptive neighbour you can’t stand, you try to get rid of, and you can’t get on with.

We then receive in the press the wisdom of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), who, according to a spokesperson,

“supports the idea of public sector workers getting a better pay deal”.

This is followed by his past campaign manager turned political assassin, the new Environment Secretary, who supports the putsch against the Chancellor. Then the whole process degenerates into farce when we have David Cameron, earning £100,000 a speech, telling us that the people who want more than 1% are “selfish”. The Chancellor has called for a grown-up debate. I agree. What we have seen are Cabinet Ministers scrapping in the school playground. Cut off from the real world that most people live in, the Chancellor has no understanding of why our public sector workers are so angry. They are angry because they have had enough of seeing tax cuts to the rich and corporations while their pay is being cut.

Can the Chief Secretary to the Treasury clarify how the Government’s estimates 2017-18, as per the Supply and Appropriation (Main Estimates) Bill on the Order Paper today, will accommodate the reported offer to the fire and rescue services, which, we are told, is subject still to Government funding? Moreover, if we are to see another Government U-turn, which in the case of public sector pay we would welcome, can the Government confirm how they will fund the £5 billion needed that they say would be saved by the 1% pay cap? Or are we being confronted with yet another uncosted commitment within weeks of a Parliament commencing? It’s the magic money tree again.

The Government’s own report on Monday showed how much doctors’ and nurses’ pay had fallen. Does the Chancellor think that is fair? Given that 20% more nurses left the nursing register than joined it this year, does the Chancellor agree with the chief executive of the Royal College of Nursing that

“For every day…the cap remains in place”

the profession is “haemorrhaging”?

Finally, given the chaos on the Government Benches over this policy, can the Chief Secretary tell us when an actual decision will be made about the future of the pay cap? Will public sector workers have to wait until the next Budget before finding out whether they will have decent pay for the next two years? Should not the Chancellor now write formally to the pay review bodies to say that they are free to do what is right by public servants and pay them a fair pay award this year?

[Elizabeth Truss]

I do not know whether to be disappointed or delighted that the shadow Chancellor does not want to see me at the Dispatch Box, but I am here today to answer his questions because I am responsible for this policy area, and I think that is entirely appropriate.

As has been outlined by the Prime Minister and the Chancellor already, our policy on public sector pay remains in place, because it is the responsible thing to do. It is the responsible thing to balance the importance of recruiting and retaining high-quality people in our public services with making sure that our public finances remain sustainable so that we can continue to see the improvements in our public services that we have seen under this Government.

Some of the shadow Chancellor’s comments were disingenuous. He did not reflect the fact—

Economy and Jobs

John McDonnell Excerpts

Thursday 29th June 2017 Commons Chamber

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

I beg to move an amendment, at the end of the Question to add:

“but respectfully regret that the Gracious Speech fails to end austerity in public services, to reverse falling living standards and to make society more equal; further regret that it contains no reference to an energy price cap and call on the Government to legislate for such a cap at the earliest opportunity; call on the Government to commit to a properly resourced industrial strategy to increase infrastructure investment in every nation and region of the UK; recognise that no deal on Brexit is the very worst outcome and therefore call on the Government to negotiate an outcome that prioritises jobs and the economy, delivers the exact same benefits the UK has as a member of the Single Market and the Customs Union, ensures that there is no weakening of cooperation in security and policing, and maintains the existing rights of EU nationals living in the UK and UK nationals living in the EU; believe that those who are richest and large corporations, those with the broadest shoulders, should pay more tax, while more is done to clamp down on tax avoidance and evasion; call for increased funding in public services to expand childcare, scrap tuition fees at universities and colleges and restore Education Maintenance Allowance, maintenance grants and nurses’ bursaries; regret that with inflation rising, living standards are again falling; and call on the Government to end the public sector pay cap and increase the minimum wage to a real living wage of £10 per hour by 2020.”.

As of this year, Mr Speaker, I have been in the House for 20 years, just as you have. Never in all that time have we seen such a threadbare scrap of a document as this Queen’s Speech. But let us be grateful for small mercies: it is a pleasure to note what has not been mentioned in this vacuous notelet. Despite their being promised in the Conservative manifesto, we have had no plans for legislation to end the triple lock, we have heard nothing about legislation to end winter fuel payments, and we have heard no legislative plans for the so-called dementia tax. There is nothing of the policy to take food from the mouths of infants and young primary school children, and even the flagship grammar schools policy seems to have been ditched from the Queen’s Speech. I would therefore like to thank the millions of voters who rejected the Conservatives because they have prevented the Tories from implementing the full cuts that they promised. I thank all those people who called a halt to the barrage of cuts that the Tories were intending to introduce. Regrettably, the Government have instead been reduced to a grubby back-room deal in an attempt to cling on to office.

The result is that we have a Queen’s Speech devoid of content which offers no solutions to the pressing issues facing our country. The Queen’s Speech says:

“My Ministers will strengthen the economy so that it supports the creation of jobs”.

The reality is that we are witnessing, to quote the Governor of the Bank of England, the weakest UK business investment in half a century, and the growth of insecure, low-paid, low-skilled jobs, with nearly 1 million people now on zero-hours contracts.

[Mr Peter Bone (Wellingborough) (Con)]

I am very surprised that the shadow Chancellor talks about jobs, because every single Labour Government in history has left government with higher unemployment than when they came to power. We have lowered unemployment and got more people into work. How can he possibly suggest that it would be better to have Labour?

[John McDonnell]

I would check the hon. Gentleman’s facts, but let me say—[Interruption.] I suggest he goes back to other Labour Governments who increased employment in this country as a result of direct state investment: the Attlee Government in particular, and the Wilson Government.

The issue for many of us is the quality of those jobs. The fact is that we now have people in employment who literally cannot fend off poverty. Two thirds of our children who are living in poverty are in families where people are in work. That is the quality of some of the jobs brought about by this Government.

The Queen’s Speech promises

“to invest in the National Health Service, schools, and other public services”,

but that could not be further from the truth. The reality is that spending per pupil remains set to fall, the jobs of police officers, firefighters, border guards will be cut, and the NHS is “already at breaking point” and has been promised no new money. Those are not our words, but those of the British Medical Association.

In various interviews over the past fortnight, the Chancellor has bemoaned the fact that he was hidden away during the election campaign and that his record on the economy was not the central plank of the Conservative campaign. I agree with him. I wish he had been more to the fore in the campaign, with his record more widely exposed, because if that had been the case, Labour would be in government now.

I do not believe that the right hon. Gentleman has been afforded his proper place in history. For those hon. Members who were not in this place 10 years ago, let me explain that prior to 2010 the Chancellor was the shadow Chief Secretary to the Treasury. In that role, as an ardent neoliberal, he was the architect of austerity. It was he who designed the detailed economic programme rolled out by his mentor, George Osborne, after 2010, and he has been at the heart of every austerity Cabinet throughout this period.

In the Chancellor’s recent Mansion House speech, he referred to his Government’s austerity record as one

“of which we are proud.”

The foundation of the Chancellor’s record is its adherence to neoliberalism and trickle-down economics—a theory that argues that if we cut the taxes for the rich and the corporations, and if we turn a blind eye to tax avoidance and tax evasion, somehow the wealth will trickle down to the rest of society. This Chancellor has certainly cut taxes for the rich and the corporations. Corporation tax, capital gains tax, inheritance tax and the bank levy have all been slashed by this Chancellor. Independent analysis of Office for Budget Responsibility costings demonstrates that the tax cuts introduced by the Conservatives on those four measures alone since 2010 will have cost taxpayers more than £70 billion between last year and the end of this Parliament.

[Helen Whately (Faversham and Mid Kent) (Con)]

As the right hon. Gentleman well knows, history tells us that increasing corporation tax actually leads to reduced tax revenues. Were he in government, his plans would mean that corporation tax revenue would fall. If he were in a position to do so, how would he make up that shortfall in Government revenue?

