Budget Statement — House of Lords, 2017-03-14
Topic: Macroeconomics
Peter Hain (Labour, Centre-left): My Lords, it is no slight on the Chancellor to say that the web of deception that he tried to weave in his Budget Statement fell short of the standard set by Britain’s foremost author of spy thrillers, John le Carré. He contrived to create the impression of an economy that is coming in from the cold, one that is enjoying robust growth Robust is hardly the word that I would choose to describe economic growth in 2016 that was slower than that expected 12 months ago: a miserly 1.8% compared with the 2% forecast by the Office for Budget Responsibility last March. It is surely misleading for the Chancellor to claim that the economy is expanding at a brisk pace when, as my noble friend Lord Livermore pointed out in his excellent speech, the OBR has downgraded its forecasts for growth in each of the next four years compared to what it expected one year ago. Growth will be slower next year than it was last year, or the year before, or the year before that. The OBR expects unemployment will be higher in each of the next four years than it is today. In the next couple of years it expects pay to go up more slowly and, thanks to Brexit, prices to rise more quickly than it thought last year. If this is the Chancellor’s idea of economic vigour, what on earth is his idea of economic sclerosis? Real recovery and rapid economic growth seem as far off as ever UK GDP grew more slowly in 2015 than in 2014, and more slowly still in 2016. The OBR expects it to grow no faster in each of the next four years than this year. These are all signs of an economy that is losing momentum, not gaining it; an economy that is stuck in the slow lane, not one that is picking up speed; an economy still mired in austerity. The Institute for Fiscal Studies expects the marginal improvement in the public finances that has emerged over the past few months to be short-lived and to make no difference to the prospects for public borrowing three years down the road. The OBR also expects the economy to be in the same sad place in 2020 that it thought in its November report The Chancellor announced a string of minor measures, which have been referred to already, such as rate relief for pubs and free season tickets for some kids at selective schools. He tweaked a few schemes such as technical training and gratuitously hit the self-employed. However, he did not cancel any spending cuts that were already in the pipeline; nor did he explain why he plans to spend only a fraction of the proceeds from the new apprenticeship levy on extra training. He left investment in public infrastructure stuck below 2% of GDP, miserably less than half the share it was between 1948 and 1983. Does he really think we have enough social housing, care homes, hospital beds and classrooms? Are there enough Sure Start children’s centres? What he did do is quietly tighten still more the fiscal squeeze that he has planned for 2017-19, as the figures for cyclically adjusted public borrowing show It will mean austerity, still more austerity, and more failure. Not only are local government services being decimated; not only is the NHS tottering underneath the strain; not only are head teachers at their wits’ end; not only is social care almost collapsing, with the Chancellor’s extra funding risibly and insultingly inadequate, as the noble Baroness, Lady Altmann, an expert on elderly policy, has pointed out. Not only is there all this colossal social failure, but there is massive economic failure created by the Tories’ own self-imposed obsessions, with their borrowing and debt targets still wildly out. Having missed them by a mile in the last Parliament, they will miss them again in this Parliament, he now admits, so he has shifted their achievement to the next Parliament. It is austerity for ever, and that is without the crushing self-inflicted economic damage of Brexit Will the Tories never learn that it is growth, not austerity, that brings borrowing and debt down? After the sky-high debt and borrowing bequeathed by the Second World War, both Labour and Tory Governments invested, not cut—achieving much higher growth than the pitiful levels achieved under Tory Chancellors since 2010—and simultaneously cut borrowing and debt. British productivity is pathetically pitiful; our skills are painfully poor; our trade deficit is historically huge; our infrastructure is embarrassingly inadequate. We have mammoth personal debt, a sinking savings ratio, and in real terms pay is about to plummet: real average earnings will be stagnant for 15 years, no higher in 2022 than they were in 2007—the longest squeeze on real wages since the Battle of Trafalgar All this and Brexit broods ominously ahead, with this Government having not the slightest notion of where they are taking the country or the economic damage that will result. Yet the Chancellor tinkers here and there. The story of this budget is simple, and le Carré provides the clue: tinker tailor wonder why.