Budget Resolutions and Economic Situation

Stewart Hosie Excerpts

Wednesday 18th March 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

Since this Government came to power, funding for the Scottish Parliament has been cut. Since 2009-10, it has been cut by around 11% in real terms, but, within that, capital expenditure has been cut by around 25%, and that is a common story around the country. Decisions taken by this Government so far mean that the Scottish Government have some £3.5 billion less in real terms to spend than they otherwise would have had.

The changes announced today will make no substantive improvement to the fiscal position in Scotland. Indeed, the cumulative impact of today’s announcements will lead, over the next five years, to a real-terms cut of around £12 billion. This is very much an austerity Government.

What this Budget and the Red Book also tell us is that the Government and the Chancellor have failed on all the substantive targets that they set for themselves. They promised that debt would fall as a share of GDP by 2014-15, that the current account would be in balance by 2015-16 and that the public sector net borrowing that year would be some £20 billion. The debt will not now fall as a share of GDP until the next financial year. The current account will not be in the black for two more years, and the £20 billion borrowing promise will be almost four times that at £75 billion for 2015-16.

In essence, the Chancellor has failed to meet all of his own targets. With Tory and Liberal Democrat policy having strangled recovery in 2010 and 2011 and with some £50 billion of cuts to come—that is the difference between the £106 billion achieved and the £126 billion of cuts promised and the other £30 billion threatened today—we are on track, unless there is a change, for a decade of austerity. And still not a single one of the Chancellor’s major targets has been met.

Amid the rhetorical flourishes, the Chancellor talked about recovery and suggested he was lifting some of the burdens on working people. I notice that he did not apologise for trying to rebalance the economy on the backs of the poor. In essence, this was a political platform for an election. We know that because if we look at the impact not of the threatened future cuts but of today’s Budget announcements we see that the Government will take an extra £1 billion either in tax rises or in cuts to services over the next three years. Not only was the Budget not fiscally neutral, it did not provide any stimulus that we need.

Of course the Chancellor did say a deal about tax, particularly about increasing thresholds, which I welcome. I was intrigued by the notion of increasing the 40p threshold, not least because the number of people paying the 40p rate has increased by 2.5 million over the past 25 years, 1.5 million of whom have emerged in the period of this Parliament. We now have almost 5 million paying a rate of tax that used to be for the rich. There is a question over the affordability of that change and the time scale on which it will be delivered, but we will come to that later.

The Budget also confirmed that for some of the poorest in society the misery of the austerity programme will continue. We know that the proportion of cuts to tax rises has moved from 4:1 to 9:1, which is the clearest indication that the Government are trying to balance the books on the back of the poor. We know that the pain of that will be felt in Scotland by the 145,000 households affected by the changes to incapacity benefit, with people losing about £2,000 each. It will be felt by the 370,000 households who have seen tax credits reduced by almost £1,000 a year. It will be felt by the 620,000 families hit by the child benefit freeze, who are losing £170 a year. It will be felt by the 120,000 people losing, on average, £2,500 a year as disability living allowance is removed. It will be felt by the 835,000 households hit by the 1% cap on benefit increases—almost 1 million people in Scotland alone are hit by that one measure.

That is important in the context of this Budget, because there is now a growing body of opinion, including not least the OECD, that suggests we do not simply need a growing economy to fund our welfare provision; we need to squeeze inequality out of the system to help to deliver a growing and booming economy. Once again, I suggest that the Government are swimming against the tide of informed public opinion.

Many of those austerity measures will have to be mitigated using the precious resources of the Scottish Government: £114 million on the Scottish welfare fund, £69 million on the council tax reduction scheme and £90 million to mitigate the bedroom tax—almost £300 million to mitigate the dreadful decisions of this Government. Why do we not devolve welfare so that rather than having to use our precious resources to mitigate bad Tory decisions, we simply do not make them in the first place?

What the Chancellor did tell us today was that he finally expects to see some substantive and prolonged growth, which of course is to be welcomed, but others have noted that we still have the drag-back from the impact of the balance of trade, which appears to be negative for the entire forecast period. I welcome what he said early in his statement about help for UK Trade & Investment with regard to exports to China, but China is only one of many countries and I fear that, in and of itself, that will not be enough to turn the negative impact of the balance of trade into a positive one.

I am also glad that the Government have U-turned on their North sea policy, particularly in relation to the reduction in the supplementary charge—an increase early in this Parliament that should never have happened—but that, in and of itself, does not make for a long-term economic plan. A long-term economic plan would require the Chancellor to change course, away from a further £30 billion of new austerity cuts, away from an approach that continues to put the recovery at risk and away from a further attack on public services and the poor; in short, away from an approach to fiscal consolidation that has damaged not only the public services but the economy and undermined attempts to improve the public finances.

How much better it would have been, as a genuine alternative, had the Government recognised that their plans have failed, which they have, and adopted a stance that, rather than inflicting further cuts, allowed for a modest 0.5% increase in public spending, which would see a real end to austerity and, essentially, see the deficit continue to fall, see debt fall as a share of GDP and deliver up to £180 billion of investment across the UK over the next Parliament, rather than the miserable plans and additional austerity cuts we have seen today.

Our judgment is that this was neither a Budget to strengthen a recovery, nor a Budget for fairness or for tackling inequality. There was no long-term economic plan, merely a long-term austerity plan. It was a political Budget, as ever, from an all-too political Chancellor. As I am sure many of us have said in the past, the Tory Back Benchers might have waved their Order Papers today, but they will pay the price at the ballot box on 7 May.