[John McDonnell]

The argument we heard was that corporation tax cuts would lead to a large-scale increase in business investment in our economy, but business investment fell last year for the first time since 2009. It remains lower than that in the rest of the G7 countries, with the exception of Italy. Corporations are now sitting on more than £580 billion of earned income that they are not investing. Some have been exposed as using that earned income in share buy-outs to boost performance statistics and therefore boost bonuses. That is the product of the corporation tax cuts.

[Anna Soubry (Broxtowe) (Con)]

Will the right hon. Gentleman give way?

[John McDonnell]

In due course.

Let us look at how seven years of austerity has contributed to the grotesque and widening levels of growth inequality in the UK. A report last year by Credit Suisse found that the richest 1% of people in the UK now own almost one quarter of the country’s wealth. The Sunday Times rich list told us that the richest 1,000 families in the UK had more than doubled their wealth since the financial crash.

[Anna Soubry]

Does the right hon. Gentleman agree that, because of Conservative policies, some 4 million people in this country who are at the lower end of the wage scale no longer pay any tax at all? This is the party that reduces taxes for the less well-off.

[John McDonnell]

It is a party that has used the taxation system to cut corporation tax, capital gains tax, inheritance tax and the bank levy, which has meant a redistribution from the poor to the wealthy.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Will the right hon. Gentleman just clarify for the House what the standard rate of capital gains tax was under the last Labour Government and what it is now?

[John McDonnell]

This is a Government who want to cut corporation tax from 28p—[Interruption.] I thought the right hon. Gentleman was referring to corporation tax. Remember who the capital gains tax cut is going to: the 60,000 wealthiest families in this country. That is what this cut is all about.

[Mr Hammond]

Will the right hon. Gentleman just tell the House what the rate was under the last Labour Government and what the basic rate is now?

[John McDonnell]

When it comes to—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am finding it very hard to hear what the shadow Chancellor has to say. If I cannot hear, you cannot hear. What is the point of posing a question if you cannot wait for the answer?

[John McDonnell]

I am sure that the Chancellor will fill us in on the details when he makes his speech. The reality is that when it comes to cutting taxes, what we have seen over the past seven years is the rich being treated to tax cuts while the poorest in society have seen their services demolished in front of our eyes. The increasing levels of poverty in our society are a direct result of the redistribution of wealth from the poorest to the richest under this Government.

[Several hon. Members rose—]

[John McDonnell]

I will give way in due course.

Let us measure the impact of that record of tax cuts on the rest of society. It is important that we do so, because the Queen’s Speech promises more of the same. This could have been the Queen’s Speech that ended austerity once and for all, but it certainly does not do that.

This is the record that the Chancellor says he is proud of. Is it a matter of pride for the Chancellor that nearly one and a quarter million food parcels were handed out in food banks over the past year? Are we proud of a Government who cannot feed their population? How can anyone be proud of the fact that more than 77,000 households—an almost 8% increase on last year—were in temporary accommodation this year? How can anyone be proud of the 134% increase in the number of people sleeping rough in this country? There are now 1.2 million households on waiting lists and 70,000 of our children are being brought up in temporary accommodation, while house building has fallen to its lowest level since the 1920s.

[Chris Williamson (Derby North) (Lab)]

Is my right hon. Friend aware of research by Professor Danny Dorling stating that Britain is the second most unequal country of the richest 25 nations on earth? [Interruption.] It is not rubbish; it is a fact based on research by an eminent professor. Is my right hon. Friend aware that if we continue on the same trajectory, Britain is on course to be the most unequal nation on the planet within the next decade?

[John McDonnell]

One of the warnings from the Institute for Fiscal Studies is that inequality will increase on such a scale if the Government’s austerity programme continues. Are Government Members really proud that we have a Government who cannot adequately house their population?

[Vicky Ford (Chelmsford) (Con)]

Will the right hon. Gentleman give way to a new Member?

[John McDonnell]

Certainly. Let me just finish this paragraph and then I will come straight to the hon. Lady.

Can the Chancellor be proud that 4 million children in this country are trapped in poverty? It is not just children; the latest figures show that 14 million people in the UK are living in poverty, including 2 million pensioners, the very people the Conservatives were going to hit with the end of the triple lock, means-testing for winter fuel payments and the introduction of a dementia tax.

[Vicky Ford]

The right hon. Gentleman talks about things that we should be proud of. According to the Office for National Statistics just this week, the UK has the fifth lowest level of persistent poverty of anywhere in Europe. Unlike when the last Labour Government were in power, when more than 1 million people had no job or education, we now have one of the lowest youth unemployment levels anywhere in Europe. Are those not statistics that we should be proud of?

[John McDonnell]

I find it astounding that there can be that sort of complacency when we have such levels of poverty, homelessness and, yes, people going without food. People have to choose between heating and eating every winter.

More than 80% of the Government’s austerity measures have fallen on women, but some of the hardest-hit people in the Chancellor’s record of pride have been disabled people. According to the Joseph Rowntree Foundation, almost half of those in poverty are disabled or live in a household with a disabled person. The brutality of the work capability assessment has now been associated with 590 suicides.

[Stephen Timms (East Ham) (Lab)]

Does my right hon. Friend share my dismay at the growing rate of child poverty in the UK? Has he seen the prediction by the Institute for Fiscal Studies that by the end of this Parliament, on the current trend, the rate will by well over one third—even higher than the catastrophic level that the Labour Government inherited in 1997?

[John McDonnell]

We are returning to a society of grotesque inequalities and poverty among some of the most vulnerable. How can anyone claim that as a proud record?

Is it a record to be proud of that the Chancellor’s cap on public sector pay has contributed to wages falling by 10% since 2008? We have witnessed the longest fall in wages on record. Nearly 6 million people earn less than the living wage. People were shocked when the Royal College of Nursing revealed that nurses’ pay had fallen by 14%, which has forced some nurses—yes, nurses—to rely on food banks.

[Gloria De Piero (Ashfield) (Lab)]

In Ashfield, average weekly earnings are below the national and regional average. The Government have made attempts to help to create and protect jobs, such as through the regional growth fund, but not a penny of that money has gone to my constituency. Is it any wonder that so many of my constituents feel that the Government have forgotten them?

[John McDonnell]

We talk about people being left behind, but it is whole communities across the country that have been left behind.

[Charlie Elphicke (Dover) (Con)]

The right hon. Gentleman is making the case for spending more money. His party’s manifesto included pledges to spend billions more, and that money would be borrowed. What does he have to say to homeowners who would face higher interest rates as a result of his policies?

[John McDonnell]

By wanting to invest for the long term to turn our economy around and grow it, I was following the advice of a whole range of economists. I also took into account advice that was provided to us from quite a surprising source:

“Now is a good time to invest in genuinely productivity-enhancing infrastructure, and to take advantage of low borrowing costs and our ability to borrow”—

that was the Chancellor of the Exchequer.

Is it something to be proud of that the UK is the only major developed country that has seen economic growth but falling wages? Yesterday we had the absolute chaos of W-turns, S-bends or whatever they have been described as from No. 10 and the Treasury over hints that the pay cap was to be scrapped. It was a disgrace that the coalition of the Tories and the Democratic Unionist party last night voted down our amendment to support public sector workers simply securing a fair pay rise. I will be happy to give way to the Chancellor if he will confirm whether the pay cap is to be lifted and if public sector workers will now get a fair pay rise. Would he like to respond? No. We need that assurance as soon as possible. Ministers are quick to praise the devotion and bravery of our emergency services in the aftermath of tragedies, as we have seen in recent weeks, but last night they could have extended their generosity to giving those brave, conscientious men and women the decent pay rise that many of them need if they are to be lifted out of poverty.

[Geraint Davies (Swansea West) (Lab/Co-op)]

My right hon. Friend will be aware that both the International Monetary Fund and the OECD have said that there is a relationship between inequality and growth—namely, the more inequality, the less growth. Does he not agree that it is not just unfair but unwise to pursue a policy that has led to Britain having the greatest inequality in Europe, rising at the fastest rate? If we were fairer, there would be a bigger cake with fairer shares for all.

