Budget Resolutions Debate
Full Debate: Read Full DebateRushanara Ali
Main Page: Rushanara Ali (Labour - Bethnal Green and Stepney)Department Debates - View all Rushanara Ali's debates with the Department for Work and Pensions
(5 months, 3 weeks ago)
Commons ChamberDoes my right hon. Friend agree that the Prime Minister’s tax plans will leave households on average £870 worse off under the Conservatives?
My hon. Friend has done the maths and is absolutely right. Taking into account the changes to the tax threshold, the announcements yesterday and in November, and council tax, by the end of the forecast period the average family will be £870 worse off.
As the Resolution Foundation highlighted just this morning, the 8 million tax-paying pensioners will see their taxes increase by an average of £1,000. That is a collective £8 billion tax grab from our nation’s pensioners. As Paul Johnson, the director of the Institute for Fiscal Studies, said yesterday:
“This remains a parliament of record tax rises.”
That is the legacy of this Conservative Government.
The Tory Government’s pickpocketing has meant higher taxes on working people, leaving them with less money at a time when their daily lives are getting more expensive. Yesterday, the Chancellor said that a person on average earnings is £900 better off, but let us take a look at that claim. He has ignored not only his own stealth tax rises, with the tax thresholds and council tax, but the rising costs of energy bills, food, mortgages and rent. In fact, rather than being better off, as he claimed, household disposable income is set to fall by £200 per person over the course of this Parliament.
Thank you, Madam Deputy Speaker. The right hon. Lady commenced her remarks by saying much about where Labour is on tax. She criticised the aspiration that the Government rightly have to abolish national insurance at some point in the future. She rather disingenuously repositioned that as a firm commitment, rather than an aspiration, but let us set that to one side.
The right hon. Lady knows all about firm commitments, because we had a firm commitment from her to £28 billion- worth of spending every year over the forecast period. That did not survive contact with reality. Indeed, she has little to say that is original. When she writes about economics, she has to cut and paste from Wikipedia. When she trumpeted her ruinous £28 billion spending plan, she ultimately had to U-turn and run for the hills. For this shadow Chancellor, when it is not cut and paste, it is cut and run. [Interruption.] I thought the right hon. Lady would like that.
The right hon. Lady has also accepted our tax measures as set out in yesterday’s Budget, including the abolition of non-dom status and the windfall tax on oil and gas. She has hypothecated the money raised from those two measures many times over—for the NHS, dentistry, breakfast clubs and so on. Now that she has accepted all the tax measures in the Budget, I invite her to come back to the Dispatch Box; I will give way to her if she will let us know whether she will U-turn again on her spending commitments on the NHS and dentistry, or whether she will put up taxes and borrowing. I would be very happy to hear from her—all right, perhaps not.
When the Secretary of State was Chair of the Treasury Committee, he was keen on Office for Budget Responsibility assessments and forecasts. Indeed, he argued for them, but his then Prime Minister and Chancellor failed to listen to him and crashed the economy. He and his Government want to pursue the aspiration, as he now calls it, of scrapping national insurance contributions altogether, which would cost £48 billion a year. Will he commit to seeking an OBR forecast and assessment of that, and showing how the Government would pay for that?
Let me talk about the general point that the right hon. Member for Leeds West (Rachel Reeves) made about the tax burden. It is as if history has been erased from her mind. The fact is that the covid pandemic shrank the economy overnight by 10%, and this Government stepped in, supported jobs, and saved 10 million jobs as a result of the intervention that we came forward with. It is as if it has been erased from her memory that a war is going on between Russia and Ukraine, and that that has led to an increase in energy prices and inflation. This Government have stepped in to support the most vulnerable in society, including families, pensioners, and the disabled up and down this country. The Government provided £400 billion of support across that period, and in all candour, I do not believe that there was a single occasion on which she opposed any of our interventions. She was up for spending the money to support people, but not up for recognising that it has to be repaid. That is why the tax burden is indeed increasing.
To go back to the point about the OBR’s economic and fiscal outlook raised by the hon. Member for Bethnal Green and Bow (Rushanara Ali), the OBR makes it clear that the measures taken yesterday in the Budget mean that the tax burden will be lower than was forecast in the autumn, as a result of the management of the economy and the reduction in taxes that my right hon. Friend the Chancellor brought forward.
