Balancing the Public Finances

Rachel Maclean Excerpts

Tuesday 11th July 2017 Westminster Hall

[David Linden (Glasgow East) (SNP)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate the right hon. Member for Forest of Dean (Mr Harper) on securing this debate. It was somewhat mischievous of him to comment on one side of the Chamber being empty—interestingly, the Government side was empty last week when we were debating WASPI women.

For far too long, balancing the public finances has generally been done on the backs of the poorest and most vulnerable in our society.

[Rachel Maclean (Redditch) (Con)]

Will the hon. Gentleman give way?

[David Linden]

I will not, because Members have taken quite a long time. Despite several years of austerity, Her Majesty’s Government continue to miss their targets on debt, deficit and borrowing. Quite simply, austerity has failed to rebalance our public finances, and we need to reassess and re-evaluate our approach.

The biggest contributor to a sluggish UK economy and the biggest threat to our public finances is the reckless hard Brexit currently being pursued by Her Majesty’s Government. That has not been helped by Labour Members voting to give the Prime Minister a blank cheque by voting against single market membership only two weeks ago.

Scottish National party Members will continue to stand up not only for access to but membership of the single market and customs union. When we look at our public finances, we see a major trade deficit, which in the three months to April was £8.6 billion, up from £6.9 billion in the previous quarter. By turning our back on the single market and pursuing a hard Brexit, we risk delivering further shocks to our already precarious economy.

The UK economy grew by just 0.2% in quarter 1 of this year. In comparison, in the same quarter Scotland’s economy grew four times faster. That was somewhat of a surprise, not least because colleagues in the Scottish Conservative party were briefing last week that Scotland was about to move into recession, which certainly did not happen.

We face difficult financial decisions in Scotland, not least because Scotland’s budget faces a real-terms cut of £2.9 billion due to UK austerity. That figure of £2.9 billion is significant, because had Barnett consequentials been followed during the Government’s grubby deal with the Democratic Unionist party, Scotland would have stood to receive £2.9 billion.

I want to move on and to some of my concerns about the deeply worrying consequences posed for Scotland by a hard Brexit. The stark reality is that Brexit threatens to cost the economy around £11 billion by 2030 and result in 80,000 fewer jobs compared with remaining within the EU. We understand and accept that, despite 62% of Scots voting to remain in the EU, we are leaving. However, the Scottish Government have sought to be reasonable and amicable, and have come forward with a compromise that would allow Scotland to remain within the single market. Unfortunately, those pleas have fallen on deaf ears.

We know that Her Majesty’s Government are pursuing a reckless approach to the economy, with a hard Brexit coupled to an ideologically driven obsession with austerity. SNP Members believe it does not have to be like that. Cuts are a choice, not a necessity. During the recent general election campaign, we put forward a responsible and credible fiscal plan that would return a balanced budget by the end of the Parliament. However, in doing so, we would generate an additional £118 billion cumulatively over the next Parliament, with around £10 billion flowing to Scotland. Our fiscal plan would stabilise net borrowing at the level it was before the financial crash and see debt begin to fall as a share of GDP from 2019-20.

Ministers and Conservative Members regularly tell us how employment is high under this Conservative Government. What they do not say is that much of that is due to part-time work or, worse still, exploitative zero-hours contracts. Unstable and low pay is a worry for my constituents in the east end of Glasgow, with the Resolution Foundation estimating that the period 2011-2020 will be the worst decade for wage growth in 210 years. That is before we take into account the Government’s con trick of the living wage, which will actively discriminate against under-25s.

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[Rachel Maclean (Redditch) (Con)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I commend my right hon. Friend the Member for Forest of Dean (Mr Harper) for securing this much-needed debate and for his excellent points.

I want to focus my comments on one issue only: income inequality, which the hon. Member for Glasgow East (David Linden) referred to. Almost a year ago today, the Prime Minister gave a statement on the steps of Downing Street in which she focused on her aim to make Britain a country that works for everyone by tackling deep-rooted injustices such as income inequality. That is one of the most pernicious issues facing our country, and it lies at the heart of our Prime Minister’s vision for our country. In this Parliament, we are setting out the meaningful ways in which we will effect change.

One thing that came up time and again in my election hustings, and I am sure those of other hon. Members, was the idea of taxing the rich more to pay for all the things on which Opposition Members propose to spend money. In fact, the Leader of the Opposition has proposed that as a highly desirable option, which he thinks would lead to lower inequality in our country. However, far from having the desired effect, would that not have precisely the opposite effect?

Is it not a fact that, under the Conservative Government, the people who pay the highest taxes in actual and relative terms are the rich? In 2016-17, the richest 1% in our country are set to pay 27% of all income tax revenue, a higher proportion than under the Labour Government. The richest 5% will pay 38% of total tax. I welcome that. Never let it be said that the Conservatives shy away from taxing the rich. We do tax them, but we do it in a way that delivers real income to the Exchequer. Labour Members—if they were here—would do it in a way that damages the economy, hurts businesses and jobs, and results in tax hikes for ordinary hard-working people, including my constituents in Redditch. Is it not a fact that, under the Conservatives, people on lower incomes are paying less tax than they did in all the years of the Labour Government?

[Mr Harper]

I will be very brief, but I cannot let what the hon. Member for Glasgow East (David Linden) said go unchallenged, which is why he did not give way to me. Over the years that the Conservatives have been in power, income inequality has reduced. The country has become more equal, not less. That does not support Opposition Members’ arguments, which is why they do not want to hear it, but it is a fact of which Government Members should be very proud.

[Rachel Maclean]

I thank my right hon. Friend—he has managed to make my speech a bit shorter.

I will focus on the lower paid, hard-working earners. For 2017 to 2018, the personal allowance is being raised to £11,500, which means that the amount of tax-free income someone can earn will be more than 75% higher than in 2010. That means more money in people’s pockets to cope with the cost of living, because taking people out of tax has the same effect as giving them a pay rise. We have discussed the importance of giving pay rises to everybody, which I welcome. People are keeping more of what they earn.

I reiterate my right hon. Friend’s comment that income inequality is in fact at a 30-year low. It continues to fall, and we want to see it go further. It is the Conservatives who are on the side of the lowest paid—we have taken them out of tax. We are on the side of those earning the minimum wage, and we are boosting their incomes with the national living wage. We are on the side of hard-working people, and we are stabilising the economy so that it creates jobs for people, and they can go to work and earn a decent living. It is the Conservatives who believe in fairness, because we have delivered the lowest levels of income inequality for 30 years, giving people a sense that our country works for everyone.

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[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.