[John McDonnell]

Virtually every mainstream economist now, and most mainstream economic institutions, argue that a fairer society is more economically efficient and more sustainable in the long term. That is not what the Chancellor’s supposed record of pride has delivered.

[Chris Stephens (Glasgow South West) (SNP)]

Is the shadow Chancellor aware that 25% of posts in the national minimum wage compliance unit are lying vacant? Is that not one reason why minimum wage compliance is so weak?

[John McDonnell]

The hon. Gentleman currently chairs the Public and Commercial Services Union parliamentary group, which I previously chaired, and we have campaigned on that point for seven years. If we cannot staff up the unit that is meant to carry out inspections and ensure compliance with the minimum wage, how can we expect the minimum wage to be paid fairly?

Let us look at the desperate state of our public services. How can anyone in government take pride in the fact that spending per pupil is set to fall by 8% by 2019-20? More than 46,000 children’s operations have been cancelled over the past four years. Police numbers have been cut by 20,000 since 2010, firefighter posts have been cut by 10,000, and 20,000 soldiers have been cut from the Army. A record of pride? I don’t think so.

So we have a Government who cannot feed their people, house their people adequately or protect their children and older people from poverty. They cannot ensure that when people go to work they earn enough to live on, and they cannot maintain our basic public services. They are a Government who do not deserve to remain in office.

[Dr David Drew (Stroud) (Lab/Co-op)]

Does the shadow Chancellor agree that it is a scandal that local authorities that have retained their council stock—the Government and the Opposition agree, post-Grenfell, that we need more council housing—are faced with having to pay back money because of the bizarre and byzantine housing finance rules, even though they have built houses? Does he agree that we need to get rid of that scandal as soon as we possibly can?

[John McDonnell]

The housing situation in our country is in dire straits because of the lack of building. That is why in the popular Labour party manifesto, we promised to build 1 million new homes—half of those to be council houses—and to free up local governments to perform their traditional role of putting roofs over the heads of local people.

All this suffering by ordinary people under austerity, so as to protect the rich and the corporations, has been for what? By the Government’s own metrics it has significantly failed. The Government promised that the deficit would be eradicated in five years, but now it will be 15 years at best. They have added £700 billion to the national debt, leaving £1.7 trillion of debt for future generations. In the first quarter of this year growth fell to 0.2%, and inflation has now increased to 2.9%. Last year saw the slowest rate of business investment since 2009. Unsecured debt per household will reach a record high this year.

[James Duddridge (Rochford and Southend East) (Con)]

During the election, Labour made more than £105 billion worth of promises. If the right hon. Gentleman were to be Chancellor of the Exchequer, when would he expect the deficit to be repaid?

--- Later in debate ---

[John McDonnell]

Interestingly, Labour was the only political party that published a costed programme. I repeat: the only numbers in the Tory manifesto were the page numbers—nothing more. We will send the hon. Gentleman a copy of the costing booklet—I thought he had already received it but clearly he has not. We increased our expenditure by £48.6 billion, and that is covered by a range of revenue sources, all of which are identified and advised on, and ensure that day-to-day expenditure is covered. The IFS told us that we would comply with Labour’s fiscal credibility rule, reducing the overall deficit over a rolling five-year programme, and reducing the debt within that period.

[James Cleverly (Braintree) (Con)]

Will the right hon. Gentleman give way?

[John McDonnell]

I will come back to the hon. Gentleman.

It is not only the Labour party that highlighted the consequence of the Tories’ failed economic approach. Last week the Governor of the Bank of England warned of “weaker real income growth”. He spoke about “markedly weak investment” and “rapid consumer credit growth”. Worryingly, he warned that the extent to which the UK’s current account deficit has moved closer to sustainability “remains open to question”, as we continue to rely on what he describes as the “kindness of strangers” to fund us.

[Rachel Reeves (Leeds West) (Lab)]

The shadow Chancellor mentions comments by the Governor of the Bank of England. Like the shadow Chancellor, the Bank is concerned about the rise in household debt, which is now 142% of GDP, with unsecured borrowing rising 10% just last year. Does the shadow Chancellor share my concerns that household debt reflects the falling real wages that we have seen under this Government, and that it spells problems for the future and households being able to sustain current levels of spending?

[John McDonnell]

I will come on to that. Household debt is at a record level. Why? Because wages are so low, yet housing costs, and other costs with inflation rising, are biting hard for working families. It is no wonder that they have to resort to increased levels of debt just to get by. Those are the JAMs—the “just about managing”, who were supposed to be protected in the last Budget.

[Julian Knight (Solihull) (Con)]

Does the shadow Chancellor understand the very basic economic point that the ability to borrow relies on confidence? If the individual institution that is lending someone money has no confidence that they will be able to repay it, the interest rate will go up. If we do not have the correct economic policy in place for the correct borrowing, we will end up with higher interest rates.

[John McDonnell]

I am not sure that that adds to the sum of human knowledge.

[Alison McGovern (Wirral South) (Lab)]

In response to the intervention from the hon. Member for Solihull (Julian Knight), does the shadow Chancellor think that the Tory Brexit mess has been good for confidence in the UK economy, or less good for confidence in the UK economy?

--- Later in debate ---

[John McDonnell]

Sometimes we can be bemused by interventions from Government Members, and I find it bemusing that they have got us into a Brexit mess, they have called an unnecessary general election, they have an unstable Government, yet they talk to us about confidence!

Let me quote a few other comments and I will try to move on quickly—I see you are getting worried about time, Mr Deputy Speaker. The Bank of England’s chief economist said last week that 7% of our entire workforce could be on zero-hours contracts within a decade. The director of the Institute for Fiscal Studies called the low wage growth in this country “completely unprecedented.” The IFS also referred to

“unacknowledged risks to the quality of public services”

under the Conservatives, and judged that their austerity plans would be so harsh as to be potentially undeliverable.

What is the Government’s response? It is a Queen’s Speech devoid of any serious measures to address the economic challenges facing this country and the pressures that ordinary people and our public services are under. Austerity will continue to impact on our schools, our health service, emergency services, and people’s living standards. In the autumn Budget it will be interesting to see how the Chancellor covers the black hole derived from his last disaster of a Budget. We are aware of at least £2 billion, and according to some commentators it could grow to anything up to £7 billion. It would be particularly helpful if the Chancellor explained today how he covers the cost of the £1 billion grubby bribe to the DUP to keep his party clinging on to office. That is £100 million a vote. If I were a Tory Back Bencher, I would want to start negotiating a slice of that action.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman accept that his party has a lot to tell us about grubby bribes in the form of letters to terrorists to get them off their murder charges and so on? What is grubby about money put into the infrastructure of Northern Ireland to promote jobs, or money going into the health service in Northern Ireland or the education system? What is grubby about that?

[John McDonnell]

I will tell the hon. Gentleman what I think is grubby—[Interruption.] Sorry—I thought he was sitting on the Government Benches; I didn’t realise. What is grubby is that if we were to abide by the rules of our system, and the Barnett formula in particular, England would get an additional £59 billion, Scotland £6 billion, and Wales £3 billion. After the miraculous discovery of funds for the DUP deal, in future I do not expect to hear much more about magic money trees from the Government Benches. One billion pounds was found for the DUP, but there is nothing to address the fundamentals of our weak and precarious economy, which as my hon. Friend the Member for Wirral South (Alison McGovern) said, is now faced with the challenges of Brexit.

Increasingly, people are waking up to the fact that a Government lacking—what can I call it?—a strong and stable leadership, are incapable of securing a deal that protects our jobs and economy. There are divisions at the top of Government, a Cabinet divided, and rows between members of the Government and their own negotiating team are breaking out on a daily basis as they position themselves for their own leadership challenges. As a result, we witness weekly changes of direction in the Government’s negotiating stance, including even by the Chancellor. Only weeks ago the Chancellor was threatening no deal, walking away to set up the UK as a tax haven off the coast of continental Europe. Now it is reported that he is potentially looking to the customs union, and a long and uncertain transitional period. Only months ago, he went along with the Government prioritisation of immigration control over the protection of jobs. Now he claims to want a jobs-first Brexit.

