Amendment of the Law — House of Commons, 2015-03-19
Topic: Macroeconomics
Edward Michael Balls (Labour, Centre-left): I understand the hon. Gentleman’s concerns. I know from reading Hansard that he said to the House a year ago that "for all the huff and puff, when it comes to what it actually puts into and takes out of the economy, the Budget represents a 0.3% change . . . That is somewhat worrying when we consider the very big challenge we face on deficit reduction".—[Official Report, 20 March 2014; Vol. 577, c. 993.] I share his concerns about the Chancellor’s track record, and I am going to set out our alternatives in a moment Before I do that, let us go back to the Chancellor’s claims yesterday. He seems to have been telling the media this morning that he has retreated from his commitment to austerity, but the OBR’s document sets out the truth. Its verdict on the Budget is that it represents "a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years." It goes on to give the details on page 130, where it sets out in graphical form the cuts in public spending that we shall see from the Chancellor. Paragraph 4.108 states: "One implication of the Government’s spending policy assumptions is a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services and administration in 2016-17" I am going to set out a better way to do this, but first I will highlight what the Chancellor is actually doing. The reason he has to set out such deep cuts to public spending—deeper in the next Parliament than in this Parliament—is that, as the OBR confirms, and as the hon. Member for Gainsborough (Sir Edward Leigh) knows very well, in this Parliament he has failed to balance the books. Yesterday’s numbers confirm, according to the OBR, that the Government are borrowing £200 billion more than they planned in 2010. The deficit is set to be not balanced, but £75 billion. For all this Chancellor’s boasts about national debt falling, public net debt in 2015-16 is £217 billion higher than he was forecasting in 2010. He now claims that the national debt is going to be falling. That is based on his forecasts of short-term, one-off money coming in from the sale of bank shares. In 2014-15, he was planning on the national debt falling from 69.4% to 67.4%. In fact, his forecast yesterday has the national debt in 2015 at 80.4%, falling to 80.2%. It takes some hubris for a Chancellor to borrow over £200 billion more and then claim he has succeeded. That is the reality, and we know why. As the OBR confirmed yesterday, income tax and national insurance receipts have come in short of the 2010 forecasts by £97 billion cumulatively across the Parliament The result is the deeper spending cuts that the Chancellor had to set out yesterday. The IFS said back in the autumn that these were colossal cuts; they are still colossal cuts. The OBR said in the autumn that this would take spending on day-to-day public services back to the level of the 1930s. The Treasury tried to tell us yesterday that that was no longer the case. Its special advisers tweeted that they are only the deepest cuts since 1964. It comes to something when they have to boast that we are cutting our public spending to a level not seen for 50 years. In fact, the small print of the OBR tables reveals that 2018 spending, on the historical comparative measure that the OBR uses—day-to-day spending on public services—falls to its lowest level since not 1964 but 1938 The Chancellor claimed that he had changed the position, but he has confirmed the reality—even deeper cuts in the next three years than in the past five years. That is the truth. These are, in my view, cuts that will be impossible for our police services, our defence and armed forces and our social care to bear. Even this Chancellor cannot make this scale of cuts to our armed forces, our police forces or our social care, so he is going to have to end up doing what he always has to do—raise VAT and cut the NHS. That is the reality The Chancellor wants us to believe that this does not have to happen. He says that he can instead cut welfare and tackle tax avoidance. The problem is that his record on both is miserable. He is promising £12 billion more cuts to welfare, but he cannot tell us where they are going to come from. We know he has brought in the bedroom tax, but he cannot tell us what else he has in store. In this Parliament, he has overspent on his welfare plans by £25 billion Apparently the Chancellor is now going to crack down on tax avoidance. This is the Chancellor who has seen the tax gap—uncollected tax—rise by £3 billion. This is the Chancellor who, with the Prime Minister, appointed Lord Green—who, it turns out, had presided over HSBC’s industrial-scale tax avoidance. Despite repeated questioning, the Chancellor still cannot tell us whether he actually talked to Lord Green about tax avoidance. Why will he not, between now and the general election, come clean and tell us whether he had conversations with Lord Green about tax avoidance? No wonder the Chancellor did not come to Treasury questions a couple of weeks ago. No wonder he does not want a head-to-head debate. We now know why. One member of the Tory Cabinet does not want to talk about Michael Green, and another member of the Tory Cabinet does not want to talk about Lord Green. One is a deluded fantasist who has great problems with the truth, and the other is the chairman of the Conservative party. To be fair, only the chairman of the Conservative party changed his name—although, then again, perhaps the Chancellor did too This is the truth: the Chancellor promised to make people better off, and they are worse off. He promised to balance the books in this Parliament; that pledge lies in tatters. He promised, "We’re all in this together", and then cut taxes for millionaires. Now he is forced to confirm extreme and risky cuts to public spending in the next Parliament, bigger than in this Parliament We need a fairer, more balanced approach to the deficit and living standards. That is why Labour is now the only centre-ground party in British politics. We will cut the deficit every year and balance the books, with a surplus on the current budget and the national debt falling, as soon as possible in the next Parliament. Unlike the Conservatives, we have no unfunded commitments on welfare or on taxes. We were the party that wanted the independent OBR to audit all our manifestos—blocked by this Chancellor.