Budget Resolutions and Economic Situation

William Bain Excerpts

Wednesday 18th March 2015 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

This was the Chancellor’s sixth Budget, and after a Parliament of unparalleled failure on living standards not seen in decades, today was his final chance to chart a fairer course for the British people. He failed that test. He failed it because the values by which he has conducted economic and fiscal policy for the past five years are not the values that build an economy where we have a dynamic industrial policy and public spending plans that generate more growth, decent jobs and rising living standards with higher productivity. He failed because, by his actions, he has shown that he does not believe in a society where opportunity and assets are more equally distributed to the benefit of all, and inequality is lower. He failed because time after time he has put short-term tactics before a long-term strategy for growth in our green industries. This is the Chancellor who told us he could balance the books without hurting the poor, yet young people have seen the biggest drop in incomes during this Parliament and all he has to offer now is a vision of a low-wage, lower-skill economy drifting out of the EU, thereby damaging our future prosperity even further.

Britain is a better country than this Chancellor gives it credit for. He said that his policies today will tackle waste and inefficiency, but what can be more inefficient than the waste of young talent or over-25s being idle? A Government with real ambitions for our country would be creating opportunities to give them hope with a decent job. He says his chancellorship has been about fairness, but what could be more inequitable than bonuses rocketing at the very top of society, while he has broken his promise on the minimum wage by raising it by a measly 70p, instead of to the £7 per hour by this autumn which he promised last year? He boasts of his record on growth, but the UK has had the slowest recovery from recession of any other developed country apart from Italy and Greece, with the IMF and other forecasters predicting that growth will be lower next year and the year after than this year.

According to the Fraser of Allander Institute’s most recent commentary on the Scottish economy, full-time employment is more than 4% below its pre-recession peak and the total numbers of hours worked in Scotland is still lower than it was before the recession. On this day, when unemployment has gone up in my constituency and risen across Scotland by 6,000, this Government should have had more measures in their Budget to deal with that.

We know that bank lending to small and medium-sized businesses has been falling and that exports are weak, with the OBR pointing out that net trade will make a negative contribution to growth all the way until 2019. Productivity is poor. People are having to take out credit and take on more personal debt to make ends meet. This was supposed to be a recovery based on the march of the makers, yet it has stretched households, who are taking on more debt and shouldering the burden of fuelling growth. This should have been the Budget that addressed structural problems in the British economy, because a Chancellor who wants a credible deficit reduction plan for the next Parliament has to have a plan for more balanced growth and prosperity. The rewards of that growth have to be more fairly shared among ordinary working people than this Chancellor has achieved. But he failed. He failed because not only does he have the wrong plan for Britain’s future, but he has the wrong values for our economy and our society, too.

[Adam Afriyie]

This is the 10th Budget that I have listened to in the House of Commons. The first five led to massive unemployment and a huge deficit, and really damaged the lives of the least well-off in this country. The five under the current Government seem to have led to greater levels of growth, lower youth unemployment, low unemployment overall and a lower deficit. Does the hon. Gentleman recognise that in any way, shape or form?

[Mr Bain]

I gently point out to the hon. Gentleman that the emergency Budget and the spending review adopted in autumn 2010 led to three years of hardly any growth at all in the economy, a dramatic fall in tax revenues, the deficit having not fallen or been wiped out as the Chancellor had promised, and debts doubling over the course of this Parliament. That was the reason the economy has underperformed and why this Government are going to leave to their successor the highest deficit in the developed western world. The fiscal policies that this Government have adopted could not have been more wrong.

We need a different plan for public spending and for more balanced economic growth, not the one the Chancellor has offered today. We need a plan for a fairer tax system, with tougher action against those who do not pay their fair share of tax or indeed do not pay any tax at all. It was very troubling to read in the OBR’s fiscal outlook this afternoon that it has doubts about the £5 billion that the Government have suggested they will pull in from the tax evasion measures set out today. For example, the OBR said that some of the specific measures were “unlikely” to generate the extra revenues that were scored in the Red Book.

The test for this Government in their Finance Bill next week is whether they will be prepared to bring in legal penalties for those who evade or avoid taxes so that we can fill the gap of £34 billion of tax that should be collected by the Exchequer and has been foregone under this Government. That is what hard-working taxpayers will want to see in the Finance Bill next week.

Despite the Chancellor’s modest U-turn today, he still intends by 2018 to force through the biggest fall in core public service expenditure since 1938. The cynicism of this Budget is that, by bringing in deeper cuts between 2016 and 2018 and then partially reversing them in 2019 and 2020, we can see that it is the electoral cycle that has motivated the Chancellor more than the cycle of what is good for jobs and stable growth in this country.

Labour has a different and a better plan. It is one that does not jeopardise investment in infrastructure. If we balance the current budget in the next Parliament, then, as the National Institute of Economic and Social Research has said, we would have more growth, more jobs and faster rises in wages—a better plan for Britain.

I welcome what the Chancellor did for the oil industry. With receipts forecast to fall to £700 million in the next fiscal year, there is an even stronger case for an oil resilience fund, which would do a great deal to secure investment and jobs in the offshore sector in Scotland.

We should have had a Budget that raised the minimum wage to beyond £8 an hour. We should have taken steps to encourage the living wage to be paid to as many people as possible in this country. We should have had a higher rate of income tax for those earning more than £150,000 a year. We should have had the opportunity to begin the job of change, but change is coming. A Labour Government are coming, and I believe that the British people will begin that job of change by voting, in just seven weeks’ time, for a Labour Government and for a more equal and prosperous society.