[Nicky Morgan (Loughborough) (Con)]

It has taken the right hon. Gentleman 33 minutes to get to this country leaving the European Union, which is the defining issue affecting our economy. He talks about divisions. He might want to think about the 100 Members of his own party who have been through the shadow Cabinet during the course of the previous Parliament. He might also want to ask questions about the lamentable performance of his leader, and his Back Benchers might want to ask him questions about his lamentable performance in the EU referendum last year. If they felt that strongly about Brexit, they would have defended our membership of the EU.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I hope to call the right hon. Lady very early on and save her speech until then rather than now. That will help everyone.

[John McDonnell]

It was a great speech, though. I am quite used to throwing red books about in this place. I will send the right hon. Lady a copy of the manifesto my party is united behind.

[James Cleverly]

United!

[John McDonnell]

Yes, united behind. I am proud to say it.

The failed and deeply unpopular austerity programme, the deeply divided rudderless Cabinet, the directionless Brexit negotiation strategy and a contentless Queen’s Speech surely confirms it is time for this Government to now go. It is time for change. Our amendment addresses the change that is needed. As the Labour party demonstrated during the general election campaign, there is an alternative. We can address the deep-rooted problems our economy faces. The Labour party has forged ahead with a serious credible alternative to the Government’s failed approach. Our society can afford decent public services. We are the fifth-richest economy in the world. If we have a fair taxation system, we can end the cuts to schools’ budgets. We can end the horrific sight of children sleeping on chairs in hospital corridors. We can end the bedroom tax and the punitive benefits sanctions regime. We can do that, as the IFS confirmed, while remaining on target to eliminate the budget deficit in accordance with our fiscal credibility rule.

It is not just about a fairer taxation system. We need a Government to invest what is needed to secure our future: not the derisory numbers floated by the Chancellor in the autumn statement with so little to back them up, but a serious, long-term vision of the economy that tackles the regional disparities and the changes taking place in the labour market. We need a Government committed to driving up productivity by increasing investment, as demanded by the CBI and many others, and to delivering a serious industrial strategy. It is a transformative programme that we look forward to implementing in government shortly.

This Queen’s Speech does nothing to solve these problems. It confirms a Government isolated from the real world in which our people live. Labour’s amendment today sets out the alternative our country so desperately needs. I urge all hon. Members to support the amendment.

--- Later in debate ---

[Mr Hammond]

I will in just a moment.

Then there is the nationalisation programme. Let me explain these plans, Madam Deputy Speaker, because they are important. The Labour party wants to nationalise gas and electricity, water and Royal Mail. They would borrow a fortune to do it, and it would deliver no economic benefit whatsoever.

First, a Labour Government would have to buy up the shares of publicly listed companies on the stock exchange. Taking over just the single largest company in each sector would cost close to £44 billion, and the Government would have to pay a market premium on top, because a programme to buy the shares would drive up the price. Moreover, the taxpayer would take on those companies’ debts; that is another £26 billion. So that is £70 billion of public debt. When the Labour Government were done with the publicly listed companies, they would have to strike deals with scores of private investors and funds to buy the rest. All told, we are looking at more than £120 billion. [Interruption.]

The right hon. Member for Hayes and Harlington says from a sedentary position, “You do not understand. It is a financial transaction, so it does not need any money, and it does not require us to go out and borrow any.” He is simply wrong. Financial transactions add to public debt—[Interruption]—and that is before we even get to the railways, which he has been chuntering about. I have deliberately left the railways out of my equation, because his proposals for those are more complex.

[John McDonnell]

The right hon. Gentleman fails to understand that we will gain an asset when we take over the railways. It will give us an income that will cover any borrowing costs, and as the franchises drop out, it will be cost-free.

[Mr Hammond]

So the proposition is this: would I entrust an asset to the right hon. Gentleman? Would I lend him the money to buy that asset, on the assumption that he would be able to produce an economic return by operating it? Let me ponder on that one, Madam Deputy Speaker.

[John McDonnell]

It will be managed by the people of this country, in whom I have confidence, not by the profiteers whom the right hon. Gentleman represents.

[Mr Hammond]

Let us test that proposition. When these industries were last in public ownership, who were they managed by? They were managed by intervening, interfering politicians and their buddies in the trade unions.

--- Later in debate ---

[John McDonnell]

It was increased under George Osborne and then cut back again. Let me remind the Chancellor of the Financial Times survey that found that the measures on tax evasion and avoidance introduced by Gordon Brown were 10 times more effective than anything that this Government have done.

[Mr Hammond]

Let me do the maths. Hmm, it would be £1.5 trillion that they raise. Perhaps one of my hon. Friends will check down the back of the Treasury Bench in case the previous Chancellor hid that away down there. As usual, the right hon. Gentleman is talking absolute nonsense.

--- Later in debate ---

[John McDonnell]

George never gave it back to me.

[Nicky Morgan]

I am sorry that his copy has not been returned; somebody watching this might do him that favour.

It is worth remembering that the economy underpins everything that any Government or Ministers want to do. Job security is fundamental to overall security for individuals. The Chancellor mentioned in his remarks the part of the Queen’s Speech that talks about the Government strengthening the economy so that it supports the creation of jobs and generates the tax revenues needed to invest in the NHS, schools and other public services. The “so that” is important. I describe myself as a one nation Conservative—that is how most on the Government Benches would describe themselves, I think. That means policies that work for the whole nation, for people of all ages, all backgrounds and all educational experiences, including those working very much in the public sector. The Chancellor also rightly talked about the importance of making tough choices for the future, thinking about intergenerational unfairness but also about sustainable funding for our essential public services.

The challenge on the Government Benches is to explain—not just here, but to our constituents and the country—why we are intent on balancing our budget as a country, why it is not right to pile debt on the next generation and why we need to clear the deficit. Sometimes we are too ready to talk about numbers and throw millions and billions of pounds around, without remembering that there are people working hard to pay their taxes to allow Ministers to have money to spend on various things.

The Chancellor rightly talked about the progress made in the past seven years: 4 million people taken out of paying tax completely and 31 million paying less tax. The key distinction between the Conservative and Labour parties is that we believe that people should keep more of the money that they earn; the Government do not always spend money wisely, and people should be left to make their own decisions about how they spend and what they spend on. The Chancellor also rightly highlighted the jobs created in the past seven years—2.9 million jobs secured since 2010. He also mentioned that income inequality was at a 30-year low.

I turn to my second point. It took the shadow Chancellor 33 minutes to get on to the important topic of Brexit, which will be the defining issue for this House over the next few years. If we do not deliver a successful exit from the European Union, our constituents will have something pretty negative to say when we next knock on their doors. I agree with the Chancellor that people did not vote last year to become poorer. I am tempted by amendment (g), although I will not support it because I do not think the drafting is right. However, it is important that the Government know that Members on both sides of the House want to hear more, sooner rather than later, about proposed transitional arrangements. If we are not to be a member of the single market or the customs union, how do we get the same access or benefits? How do we avoid a negative impact on our GDP as a result of our departure?

I welcome Government moves to address issues raised in amendment (d) this afternoon, about the access of women from Northern Ireland to abortions. That reflects what the right hon. Member for Doncaster North was talking about: building a broad consensus in this House on issues that we all care about and that our constituents tell us they care about. Frankly, there needs to be a lot more of that in this Parliament.

The next thing I welcome in the Queen’s Speech is the emphasis that the Prime Minister has rightly put, from the first days of her premiership, on tackling the mental health challenges in this country. Poor mental health is estimated to cost our economy £100 billion per year. We have to do better than that.

