Balancing the Public Finances

Peter Dowd Excerpts

Tuesday 11th July 2017 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your stewardship today, Ms Ryan. I welcome the Financial Secretary to the Treasury to his position. I have no doubt we will have many of these debates in future. I thank the right hon. Member for Forest of Dean (Mr Harper) for tabling this debate on this important issue and on the need for Governments to balance the books. I also thank hon. Members for inviting me to the 1922 Committee. It is a pleasure. That was a joke—give it a bit of thought and try to keep up.

It is worth looking at the Conservative Government, in which the right hon. Member for Forest of Dean was a Minister for six years when all those decisions were made. Since coming to office, the Conservative Government have consistently failed to balance the books and to abolish the deficit, despite continually pledging to do so.

[Andrew Selous]

Will the hon. Gentleman give way?

[Peter Dowd]

May I get further into my speech? I will then be happy to give way.

First, it was promised that the deficit would be abolished by 2015. Then it was pushed back to 2020. We have now been told by the Chancellor that it is likely that it will not be abolished until 2025. The phrase used in the Conservative manifesto—hon. Members will appreciate that I read it avidly—was

“by the middle of the next decade”.

A full 10 years after the former Chancellor originally pledged to do it, and a full 15 years since the Conservatives started making the promise, the books still will not be balanced.

[Andrew Selous]

Does the hon. Gentleman think that our task of reducing the deficit would have been easier or more difficult if we had acceded to the Labour party’s continual requests for more spending and its opposition to every single reduction in spending that we put through?

--- Later in debate ---

[Peter Dowd]

The hon. Gentleman will appreciate that I am not going to get into hypotheticals or “what ifs” in this debate. We are looking to the future. That was promised. [Interruption.] I am sorry; I did not hear what was said. That was promised, but the Conservatives failed to deliver. I do not think that there is a case in modern political history of a British Government so regularly failing to meet their own economic targets.

[Royston Smith]

Will the hon. Gentleman give way?

[Peter Dowd]

In a moment, if I may.

A Government can balance the books in many ways, and very many difficult decisions have had to be taken during the past seven years. No one doubts that. However, this Government chose the path of austerity over the long-term prosperity of everyone in the country. Some hon. Members have said that that was not a choice, but it was. The Government chose to cap public sector wages and to cut local council budgets by 40% and in certain cases by as much as 60%, with more on the way.

[James Cartlidge]

Does the hon. Gentleman remember that the 2010 Labour manifesto promised a 1% cap on public sector pay? Does he think that that was because the Labour party does not support public sector workers, or because it was the right thing to do given the circumstances of the economy?

[Peter Dowd]

The reality is that that pay cap has now been institutionalised. It has been there for virtually a decade and it will continue. The Government have also chosen to underfund the NHS and cut £4.6 billion from social care, and they now threaten huge cuts for schools. However, despite those huge and deeply unfair budget cuts to public services, the Government have been able to find £70 billion of tax cuts for those who need them least of all.

Throughout the election campaign, which I might add is a happy memory, we were told that there was no magic money tree that could be used to solve the nation’s financial problems. If anything was magic about it, it was that it turned into a cherry tree, and the Prime Minister proceeded to pick the cherries and hand at least £1 billion-worth to the Democratic Unionist party to keep her in No. 10.

[Alex Chalk]

Under the previous Labour Government, low-paid workers were required to pay tax on earnings above about £6,500. The position now is that they do not pay it on earnings up to about £11,500. Is it not a positive thing to take low-paid people out of tax? Does the hon. Gentleman not welcome that?

[Peter Dowd]

Yes, I welcome anything that helps the low-paid, but that is not the only element in someone’s life chances or in people’s prosperity. The reality is that there was a mendacity in the deal with the DUP that will take a long time to be wiped clean.

Similarly, the Chancellor, in the spring Budget, was able to find a temporary £2 billion to backfill the cuts to social care and then further money to do a U-turn on raising national insurance contributions for the self-employed. There was a bit of cherry-picking there as well. It is clear that the Tories can find money when it is needed to oil the palms of certain people in order to assist the Prime Minister in retaining the tenancy of No. 10, and it is all dressed up as being in the national interest. That is not real and it is not acceptable.

When it comes to the long-term health of our economy and a wage rise for dedicated nurses and teachers, there is no money. They will have to continue with the pay they have, year in, year out. The truth is that austerity is not a necessity, but has been used by the Government to fulfil the ideological aim of shrinking the state beyond comprehension and privatising public services. That is a choice that the Government made. They should simply acknowledge that.

There are countless examples of countries taking a different approach. One hon. Member referred to Greece, and another referred to Portugal. The Government of Portugal, our oldest ally, have reduced the country’s deficit faster than us, but simultaneously they have restored state pensions, wages and working hours to pre-bail-out levels, and they managed that without crippling austerity. When we use examples, let us have a spread of international examples.

The well-off have done much better in austerity Britain. Meanwhile, those in the public sector have not seen their wages increase. The richest 100 families in the UK have seen their wealth increase by £55.5 billion. The Public Accounts Committee has reported that, while income tax for all taxpayers has risen by 9% under this Government, income tax receipts from high-net-worth individuals have fallen by 20% since 2009-10. That is typical of this Government’s approach: those who had nothing to do with the global financial crisis—the bulk of low and middle-income households—are made to pay the price of austerity through slashed services, increased taxes and falling wages, while the richest in society and big corporations get greater tax benefits. The old chestnut that we are all in this together is still trotted out.

[Rachel Maclean]

I made this point in my speech, to which I refer the hon. Gentleman. Does he not agree that the richest 1% in our country are set to provide 27% of all income tax revenue in 2016-17, and that that is a higher proportion than it was under the Labour Government?

[Peter Dowd]

The hon. Lady made that point before, and I will repeat the point that I have just made. The claim is that we are all in this together, but Newcastle University has showed that, while my constituents saw a £195 per head reduction in spending by my local authority between 2010 and 2015, the constituency of the right hon. Member for Forest of Dean had cuts of only half that amount. If we are all in it together, is that fair or reasonable? It is not reasonable. Of course we need to balance the books, but doing it fairly rather than by cherry-picking is crucial. The Institute for Fiscal Studies has reported that for the Government to reach their target, they will have to find an additional £15 billion-worth of spending cuts or tax rises.

There is another question that we must ask ourselves. If this issue is so important, why are we waiting for the Finance Bill? We have waited and waited for the Finance Bill. I hope we get it this side of Christmas—we might get it next Pancake Thursday. I hope we get it on the Floor of the House so that we can debate it.

We can either carry on with the redundant approach of industrial-size spending cuts for most people and tax cuts for the rich and corporations, leading to an economy in the doldrums and falling household incomes, or we can start investing in our country, ensure that everyone pays their fair share, and use a growing economy to help to balance the public finances. We need a real long-term economic plan, without magic cherry trees, without bungs and smoke and mirrors, and without a Prime Minister who barely has the support of her Cabinet, let alone her party, and certainly not the country. We need a long-term economic plan for the many, not the few, and given the state of the Tory party under the Prime Minister, I do not think that that is far away.