Budget Resolutions and Economic Situation

Stewart Hosie Excerpts

Wednesday 19th March 2014 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I start by welcoming a number of the measures that the Government announced, such as the increase in the revenue non-compliance budget, increased export funding and the further doubling of the annual investment allowance. If the Government carry on like this, we will be back to having an industrial buildings allowance policy, which should never have been scrapped in the first place. There is also the halving, at last, of bingo duty—my favourite cause. All these one-off measures are very sensible, could be implemented by any Government and ought to be welcomed by everybody.

However, that does not change this Government’s underlying direction of travel or the underlying shape of the economy as described to us in the Red Book. Scotland has suffered an 11% cut in the fiscal departmental expenditure limit, a 27% cut in capital and a real-terms 9.9% cut in the overall budget. The numbers announced today imply a further real-terms cut in the budget. I do not want to speak too much about Scotland, but it is important that we get on the record just how damaging this Government continue to be.

What the Budget speech and the Red Book tell us is that, by every measure the Chancellor has set for himself, he has failed. In his first Budget, he told us that in 2013-14 the current account deficit would be 2.3% of GDP, borrowing would be reduced to £60 billion and the net debt would be 70% of GDP. Today, he told us that for the same year, the current account deficit is higher, borrowing is actually at £95.6 billion and the net debt is around 75% of GDP.

Let me be generous: any Government can make a mistake for one year, so what about the big targets the Chancellor set for himself? They were: that debt would begin to fall as a share of GDP by 2014-15; that the current account would be in balance the following year; and that in the same year, public sector net borrowing would fall to £20 billion. Debt will not begin to fall until 2016-17—two years late. The current account will not be back in the black until 2017-18—two years late. Public sector net borrowing in 2015-16 will not be £20 billion; rather, the forecast figure—£68 billion—is more than three times that. Not a single one of the Chancellor’s key targets has been met.

[Mr Redwood]

Has the hon. Gentleman noticed the forecasted very sharp fall-off in petroleum revenue tax, and is that reflected in SNP plans?

[Stewart Hosie]

It is extremely convenient that, once again, we have a “North sea oil price crash” story on Budget day, some six months before the referendum. If the right hon. Gentleman keeps saying it, I am sure someone somewhere will finally believe him. I am not dreadfully convinced.

The bottom line is that—just like the right hon. Gentleman’s intervention—the Chancellor’s speech was hugely political. He did not tell us about recovery; he did not tell us that he is trying to lift the burden from hard-working families; he did not apologise for trying to rebalance the economy on the backs of the poor. This Budget speech was a political platform for the next election, and if it was supposed to be a vindication of his policies, then it failed, because the policies have failed.

The Chancellor did of course have a deal to say about tax. He is right to increase the basic rate threshold to £10,000, and then to £10,500. Raising the threshold from £6,500 to £10,000, resulting in savings this year of £700 for the average person, is sensible, but of course, that is only part of the personal tax story. This Government have pushed ahead with a tax cut for millionaires and have continued to squeeze the middle—the genuine middle class. The threshold for those paying the 40% rate of tax has come down from £37,500 to under £32,000, so for every penny saved at the bottom, they have had to pay more than a penny at 40%. I therefore welcome the fact that the 40% threshold is going to be increased, but that is not until 2014-15. It will not change the fact that the proportion of people paying the 40% tax rate has doubled over the past two decades, and there are now 2.1 million more people paying a rate of tax that was previously only for the rich.

It is not just the middle: it is the poorest in society who have been hit hardest. We know—the right hon. Member for Wokingham (Mr Redwood) told us—that the proportion of tax cuts to tax rises is 4:1. We knew from previous Budgets that the impact of the discretionary consolidation would be £155 billion. Interestingly, the Government have removed that figure from the Red Book: they have removed the year 2016-17 from the forecast, and are now telling us that the discretionary consolidation will be only £126 billion. However, that forecast goes only to 2015-16, and I am concerned that they are not making a longer forecast, so we can see the real scale of the damage they are trying to do.

We in the SNP know where the pain of this Budget and of this Government’s policy direction will be felt. It will be the 144,000 households in Scotland who are losing some £3,500 each through changes to incapacity benefit. It will be the 372,000 Scottish households who have seen tax credits reduced to the tune of £800 a year. It will be the 620,000 families hit by changes to child benefit, who have lost an average of £360 a year. It will be felt by the 55,000 people who are losing an average of £3,000 a year as disability living allowance is removed. Those are the people whom we should be thinking about and who should be helped. Instead, the Government continue to try to balance the books on the back of the poor.

I welcome the fact that the Budget forecast at least says that there will be some growth, but it is once again heavily predicated on business investment growth. In Budget after Budget, the Government have produced five-year growth forecasts. In 2010, growth was predicted to be between 8% and 10% a year, but by the time we got to 2011 it had turned negative and they had to set yet more ambitious targets for the next five years. So it went on, and we find in the Red Book that the forecast business investment growth for last year turned negative again. I am desperate to see positive business investment growth, and the jobs that come with it, but we keep seeing the same story from the Government. They keep failing.

What should the Government have done? There are any number of policies that they might have adopted. Instead of tinkering with air passenger duty, they might have cut it properly or acted sensibly to boost international connectivity. Instead of simply freezing fuel duty, they might have introduced a real fuel duty regulator to smooth out future spikes. They might have cancelled some of their austerity measures, or at least removed the cap on discretionary housing payments to help the poorest. There are so many things that they might have done.

In the North sea, the Government announced that they would implement the Wood review in full. That will save the industry some £45 million, and it is to be welcomed. However, they are keeping the offshore chartering regime that they announced last year, which will cost the industry £600 million. They keep getting it wrong every single time.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Should the Government not acknowledge that the North sea is booming, and that the drop in revenues is due to investment being tax deductible? What we are seeing is a healthy North sea for the years to come.

[Stewart Hosie]

I am sure that we all support £14 billion-worth of investment this year and £100 billion in the plans, and the drilling of 133 oil and gas wells to invest for the future. We would all be far less happy if that investment was not taking place. The problem is that all the good things that the Government could and should have done would have required them to change their policy fundamentally, away from billions more in austerity cuts and away from the policies that have stifled growth and recovery over the past few years.

I am not at all convinced that this was a Budget for recovery. It was a political Budget from an all-too-political Chancellor. I saw Tory Back Benchers waving their Order Papers not only after the Budget statement but before it was even made, and I suspect that such hubris will come back to haunt them. I hope that with a yes vote in this year’s referendum, this will be the last Tory Budget ever to affect Scotland.