This is going to be an unusual Parliament. My party is in an unusual and unexpected position. We can provide the stability and certainty for the country, but we will need to build a consensus on the issues affecting this country. The challenges are continuing to grow a successful economy; leaving the European Union; tackling extremism; and addressing the issue of housing—and that is only a brief selection.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 18th April 2017 Commons Chamber

[Mr Hammond]

I do not recognise the picture that the hon. Gentleman paints of my position. I have stood at this Dispatch Box on countless occasions and lamented the fact that Britain has a poor productivity record—worse than Germany’s, and worse than those of the United States, France and Italy—but simply lamenting that fact is not enough. What we must do is put together a plan for tackling it, and it will be a long—

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

Seven years.

[Mr Hammond]

If the right hon. Gentleman checks the records, he will discover that this problem has existed for 40 years. It would be better if we tried to tackle this challenge in a spirit of bipartisan recognition and if we both recognised that there is a real problem that we have to tackle by investment in infrastructure, by investment in skills and by actions to spread growth and prosperity across the country.

[John McDonnell]

Seven years.

[Peter Dowd]

Yes, seven years.

Although the £6 billion investment for a new two-mile lower Thames crossing is welcome, how does such imbalanced infrastructure spending help to close the economic gap of regions outside London and the south-east? Does not that simply reaffirm the Government’s pathological incapacity to see much beyond the M25? I will be happy to buy the Chancellor a satnav if he wants to take the opportunity to use it.

--- Later in debate ---

[The Financial Secretary to the Treasury (Jane Ellison)]

Agricultural land and buildings are, of course, exempt from business rates, although I know my hon. Friend was talking in particular about some of the capital allowances. We are committed to a capital gains tax system that supports investment and growth right across the economy, which is why at Budget 2016 we reduced CGT rates from 28% to 20%, and from 18% to 10% for gains on most assets. Owners of agricultural businesses benefit from the same CGT rates and reliefs as other business owners.

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

As you know, Mr Speaker, this morning the Prime Minister called a general election. She is breaking her commitment not to hold an early election, which was made only weeks ago. She has blamed Brexit, she has blamed our European neighbours and she has blamed the Opposition parties, but the real truth is that after seven wasted years of failure the Tories have failed to close the deficit; they have added £700 billion to the national debt; pay has fallen behind prices; 4 million children are growing up in poverty; our schools are in crisis; more people than ever are on NHS waiting lists; more families are homeless; and more elderly people are not getting the care they need. Will the Chancellor use this last opportunity before the election to apologise to the British people for the utter failure of this Government’s economic policies and for the pain he has inflicted on this country?

[Mr Philip Hammond]

The right hon. Gentleman has some brass neck to stand there and accuse us of having failed to eliminate the deficit, given that his policy is to add another £500 billion to it overnight. The British people understand very well what is going on here: we have a Conservative Government who are maintaining growth, and who have got unemployment down and record levels of employment, and a steadily closing deficit; and we have a Labour party which remains as fiscally incontinent as ever and which, if given a chance, would wreck this economy once again.

[John McDonnell]

There we have it: not one word of apology—no contrition whatsoever—from a Chancellor who has broken his promises to the British people and is still failing to deliver on a manifesto on which he was elected only 23 months ago. The Government are entering this election having scheduled £70 billion-worth of tax giveaways—for whom? It is for the super-rich and for the corporations, and is over the next five years. The Government are entering an election with a £2 billion unfunded black hole in the Budget the Chancellor delivered only a few weeks ago. So will he now use this opportunity before the general election to put on the record that his party will rule out raising VAT and rule out raising income tax? Will he commit unequivocally to support legislation to protect the triple lock? If the Tories cannot be straight with the British people, Labour will be.

[Mr Hammond]

The truth is that promises made from the Opposition side of the House are not worth the paper they are written on. The voters, pensioners and workers of this country understand that very well, and they will give their verdict on Labour’s promises on 8 June.

Money Laundering: British Banks

John McDonnell Excerpts

Tuesday 21st March 2017 Commons Chamber

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

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on allegations of money laundering against British banks.

[The Economic Secretary to the Treasury (Simon Kirby)]

We want our financial institutions to lead the way in the global fight against money laundering. This is not only a question of financial crime, with illicit finance used to fund serious organised crime groups, as well as terrorist organisations; this is about keeping our citizens safe. That is why the Government are going to do what it takes to prevent the practice and pursue anyone who might seek to abuse our financial system.

The Financial Conduct Authority and the National Crime Agency take any such allegations seriously and will investigate closely whether recent information from The Guardian newspaper—or, indeed, any other media source—regarding money laundering from Russia would allow the progression of an investigation. Beyond that, we need to ensure that sophisticated criminal networks cannot exploit our financial services industry.

This Government already do more than any other to tackle the global threat of money laundering. Since 2010, we have seized £1.4 billion in illegal funds and put hundreds of millions more beyond the reach of criminals. We have set up the Panama papers taskforce and we hosted the global anti-corruption summit last year. Now, we are preparing the most significant changes to our anti-money-laundering and terrorist finance regime in over a decade. We are strengthening the rules to put the UK at the forefront of international efforts to crack down on money laundering, with new regulations coming into force by the end of June. We are also bringing in a landmark piece of legislation in the form of the Criminal Finances Bill. That will allow banks to share more information than ever to help to uncover money laundering. It will also give law enforcement agencies new powers to bring criminals to justice.

However, domestic changes alone are not enough in a world of global criminal networks, which is why we are working closely with our international partners to stand up to this threat together. Work continues apace in groups such as the G20 and the Financial Action Task Force, whose membership includes all the world’s leading financial centres. We have led the way in getting more than 90 countries to exchange data on offshore accounts and to uphold the global standard of tax transparency. We are determined to make the UK the most difficult place in the world for international crime networks to channel their finances through, and we will not relent in our efforts to do that.

[John McDonnell]

I hope that the Minister recognises the immense gravity of the situation that we are facing, because I believe that his statement reflects complacency on the part of the Government. Let me go through the allegations, which are of the deepest concern. First, it is alleged that, via an operation referred to as the “global laundromat”, banks based in Britain have been used to launder immense sums of money obtained from criminal activity in Russia linked to the FSB spy agency there. This appears to point to an overwhelming failure of basic management on the part of the banks. One of those banks, HSBC, is an institution that has previously faced money laundering charges in the US and across the globe. The direct intervention of this Government helped to block a 2012 US investigation on the purported grounds of its potential risk to financial stability. Money laundering through London and elsewhere threatens the stability of our financial sector and our economy.

In the case of another bank, RBS, the Government directly own a 72% stake. A third bank, Barclays, has been under investigation for its role in LIBOR rigging. Will the Minister give us specific details of what steps are being taken to address this scandal? Can we have an assurance that there is the potential to open criminal proceedings to break up what is effectively a criminal network? Will the Government also undertake that they will not—as they have in the past with HSBC—attempt to intervene in criminal or other investigations taking place elsewhere in the world? The major risk to financial stability is not from investigations intended to clear out criminal activity from our banking system; it is from inactivity on the part of the Government and others, and from failing to act to ensure that our major banks are clean and fit for purpose.

Secondly, all those banks claim to have strict internal policies to deal with money laundering. The Financial Conduct Authority places great stress on the need for banks to self-police and create appropriate internal procedures to prevent money laundering. It is obvious from today’s revelations, however, that the current arrangements are not working to prevent widespread, organised and sophisticated criminal activity. Will the Government tell the House what steps they will be taking to address this matter with the FCA? Will the Government today commit to opening an inquiry with a view to reporting rapidly on measures to be taken that will strengthen the regulations, including introducing tighter controls on and closer monitoring of the banks themselves?

Finally, when the Government own major stakes in the banks involved—RBS in particular, since they are no longer able to sell off that stake—there is an immediate need for them to reassure taxpayers that publicly owned banks are not indirectly involved in criminal activity. What steps will the Government, as a major shareholder in RBS, take to investigate the allegations against it and to reassure taxpayers? Our banks have been found wanting yet again. Urgent action is needed from the Government to protect the standing of our finance sector and to protect our economy. Complacency and inaction are not good enough.