I am incredibly grateful to the Minister for giving way a second time. I remind him that the tax burden has gone up by £27 billion in the last year, and it will go up by £19 billion after the election because of decisions his party made. People who earn less than £19,000 will be worse off because of the Budget. Two decades of lost pay growth—that is the record of his Government over the last 14 years.
I thought I had already covered this point, but the reality is that the tax burden has had to go up to pay for all the support we provided around covid, and because of the inflationary pressures created by a war on European soil. The hon. Lady cannot get away from the fact that through this fiscal event, and the previous one, 27 million hard-working people, employed in businesses up and down the country, will be better off to the extent of £900 per year. Some 2 million self-employed people will be £650 per year better off. She talks about those earning less than £19,000, but those many millions of people who earn above £19,000 will have a lower tax burden than before, when we take into account the interplay of the freezing of thresholds and the cuts in national insurance.
After 14 years, we needed a sober and serious plan to revive our economy, boost productivity, and encourage entrepreneurship and investment to power serious economic growth. We needed a Budget for growth. Instead, what did we get? We got reckless gimmicks and political trickery.
When the country is crying out for renewal and investment in public services, this Budget puts party before nation. After 14 years of Conservative rule, our economy has been wrecked and vandalised. Before yesterday’s tinkering around the edges, we knew that public debt as a share of national output was at its highest since the 1960s. Debt interest payments are at their highest level since the second world war. The economy is smaller per capita than when the Prime Minister took over after the mini Budget fiasco, when his predecessor and the then Chancellor crashed the economy. This will be the first ever Parliament in which living standards, as a measure of real household disposable income, have fallen.
The Conservatives now expect us to rejoice in their planned expenditure of £9 billion on tax cuts, which will be funded by increased borrowing. This will be dwarfed by the £27 billion of tax rises that came into effect last year, and the further £19 billion that is due to come into effect after the election, because of the choices and the decisions that they have made.
Let us look at the impact of these measures on different groups. Research by the Women’s Budget Group shows that single men will gain, on average, close to £500 more a year than lone mothers from the combined national insurance cuts in the autumn statement and spring Budget. The Institute for Public Policy Research estimates that half the tax cuts will go to the wealthiest households, and just 3% to the poorest.
We also heard the Chancellor boast yesterday of the Conservative party’s intentions to scrap national insurance altogether. Without any plans to fund this, we would see a £46 billion black hole in the country’s finances every year. That is deeply irresponsible. The Conservative party should have learned its lesson, having crashed the economy with the omnishambles of its mini Budget and its £45 billion of unfunded tax cuts, which came at a very high price, particularly in relation to costs and mortgage hikes. And people are still living through that crisis, while the former Prime Minister remains in denial, as she goes off and earns huge amounts of money, dining out on having crashed the economy. This is why my right hon. Friend, the shadow Chancellor, has committed to upholding and strengthening the role of the Office for Budget Responsibility. Only Labour can deliver the economic stability that this country desperately needs and put an end to the Conservative party’s fantasy of unfunded and unsustainable tax cuts.
I just wonder whether there is any scope for a special “crash the economy” tax, so that we can claw back some of the money that the former Prime Minister has earned from her speaking tour.
For a start, the former Prime Minister could certainly donate her earnings to the millions of children now living in poverty—poverty that was worsened by her crashing the economy. The parents of children in my constituency are having to work even more to make ends meet, particularly to pay their mortgages, which in some cases have doubled. That is the consequence of the rot that she and her Chancellor caused by crashing the economy.
On a more serious note, reports allege that, ahead of that mini-Budget, the then Chancellor briefed certain hedge fund managers and they made significant financial gains off the back of it. Surely there should be some comeback on that
My hon. Friend makes an important point. Those reports were well publicised at the time, and it is shocking that there has not been an investigation or an inquiry into what happened. Shockingly, the then Chancellor and Prime Minister continued to behave as if they had done nothing wrong, as if we should be grateful that they were in charge at the time. They continue to go on speaking circuits, gaslighting the British public, having crashed the economy and ruined their lives. We are still paying for that. The time cannot come soon enough for this episode to be over, for a fresh start with a new Labour Government.
