Budget Resolutions and Economic Situation

Simon Hughes Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Ms Harriet Harman (Camberwell and Peckham) (Lab)]

The Chancellor of the Exchequer has delivered his Budget. It is his first Budget, but we have seen it all before. This is a Tory Budget that will throw people out of work, will hold back economic growth—[Interruption.] Read the book! This Budget will hold back economic growth, and will harm vital public services. Yes, it is the Chancellor’s first Budget, but it is the same old Tories, hitting hardest at those who can least afford it and breaking their promises. This is true to form for the Tories, but it includes things that the Liberal Democrats have always fought against. Surely they cannot vote for this.

The Chancellor says his top priority is to cut the deficit. In order to get the deficit down, we need to keep economic growth up and we need to keep unemployment down. Today’s Budget—[Interruption.] Read the book! Today’s Budget is bad for growth, and that will make it harder to cut the deficit.

The new Office for Budget Responsibility has said in its report today that because of this Budget, growth next year will be lower than it would have been under our policies to support the economy through difficult times. It has revised growth for next year down from 2.6% to 2.3% because of the harm that the Chancellor’s Budget does. He said he was going to tell it straight, but the Chancellor has not told it straight today on jobs. Today’s Budget is bad for jobs and that, too, will make it harder to cut the deficit. The OBR forecasts on page 84 of its report that the price of the plans he has set out today in his Budget is tens of thousands of people out of work. [Interruption.] I say to hon. Members, look at the OBR report last week and compare it, on the International Labour Organisation unemployment and claimant count, with the forecast as a result of this Budget: tens of thousands more people out of work, and unemployment higher next year and every year of this Parliament. For people affected, this is a high price to pay, and it is equivalent in scale to putting every working man and woman in the city of Coventry out of work; that is the scale of the changes on jobs. And it is counter-productive. Private sector jobs will not spontaneously emerge as we see fewer people employed in public services. This Budget will hit private sector jobs as well as public sector jobs.

The reality is we do not get borrowing down by pulling the plug on support for businesses. We do not get borrowing down by throwing people out of work and on to the dole. [Interruption.] Look at the forecasts! We do not get borrowing down by stifling economic growth. This reckless Budget’s short-sighted approach will jeopardise the recovery and make the deficit worse, and when we do that, we end up with more tax rises further down the track, and it is unfair.

It is unfair on young people who need help to get work and get a decent start in life. The Government have scrapped the future jobs fund before it has even been formally evaluated, but every young person helped into work shows its value. It is unfair on the regions, whose manufacturing industries will suffer. They have cancelled the loan to Sheffield Forgemasters; they have snatched away the chance of new jobs. It is unfair on families: cuts to the value of child benefit; cuts to the disability living allowance; cuts to help for the jobless; ending the health in pregnancy grant; cutting the Sure Start maternity grant; ending free swimming; and cutting back free school meals. It is also unfair to older people, who will have to pay higher VAT and will have less money to spend in their local shops.

The Chancellor tells us that his plans are fair: that the rich will pay most. That is not true. As the Prime Minister himself said of VAT:

“it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you”,

and as the hon. Member for Bermondsey and Old Southwark (Simon Hughes) rightly pointed out last week, VAT “penalises the poor”.

It is unfair when cuts in public spending hit those people and those areas where public services and benefits matter most. The impact of the Chancellor’s changes to benefits and tax will be greatest in the poorest areas. We agree that borrowing must be brought down, but look at whom he has chosen to bear the brunt of cutting the deficit. The area most affected by his austerity policy, where people will see the biggest fall in average incomes, is Merseyside; the area least affected by his austerity policy—least affected by the fall in income—will be Cheshire. Yes, that includes his own constituency. This is not a fair Budget; it will entrench unfairness for the future.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Please wait until after the right hon. and learned Lady has spoken.

--- Later in debate ---

[Malcolm Bruce]

I am sorry but that intervention also shows no recognition of the fact that we have to find the money from somewhere. Our approach to that gives the poorest the most and makes the richest pay the biggest contribution. I cannot think of anything more progressive than that, and the more the hon. Gentleman and others consider the Budget, the more they will recognise that it stands up to robust analysis.

I had the honour of being my party’s Treasury spokesman between 1995 and 2000. During the 1997 election, the Liberal Democrat manifesto included an aspiration to raise the threshold at which people started to pay income tax to £10,000. That was only an aspiration because, try as we might, we were unable to find the resources at that time to pay for it. However, when the Labour Government were elected in 1997, the first thing that they did was to introduce the most generous capital gains tax relief that the richest people in this country had ever enjoyed—Mrs Thatcher never contemplated it! However, closing such tax loopholes has enabled us to start to deliver the increase in the tax threshold so that people will not have to pay tax and then apply for benefit, as the Chancellor said. I for one am absolutely delighted to support a Budget that fulfils a commitment set out in an aspiration on which I fought the 1997 election.

The hon. Member for Brent North (Barry Gardiner) suggests that Liberal Democrats should be ashamed of the Budget, but far from it. There is much in the Budget of which to be proud, and I make it clear to right hon. and hon. Friends in the Conservative party that it is not a Conservative Budget or a Liberal Democrat Budget, but a coalition Budget. I would argue that it draws on the best on both parties. Those parties command the support of the majority of the British people, and the Budget’s approach will deliver benefits to the majority of the British people. I said in the election campaign, when I became aware of the seriousness of the financial situation facing the country, that the position would be much better after the election if cuts that had to be made were implemented by more than one party, as they would be forced to engage with each other and find a balance that would be more acceptable than measures adopted by one party running for a sectional interest that did not have the same strength of appeal. I honestly believe that the coalition has found a dynamic that has delivered something that is greater than the sum of its parts: a Budget that is genuinely progressive.

[Simon Hughes]

Does my right hon. Friend agree that another part of this package is fundamental? The discussion about the cuts and savings in public expenditure will take place with the public, the trade unions, business, communities and local government, so that decisions are not only informed by the prejudices of civil servants and Ministers but are made as a result of the widest consultation with the British public to make sure that although, yes, they may be tough, they will be absolutely fair.

[Malcolm Bruce]

I am grateful to my hon. Friend. Opposition Members and the wider audience looking at the Budget should examine it in detail and recognise the extent to which it is based on a much broader consensus and approach to consultation, while being radical across the piece and balanced. That is not easy to achieve, and I am prepared to admit that I had my doubts about whether the Chancellor of the Exchequer would be able to achieve it. I am pleasantly surprised by the extent to which he has been able to do so.

Indeed, there is little in the Budget to which I can fundamentally take exception. It is absolutely true that an increase in VAT is a painful decision—there is no question about that. It is difficult to understand how the Opposition could balance their books without any such tax increases. Although our proposals in the self-contained Liberal Democrat budget did not require an increase in VAT, we always said that if the financial situation required it, we would not rule it out. We never did rule it out, so those attacks that suggest that somehow this is a betrayal are not true. There was careful and guarded explanation of that position.