[Simon Kirby]

I assure the right hon. Gentleman that the Government are far from complacent. As I outlined earlier, we have been updating the UK’s money laundering regulations, and I hope that the Criminal Finances Bill, which is currently in the other place, will receive Royal Assent in the near future, creating new powers for enforcement agencies. The FCA takes misconduct seriously and fined Deutsche Bank £163 million only last month. As for whether we should be telling the independent FCA or the NCA what to do, it is worth saying that if the information reveals new findings, the FCA will be able to investigate accordingly. It would not be appropriate for me to comment on potential legal proceedings.

Class 4 National Insurance Contributions

John McDonnell Excerpts

Wednesday 15th March 2017 Commons Chamber

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

This is chaos. It is shocking and humiliating that the Chancellor has been forced to come here to reverse a key Budget decision announced less than a week ago. If the Chancellor had spent less time writing stale jokes for his speech and the Prime Minister less time guffawing like a feeding seal on the Treasury Bench, we would not have been landed in this mess.

Let us be clear: this was a £2 billion tax hike for many low and middle earners, and a clearcut and cynical breaking of a manifesto promise. Sickeningly, at the same time as the Chancellor was cutting taxes for the rich and corporations, large numbers of self-employed people have been put through the mangle over the past week, worried about how they would cope with this tax increase, yet today there is not a word of apology. Nobody should be too arrogant to use the word “sorry” when they blunder so disastrously.

Let me thank all those who helped to force this reversal. My right hon. Friend the leader of the Labour party was the first to raise the matter in his response to the Budget. Labour MPs, many other Members across the House, the Federation of Small Businesses and several trade unions forced the Chancellor to see sense, but this blunder has consequences that he now has to address. The £2 billion that would have been raised was to go some way to tackling the social care crisis. We need to know where these desperately needed funds will come from now. We need guarantees from the Chancellor that no working people will be hit, either now or in the autumn statement, with stealth or other tax rises, and that there will be no further cuts to public services to pay for this blunder.

The Prime Minister and the Cabinet would have been briefed on the contents of the Budget in advance. Did the Prime Minister or any Cabinet Member raise their concerns with the Chancellor before he announced the measure? The Chancellor has announced a review. We need him to set a clear deadline for that review, and to give a commitment that its findings will be reported and debated on the Floor of this Chamber. We need him to address the real issues facing the self-employed: the scourge of bogus self-employment; the exploitation that goes on under that guise; the pressure from large corporations to reduce costs relating to the self-employed unrealistically; the problem of late payments; the lack of access to maternity pay; no paternity pay; no adoption pay; no sick pay; no compassionate leave; and no carer’s leave. That is the real agenda that should have been addressed last week, not tax hikes.

We welcome this reversal, but we now need an honest and forthright commitment that the self-employed agenda will be addressed. These people are the engine of our economy. They deserve to be respected, not attacked in the way they were seven days ago.

[Mr Hammond]

To echo what my right hon. Friend the Prime Minister said in Question Time, I am rather reluctant to take lessons from the right hon. Gentleman on anything except, perhaps, chaos theory; he certainly knows something about that. He talks about being forced to make a decision. We have listened to our colleagues and the voices of public opinion. In my view, that is how Parliament should work. We listen to what our colleagues say and make our decisions based on that. As I said to the House a few moments ago, we remain clear that the issue needs to be addressed. We have recognised that there is a legitimate view that the commitments that were made need to be interpreted widely; we have said that we will interpret them in that way and not go ahead with any national insurance contributions increases in this Parliament.

The right hon. Gentleman mentioned the leader of the Labour party, who, apart from in his performance today at Prime Minister’s questions, has scarcely mentioned class 4 national insurance contributions; he scarcely did so in his response to the Budget. I do not know whether the right hon. Member for Hayes and Harlington (John McDonnell) is even aware of this, but the Labour party actually has a self-employment commission, which it established last November. At the time it was established, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), the shadow Secretary of State for Work and Pensions, acknowledged the need to address the discrepancies in access to entitlements and the contributions that pay for them. Despite the understandable tone of the right hon. Member for Hayes and Harlington, I hope that he agrees that, on the substantive underlying issues, there is a significant degree of agreement across the House that there is a discrepancy and a threat to the tax base that will have to be addressed over time.

The right hon. Gentleman talks about additional benefits for the self-employed. Of course we will review the issues around parental benefits, as I said in the Budget—we will actually take the review wider than that—but I hope that he agrees that if additional benefits are to be made available, we will have to look at how to pay for them, and it will not be done by borrowing half a trillion pounds that the country cannot afford and our children will be left paying for.

--- Later in debate ---

[Mr Hammond]

The straight answer to my right hon. Friend is that only in the la la land that the Labour party occupies is that trick possible. Of course, my right hon. Friend is right to draw attention to the issue, and I emphasise again my commitment in this Budget to fiscal neutrality—the right hon. Member for Hayes and Harlington, of course, does not believe in fiscal neutrality.

[John McDonnell]

Oh, dear me. You just, in a week, reversed a decision—

--- Later in debate ---

[John McDonnell]

Read your own manifesto.

[Mr Hammond]

I am listening carefully to the right hon. Gentleman, but I am not hearing anything worth listening to.

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.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 28th February 2017 Commons Chamber

[The Chief Secretary to the Treasury (Mr David Gauke)]

The Government are taking forward plans for the lower Thames crossing and major road upgrades, such as at junction 5 on the M2. We are also establishing a Thames estuary 2050 growth commission, which will set out a vision for development in the area.

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

Last week, the Government snuck out a statement on regulations denying 150,000 disabled people access to personal independence payments awarded by the upper tribunal. That was brutal. Last year, the previous Chancellor absorbed the costs when the Government were forced to halt cuts to personal independence payments to disabled people. In this case, are those disabled people being denied benefits because the Chancellor has refused to absorb the costs resulting from the upper tribunal decision?

[Mr Philip Hammond]

What we are doing is restoring Parliament’s original intention for the payments, ensuring that they go to the people to whom they were intended to go and that the benefits cap, which is in place as part of our fiscal rules, is able to be met.

[John McDonnell]

One of those people contacted us. She has type 2 diabetes, fibromyalgia, depression, and anxiety. As a result of the Government’s action, she will now not be extended the support that the courts awarded her. It is clear from last night’s announcement of further austerity measures for Departments that the Government are all about forcing Departments to meet the Chancellor’s spending targets so that he can pay for further tax giveaways to the wealthy. Will he rule out further unfair tax giveaways, such as cutting the top rate of income tax to 40p in this Parliament? Otherwise, it is clear that he wants tax giveaways for the wealthy few and austerity for the most vulnerable in our society.

[Mr Hammond]

The right hon. Gentleman will have to wait until next week to find out what my proposals are, but let me be clear that we have no plans for further welfare reforms in this Parliament. However, the reforms that we have already legislated for must be delivered, and Parliament’s original intent in legislating for those reforms has to be ensured.

Charter for Budget Responsibility

John McDonnell Excerpts

Tuesday 24th January 2017 Commons Chamber

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

The motion before the House rewrites the rule by which the Government intend to manage their fiscal policy, as the Chancellor has set out. This rewriting is urgently needed because the Government’s previous fiscal rule lies in tatters. As we argued when the old rule was introduced in November 2015, it was a political device rather than a sound economic tool.

We argued that the commitment in the previous version of the charter to reach a budget surplus by the end of the decade was unachievable. That became obvious by the Budget of last year, when the previous Chancellor had to stretch budget accountancy to breaking point simply to claim that the economy was still on course to achieve the target. That was well before the referendum. By the summer, the target had to be abandoned entirely. It was dropped because the surplus target was never about sound management. No credible economist could be found to support the surplus target because it had no plausible economic justification. The Treasury Committee rightly concluded that the old surplus rule was not

“credible in its current form”.

The previous Chancellor made a political choice to impose the surplus target. Therefore, the austerity measures that the target required were not just cruel, but unnecessary. Members will recall that those measures meant that people living with disability were suddenly threatened with the loss of their independence, and those going to work, doing the right thing, looking after their children and just attempting to get by were suddenly faced with serious cuts to their income. The tragedy is that all those sacrifices and all that suffering were in vain.