Of the current Chancellor and his Budget, the former Treasury Minister David Gauke said in an article in the New Statesman that the Budget was a “work of fiction”. He said:
“He wants to be prudent and responsible, and he wants to cut taxes. The reality is that he cannot do both.”
I have a lot of time for the current Chancellor, who inherited an awful situation, but he has not faced up to the reality of needing to be responsible. His former colleague set that out in the article. It is not Labour that is attacking the decisions of the current Chancellor; it is his own former colleague, who was a respected Treasury Minister.
When it comes to growth, one does not need to be an economist to know that the Government’s economic policy is failing. Wages have fallen behind and, according to the Resolution Foundation, real wages will only return to 2008 levels by 2026. That is nearly two decades of lost pay growth, nearly two decades of people not seeing an improvement in their living standards, and nearly two decades of people having to face real-terms wage cuts. By contrast, real wage growth across the OECD as a whole has risen by almost 9%, on average, over the same period. This is costing British workers an average of £3,600 per year. It means that they have had less to spend and, on top of that, they have had to live through the mini-Budget crisis, made in Downing Street, and the cost of living crisis that came after that.
The House of Commons Library shows that UK food and alcoholic drink prices were nearly 7% higher in January 2024 than the previous year, based on the CPI measure of inflation. What does that mean in practice? In constituencies such as mine, and up and down the country, it means millions more children living in poverty during the last 14 years, children in this country going hungry because of the failures of this Government, and parents having to work more hours just to keep their head above water. That is the consequence of what the Conservatives have done to people’s lives in this country.
The Budget leaves those who earn £19,000 or less worse off. That cannot be right. The Office for Budget Responsibility’s forecasts show that GDP will grow by just 0.8% in 2024 and 1.8% in 2025. What about productivity? The Government have talked about the productivity puzzle for a very long time, but they have not managed to address it. In the last quarter of 2023, productivity was estimated to be 0.3% lower compared with the year before, according to the Office for National Statistics. What we have, and have had, is sluggish productivity, flatlining growth, stagnant wages and rising prices. No wonder our country is in recession.
As a consequence, the Government have presided over declining investment in our public services. We have seen the spectre of queues for dentist appointments; people stuck in hospitals because of the failure to invest in local government and social care; the police struggling to cope because of underfunding and cuts in police numbers; the criminal justice system facing massive cuts and, as a result, people not getting justice; major infrastructure projects cancelled, such as HS2, which means that investors have lost confidence; and so much more. I could go on, but I appreciate that others want to speak.
The question is whether people feel better off than they did in 2010 when the Conservative party came into government. The answer is no, because they are working longer hours and working harder. After austerity, which damaged our public services, and after the mini-Budget crisis, which crashed our economy and cost £60 billion to begin with, along with mortgage increases, food price hikes and much else, people are not better off. Of course, we have not mentioned partygate, the abuse of power, the billions wasted in personal protective equipment contracts, and the money wasted in fraud. The billions that we could have used to support people instead went to waste, and in particular cases went into corruption, which has not been addressed.
We have seen an endless queue of Chancellors and Prime Ministers, one after another, experimenting on our country and letting people down. Political and economic instability is causing huge distress to people in our country. What do they have to show for it? A cost of living crisis, often made in Downing Street, and a sticking- plaster Budget designed to help the Conservative party to remain in power. People can see right through it; they will not be fooled by what has been provided. We need a serious Budget for productivity and growth—no more wasting opportunities and people’s talent. We need a Government focused on national renewal, and an economic strategy for growth, which we did not get yesterday.
We could have had a sustainable programme for supporting the small and medium-sized businesses that power our economy—99% of our businesses are in that sector. They could be supported much more to grow our economy. We could have seen much more support for those in the homebuilding industry by reforming the planning system. We could have had more investment in green industries and generating green jobs; a new national wealth fund to unlock billions in private investment; a skills revolution in the form of setting up new technical excellence colleges; and investment in the younger generation, and their skills, education and early years. We could have seen a shift in making work pay, with a genuine living wage, banning zero-hours contract and ending fire and rehire.
Those are some of the things that the country desperately needs. We have seen none of that. We have seen no vision for the future—for renewing our economy and our society. Those are some of the things that we could, and would, deliver if we had the privilege of getting into Government. It is time for change. It is time to end the misery and destruction being caused by this Government. It is time for a change in Government.