Budget Resolutions

Debate between Rachel Reeves and Lisa Cameron

Wednesday 22nd November 2017 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to follow the hon. Member for Mid Bedfordshire (Ms Dorries).

I fear that today’s Budget delivers more of the same. It does very little to help people in the everyday economy who are struggling to get by—struggling to get a foot on the housing ladder, to grow their business, or to gain security in work. I shall focus on two aspects of the Budget. I shall deal first with GDP and productivity, and secondly, like the hon. Lady, with housing supply and house prices.

The biggest influence on our standard of living—on whether we can afford to pay the bills, on how we are doing, and on whether our families can get on and do better than the previous generation—is how fast the economy is growing, and in the context of that most important metric, I think we can regard the Budget only as a failure of Government economic policy. For every single year of the forecast period, economic growth has been revised downwards, and that is not from particularly high levels in the first place. There has been a further downward revision since March this year, which is very worrying for many families in all our constituencies. I believe that, by 2022, GDP will be 2.7% lower than was predicted in March, and about 80% of the downgrade is due to lower productivity during that period. Productivity is now expected to be 27% lower than it would have been if it had continued to grow at its pre-crisis levels.

That is incredibly worrying. If we are to compete with countries throughout the world in the years to come, and to do so outside the European Union, we desperately need to boost our productivity, our research and development, our business investment and our investment in infrastructure. However, all the data and all the numbers published today by the Office for Budget Responsibility suggest that we are doing exactly the opposite. We are going in the wrong direction with those most important economic numbers relating to GDP and productivity. Our productivity is already 20% behind that of the United States, Japan and Germany, and we simply cannot afford to have further productivity downgrades.

Of course, downgrades in our GDP and productivity also have a real effect on Government borrowing and debt. Over the forecast period—the next five years—the productivity downgrade adds a staggering £90 billion to our borrowing trajectory. That is incredibly worrying, given its effect on not only living standards, but the public finances. We are simply not able to invest the money that we need to invest in universal credit, infrastructure, our national health service and our schools, because we are not delivering on the requirement for productive, well-paid jobs. The Government must take responsibility for that.

I look forward to the industrial strategy White Paper, which will, I hope, be published next week, but I must tell the Government that it will have to be a lot better than the Green Paper that we saw earlier in the year, which was incredibly disappointing and simply will not deliver the productivity performance that we need. It is 18 months since the Government’s productivity strategy, and since then every single estimate of productivity has been downward, not upward. What a missed opportunity, and what a failed strategy.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

The hon. Lady is making an extremely powerful speech. Does she agree that productivity will never increase while we continue to exclude important parts of society? The industrial strategy does not mention disabled people, and neither did the Chancellor today. The Budget simply is not inclusive.

[Rachel Reeves]

That is a very good point. If we are to ensure that everyone benefits from a growing economy—we just about have growth, but not very much of it—we must have an inclusive economy and an inclusive economic strategy that works for every member of all our communities.

The Government might respond by saying, “It’s okay Labour Members. There is a productivity investment fund worth £7 billion.” “Hurray,” we all say, but the money will not start until 2022-23. Why on earth do we have to wait five years for a productivity investment fund? We all recognise the desperate need to improve our productivity, so why wait five years before putting money and support into doing that? I should have thought that it would be an urgent priority for the Budget, not something that could be kicked down the road for five years.

Let me now deal with the issue of housing. I am afraid that I am much less optimistic about the Government’s plans than the hon. Member for Mid Bedfordshire, because over the last hour or so, I have been looking at the Office for Budget Responsibility’s “Economic and fiscal outlook”. I know that not everyone likes to listen to experts, but I am one of those people who still think that they are worth listening to. If we believe what the experts at the OBR are saying, all the housing measures—not just the stamp duty measure—in the Budget will increase house prices by 0.3%, and there will be no change in the supply of housing compared with that set out at the March Budget. Notwithstanding all today’s fanfare, the OBR’s verdict, which is on page 53 of its document, is that there will be no change in supply, just an increase in house prices, which is the exact opposite of what we need if we are to ensure that more young people and families can get on to the housing ladder. Although I think we all share that objective, it is not met by the measures that have been announced today.