The record of this Government in office speaks for itself: at the same time as imposing grinding spending cuts, they have added, as of this morning’s figures, almost £700 billion to the national debt. That is not just more than the previous Labour Government borrowed; it is more than the borrowing of every post-war Labour Government added together. It is equivalent to £25,600 of extra debt for every household in the country.

[Mr Philip Hammond]

For clarification, will the right hon. Gentleman confirm that it is still his policy to borrow another £500 billion on top of that?

[John McDonnell]

That is interesting; I am pleased the Chancellor has raised that point. We have seen £700 billion borrowed over the last seven years as a result of economic failure. The Labour party’s policy, based on the recommendations of the CBI and others, is to spend £500 billion on investment over a decade. There would be £200 billion of mainstream direct funding and £100 billion would go to a national investment bank, which would prise from the private sector and elsewhere, on European Investment Bank rates, £250 billion. Such long-term investment in our economy has been recommended. Infrastructure investment is required to tackle the productivity crisis that has been caused by his Government.

[Kit Malthouse (North West Hampshire) (Con)]

I am a little confused and wonder whether the right hon. Gentleman can clarify things. He has just decried the fact that our national debt has increased by £700 billion. Is he saying that he would not have spent that £700 billion? Would he maintain the current deficit and spend £500 billion on top of that? I am not quite sure of his maths.

[John McDonnell]

We would have invested from the beginning in our infrastructure and skills, so we would have grown the economy and would not have had to borrow £700 billion for failure, rather than for growth success. Because the focus of the Government was on chasing an unachievable surplus target, they did not use the borrowing wisely. The sound policy, as recommended by international organisations such as the International Monetary Fund and the OECD, and by the CBI and the TUC here in Britain, is to put the Government to work in supporting investment. Instead, over nearly seven wasted years, the Government have cut investment to the lowest level in a decade.

[Mark Field]

The right hon. Gentleman is right that we have borrowed a hell of a lot of money, probably too much, since 2010—£700 billion—but does that not give the lie to the idea that there has been grinding austerity? We have borrowed a huge amount of money and struck a balance in trying to maintain welfare. One of the most insidious forms of investment under the last Labour Administration was the public-private partnership and the private finance initiative, much of which we will be paying off for decades to come—a colossal amount of so-called investment that actually is just adding more to our ongoing debt.

[John McDonnell]

The right hon. Gentleman will recall my opposition to PFI and its failures, but let me be clear: to borrow for investment, to ensure that people have the skills and resources necessary to tackle the productivity crisis and thereby grow the economy and create the high skills and wages which mean that people can pay their taxes and fund our public services, is creditable; however, what we have seen over the last seven years is borrowing because of the failure of the Government’s economic policy.

In the past seven years, the Government have actually cut investment, and the consequences of insufficient investment are painfully clear. Austerity measures and low investment have fed directly into what the Governor of the Bank of England has called a “lost decade” for earnings. Productivity growth has stagnated, as even the Government’s own industrial strategy White Paper acknowledged. I share the Chancellor’s concerns: every hour worked in Britain now produces a third less than every hour worked in the US, Germany and France. We have been arguing that case at least since I became shadow Chancellor, but we had no acknowledgment of it from the Government until yesterday.

With that record of under-investment, it is no use those on the Government Benches talking about a post-Brexit Britain taking on the world. An economy with low productivity can compete only on the lowest common denominator, and that means, as has happened, slashing wages and salaries and hacking away at social protections, such as the NHS and pensions. This is the grim reality of the Conservative’s low-investment, low-productivity, low-wage economy, and it can easily get worse. For some on the Government Benches, an economy shorn of basic protections in the workplace, with rock-bottom wages and social spending provisions stripped to the barest minimum, would be a desirable goal. We have had a glimpse of that future in the Chancellor’s own threats to turn Britain into a tax haven. Even to hold out this prospect is to admit that the Government have no better plan than the steady management of decline.

[Michael Fabricant]

I have been in opposition, so I understand what the right hon. Gentleman is doing, but there has to be a little reality in his speech. We are the fastest-growing economy in the G7. Like him, I have been to France, Germany and Spain. Is he aware of the rates of unemployment in those countries?

[John McDonnell]

Let us look at what is happening outside in the real world. We welcome the growth in employment, but we have also experienced the biggest fall in wages among OECD countries over the past seven to 10 years—the figure of 10.4% is matched only by Greece. One in five employees in this country were low-paid in 2015. Mark Carney has called this the biggest lost decade for income growth since the 1860s. The number of self-employed people has increased dramatically, but on average they earn less than 20 years ago. So, yes, I welcome the growth in employment, but I do not welcome the growth in poverty pay, whether for the self-employed or those being exploited on zero-hours contracts.

[Michael Fabricant]

The right hon. Gentleman will know that the Joseph Rowntree Foundation says that the gap between the rich and the poor has actually reduced since 2010. In addition, when people on zero-hours contracts were polled, more than half said that they wanted the flexibility of those contracts. Yes, people in self-employment often earn less, but it is their decision. I was self-employed when I created my own company, but I chose to do that, rather than earning more in a larger corporation.

[John McDonnell]

What we now have in our economy is a scandal of bogus self-employment. A lot of the growth in self-employment has happened on that basis, and it includes the most exploitative aspects. The hon. Gentleman mentions inequality, so let us look at some of the figures. If we use an index other than the Gini coefficient, which does not take into account the real outstripping of the super-rich, such as the P90/P10 ratio—this looks at the 10th and 90th percentiles of income distribution—we find that inequality has risen every year over the past five years. Let us look at what has happened out there in individual companies. If we compare the average total pay of FTSE 100 chief executives with that of their employees in 2015, we find a ratio of 129:1; in the mid-1990s, it was no more than 45:1. That shows the grotesque levels of inequality that result from the economy that has been created over the past seven years.

Yesterday’s Green Paper seemed to recognise the failure of previous policy, and there has certainly been a change of rhetoric. The Prime Minister has suddenly been won over by the merits of an active industrial policy. The recognition that the six previous years have failed badly is welcome, but nowhere is it clear that the Government recognise the scale of the problem. The weaknesses and inequalities in our economy stem from decades of underinvestment, when decisions about what and where to invest have been taken by too few people at the top and to the benefit of that tiny handful. That leads to an economy in which the Government are planning for more than £5,000 of investment per head in London, compared with just £413 in the north-east of England. It is an economy in which a single London capital project receives more Government backing than the whole of Yorkshire, and in which the £500 million promised yesterday for the north of England is set against £18 billion of cuts from local authority budgets since 2010.

[Mark Field]

rose—

[John McDonnell]

I see that the right hon. Gentleman is ready to jump in again.

[Mark Field]

The shadow Chancellor will recognise that he should be doing the same as me by defending London’s honour to a certain extent. Surely he recognises that if the significant amounts coming into our capital city were not invested here, they would go to another global capital, so it is not a case of money coming to London rather than another part of the UK. It is also the case that many of the cranes in my constituency—and, indeed, those in his constituency near Heathrow—are engaged in infrastructure projects involving large-scale investment. Such projects are producing huge numbers of construction jobs and are contracting well beyond the capital city. A lot of investment goes on here in London, but it has a benefit well beyond the capital city—

[Madam Deputy Speaker (Natascha Engel)]

Order. I call John McDonnell.

[John McDonnell]

Don’t worry, Madam Deputy Speaker; I was enjoying that.

The reality is that this is Government investment, and those figures are just not acceptable. Investment of £5,000 per head in London compared with £400 in the north-east is an unacceptable level of inequality that has to be challenged. The right hon. Gentleman is usually fair, so I am sure that he would accept that, no matter how much we are both champions for our capital city.

While the shift in rhetoric is welcome, it must be backed up by meaningful action, and that is where the revised charter still falls short. It is good to see the Chancellor taking on board Labour’s recommendations and ditching the surplus target. In doing so, he has held out at least the possibility of lifting some of the burden of the austerity measures that have led to crises in health and social care. I deeply regret, however, that he failed to take that option at last year’s autumn statement.  His failure to act on both NHS and social care funding has contributed to the worst funding crisis in the NHS for decades and a social care system pushed beyond breaking point.