--- Later in debate ---

[Kate Green (Stretford and Urmston) (Lab)]

I am sure that by now Government Members will recognise that the Chancellor’s Budget has not convinced my colleagues and has not convinced the country, and it will not convince my constituents. There is very little in it to return them to the confidence in the future that everyone I speak to on the doorstep tells me they desperately want. Whatever the Chancellor likes to say, low productivity, low pay, low tax receipts and high spending cuts have characterised his management of the economy until now. We heard this afternoon that such an approach is set to continue if his party returns to government in the next Parliament. Happily, we do not expect that to happen.

The Chancellor has taken a series of quite deliberate fiscal choices that have favoured the better-off, whether it is reducing the top rate of income tax or introducing the marriage tax allowance. The latter benefits only couples who are well off enough to be paying tax at all, and, what is more, only one in five of the couples who will benefit are raising children. Middle-income families have been squeezed repeatedly under this Government. My constituents report a pervasive feeling of insecurity and a deep concern for the future of young people.

Most distressingly of all, the very poorest have been pushed to the very margins of our society. There was a shocking rise in food banks from 60,000 visits in 2010 to nearly 1 million in 2013-14, and there was a 55% rise in homelessness and people sleeping on the streets between 2010 and 2014. I am sure that hon. Members cannot have escaped noticing that, as I have, including on their way home from this place in the evening.

The Chancellor repeated this afternoon the claim, which Government Members often make, that child poverty has fallen under this Government. Let us put the record straight: it has fallen in only one year under this Government—2010-11—which was before a single coalition fiscal policy had taken effect. Since then, it has flatlined at 2.3 million children, and the IFS has predicted that, under the measures the Government have already announced, it will rise by 700,000 children during the next Parliament. The fall in the first year of this Parliament was wholly and solely the result of the 2010 Labour Budget, since when median incomes have stagnated. Government Members used not to like the relative poverty measure for exactly the reason that it was bound up with what happened to middle incomes. I notice that they are not so vocal against the relative poverty measure now. They may now want to look at other measures of poverty, but it is an absolute disgrace that absolute poverty has risen under this Government for the first time since measurement of that element of poverty began, while material deprivation has also risen.

[Mr Bain]

Does my hon. Friend share my astonishment, and that of other Labour colleagues and indeed the whole country, that to try to persuade us people were better off the Chancellor used a metric that deals only with mean incomes—skewed to people at the very top of the income scale—and includes universities, which are not of course households?

[Kate Green]

The use of statistics this afternoon bore absolutely no relationship to the lived experience of my constituents and those of many of my hon. Friends.

As colleagues have said, most recently my hon. Friend the Member for Ogmore (Huw Irranca-Davies), this Government’s total lack of attention to working poverty is crucial: it is right and welcome that more people have moved into work since 2010, but that is not sufficient if they do not earn enough to live on. The increase in the national minimum wage will help a little bit, but the increase is more modest than we were promised last year. Increases in the tax threshold will increasingly give diminishing returns—they omit the poorest, who pay no taxes or whose incomes are already below the tax threshold—and what is more, they help the better-off. I remind Government Members that the better-off include us. The fundamental problem is that people cannot find the hours they need at the pay they need, which not only puts families under pressure, but is a major contributor to the failure to bring down the deficit as planned. The TUC says that we are set to borrow £54 billion more than planned this year, of which two thirds is a direct result of poor wage growth.

As colleagues have said, young people have been especially hard hit, again as a result of conscious policy choices by this Government. Of course older people should never face retirement in poverty—I am proud that Labour Governments halved pensioner poverty—and an ageing population means increasing the spending on this group, but we are significantly under-investing in the next generation. My constituents repeatedly say that to me. Hourly wages and weekly earnings have fallen fastest among young workers. Research by the London School of Economics has shown that typical incomes for those in their 20s were nearly a fifth lower in 2013 than they were five years earlier, and even those in their 30s with good degrees have lost out on their incomes. That not only blights young people’s lives today, but damages their ability to plan, save and look forward to the future. A Government who have made much of rewarding saving and forward planning should be mindful that they are putting a whole generation in a position in which they are simply unable to do so.

Although there were announcements today about helping people who wish to buy a home, an aspiration shared by many of my constituents, it is noticeable that there was absolutely no help whatsoever for the many young families who rent a property and will continue to do so for many years to come. If it is right to provide financial support to young people to buy their first home, will Ministers explain why it is not right to offer the same kind of financial support to those of them who rent?

Nor was there anything to comfort families with children. As the Child Poverty Action Group has pointed out, the cost of raising a child has grown significantly faster than its parents’ incomes under this Government. We heard nothing to help people with the additional costs of raising children, simply a tax break for married couples, many of whom will not be raising kids at the moment.

Finally, we heard today of the truly shocking plans for further cuts if the Conservative party were to form the next Government. Those shocking cuts to public service spending have been accelerated into the early part of the Parliament, no doubt so that a future Conservative Chancellor would be able to say that he was increasing spending as an election approached. We have heard in the past about shocking cuts to social security spending, and those cuts will be even harder on working-age people and families with children because pensioner benefits will be protected.

The Budget has told half the story today, hidden the pain for tomorrow and done nothing to put the country and families in my constituency back on their feet. It is not a Budget about the future: it is the Budget of a failing Government.