An image can sometimes capture the plight of a particular situation. A couple of years ago, it was the image a child’s body on the shores of the Mediterranean that brought to our attention the plight of people in the refugee crisis. Last year it was that photo of a child in an ambulance, covered in blood and dust after being pulled out of the debris in Aleppo. Two weeks ago, the image that put the NHS crisis into focus for me was that of a child below the age of five, in a hospital corridor, being treated on two plastic chairs that had been pushed together. That is unacceptable in the sixth richest country in the world, and it is the result of a failure to address underfunding in the autumn statement.

I have written to the chair of the Office for Budget Responsibility to ask whether it will look into providing an assessment of healthcare funding against expected need. In the last month, the British Red Cross has described the ongoing situation as a “humanitarian crisis”. The Government’s response has been to play down the situation, despite the volume of continuing complaints from frontline NHS staff. I strongly believe that this is leading to widespread public distrust of the Government’s presentation of funding and support for the NHS and social care. It makes sense to attempt to provide an objective assessment of the real needs of the NHS to help to prevent the real-terms funding cuts that have taken place under this Government. Let me say to the Chancellor again that he can and must take action now to ensure that both health and social care are properly funded in this period of crisis.

I am afraid that the charter represents only the smallest improvement on the previous dire fiscal policy. Unbelievably and, I think, contrary to all advice, it still attempts to keep investment spending within the spending control framework. That has already been criticised by experts from the Institute for Fiscal Studies. Keeping the investment spending cap inside the overall spending cap means that every pound delivered for investment comes at the expense of possible spending on public services. At a time when the capital costs for the Government are close to their lowest in history, that choice makes little sense. As we face Brexit, the challenge for us all is to think boldly about how this country can respond, and the amended rule falls far short of that.

[Mr Philip Hammond]

What is the right hon. Gentleman’s position on public debt? Ours is set to peak at just over 90% of GDP, yet he is setting out a course of action that would cause it to rise indefinitely—it would go on rising forever. Is he comfortable with such a position?

[John McDonnell]

That is clearly not the case. If the Chancellor had looked carefully at Labour’s fiscal credibility rule—[Interruption]—and, indeed, adopted it, he would have seen that what we would actually be doing is reducing debt in the lifetime of a Parliament as a result of ensuring that we invest properly in tackling the productivity gap, in bringing people back to work and in ensuring that they have the highest skills. Those skills will produce the high wages that will make it possible to fund the economy through a tax regime that is fairer than the existing one.

It simply will not be possible to deliver the scale of support and investment that is needed to rebuild our economy within the strictures of the rules that the Chancellor is proposing. We will get half-measures and rhetorical commitments. What we will not get is a serious commitment to delivering the economic transformation that we now need, because that would require the Government to take on a few too many vested interests. Such a commitment would involve a serious attempt to clamp down on tax avoidance, reversing handouts to giant corporations and the super-rich, and ending—in reality, not just in rhetoric—the colossal imbalance in investment between a few favoured places in the south-east and the rest of the country.

In changing the rule, the Government are admitting their prior failure, but then failing to address its causes seriously. Investment is too low, productivity is too low and wages are too low. Labour’s own fiscal credibility rule follows the recommendations of world-leading economists, business organisations and trade unions by keeping day-to-day spending entirely separate from the Government’s plans to invest. In contrast, this Government’s fiscal rule is excessively tight on Government investment at the same time as being excessively loose on Government control.

The primary reason for introducing a rule is to show that a Government’s fiscal plans are consistent and planned well in advance. That allows businesses and investors themselves to plan, and reassures markets that a Government will not attempt to spend excessively. An ideal rule should be the basis of the strict enforcement of borrowing limits—we accept that—but it should also contain the flexibility for Governments to respond when unexpected shocks occur. Getting the balance between these two points is difficult so, following the best available economic advice, Labour’s fiscal credibility rule places the power to determine when we are outside normal times in the hands of the Monetary Policy Committee, which can declare under the terms of the fiscal rule that it is necessary for fiscal policy to adjust in response to an unanticipated shock. The freedom to determine the fiscal stance is a significant power for a Government, so it has to be used responsibly.

Labour does not believe that it is desirable to return to the days when Governments would produce their own economic forecasts and then decide on their own terms where the business cycle was and how much extra fiscal leeway they were allowed. That meant that the Treasury had excessive power to determine fiscal policy, and that in turn meant Governments would have the power to favour short-term quick fixes at the expense of longer-term action to rebuild the economy. A credible fiscal rule should not allow that to happen. It should be bolted into place, compelling a Government to act for the longer-term good.

Labour’s fiscal rule does that by handing power to recognise economic shocks over to the MPC, yet the new charter for budget responsibility appears to hand the power to recognise economic shocks straight back to the Treasury. It returns us to the bad old days when short-term Treasury thinking would be allowed to dominate economic policy making. It could mean that once again Conservative Chancellors would be tempted to ease off on or tighten up their spending not because of the economy, but because an election is due. In other words, it largely defeats the purpose of having a fiscal rule in the first place. Instead of breaking with the short-term thinking of the past, it bolts it more firmly into place. How can the rule be taken seriously when it is so obviously open to being undermined? In other words, the revised charter leads us dangerously close to the worst of both worlds. It is excessively tight on Government investment when building a post-Brexit economy should demand Government intervention, yet it is excessively loose on the Government themselves, handing too much power back to the Treasury.

The Chancellor and the Government are squandering an opportunity here. They could have ditched the failed existing fiscal rule and put in place a new fiscal mandate that would grant the space needed to rebuild and transform our economy as we prepare for Brexit. Instead, they have handed more powers back to the Treasury while the Chancellor has insisted on maintaining austerity spending cuts. No part of the Government’s new fiscal rule can be supported and we will be voting against the charter as a whole.

--- Later in debate ---

[George Kerevan]

I am suitably chided, Mr Speaker. I cast no aspersions on the character of any individual on the Government Benches. As a collective, however, they have changed the rules to suit themselves, as the Chancellor has admitted. That is the basic point I am trying to get across. What possible faith can we have in this new set of rules that they will not be changed in another 15 months?

[John McDonnell]

I do not want to interfere in private banter, but I draw the hon. Gentleman’s attention to the fact that, in 2009, the person who is now Chancellor—he was then shadow Chief Secretary to the Treasury—condemned any concept of rules. In the rule that he eventually helped to develop in opposition, and that eventually came into force, there was a welfare cap that has now been completely disregarded. The deficit was meant to be not reduced but eliminated by 2015, with a reduction in debt. The rules seem to have gone out the window very early for this Chancellor.

[George Kerevan]

I agree with the right hon. Gentleman.

The Chancellor came to the Treasury Committee, and he answered questions clearly and in great detail. He pressed the point he has made today, that the new fiscal rules and the autumn statement were designed to give the Government enough fiscal headroom to meet any unforeseeable circumstances, should economic growth slow as a result of the Brexit decision. I respect that, but why give himself headroom for a future dangerous event? Why not take action now to forestall that event? In essence, the fiscal charter gives the Chancellor room, if the economy begins to slow in two, three or four years’ time, to use a fiscal surplus to invest in the economy and crank up growth. Why not do that now? The new fiscal charter gives the dangerous impression that somehow it will prevent the ill effects of Brexit because the Chancellor can intervene if something goes wrong. Why not use that fiscal headroom now?

The problem, of course, is that the underlying strength of the economy is nowhere near as strong as the Chancellor tried to make out in his introduction. Yes, there is growth but, the underpinnings of that growth over the last year are largely an expansion of consumer spending underpinned by unsecured consumer borrowing.

At the same time, post the Brexit vote, the pound has fallen substantially on international markets, which is stoking up inflation. I cannot imagine a more dangerous situation than for growth to be dependent on unsecured consumer borrowing when inflation is starting to rise.