Budget Resolutions and Economic Situation — House of Commons, 2015-07-08
Topic: Macroeconomics
Louise Margaret Haigh (Labour, Centre-left): Today’s Budget is the final act in a financial crisis that has seen debts moved from the financial sector to the public purse and piled on to individuals who will be comprehensively unable to foot the bill for the Chancellor’s raid on tax credits, housing benefit for under-25s and families with more than two children I shall deal with this before hon. Members leap to intervene. The living wage is not set at a level that would permit households to cope without in-work support. The Resolution Foundation, which the Chancellor referenced, has said: "If in-work support is cut then, as night follows day, the Living Wage will rise." Excluding in-work support raises the London living wage to £11.65, revealing the Chancellor’s announcement as mere rhetoric. As my right hon. and learned Friend the Leader of the Opposition said, it is giving with one hand and taking with the other The Budget serves notice that we have a Chancellor steadfastly refusing to tackle fundamental issues in our economy that are causing rising levels of household debt. It is ominous to listen to him talk with such confidence, given that significant underlying weaknesses in the economy that have been causing serious concern for some time are completely ignored. He might have wanted a rebalanced economy and a recovery built on rising incomes, but that is simply not happening. High debt, low pay, an economy based on credit and a housing bubble, a deregulated financial sector—back to business as usual. What was wrong in 2007 remains wrong to this day. It is that we do not have a resilient financial system. In the recently published "Financial System Resilience Index", the UK ranked lowest of all G7 countries. It is that household debt is rising to levels not seen before—higher even than at the peak of the crisis. Last year alone, it grew by 9%, which was an increase of £20 billion on households’ credit cards and other debts. It is that the housing bubble continues apace and markets are overheating. Exhortations from the Governor of the Bank of England have been ignored. He warned: "What happens if households are borrowing at high multiples is they have to economise on everything else in order to pay their mortgages. And if enough people are highly indebted, that has a big macroeconomic impact… There is the possibility that currently responsible lending standards become irresponsible to reckless." These issues are all interlinked. We have shifted the debts of the financial sector on to the public balance sheet, and now, in the final act of the financial crisis, the Chancellor is shifting it on to individuals. Ours is an economy built on the same old mistakes. I do not think that anyone in this place would care to suggest any longer that we are beyond the days of boom and bust—we are witnessing this in the international markets as we speak. While the world is understandably focused on Greece, China’s markets are in little short of meltdown. Unfortunately, crashes are far from being a thing of the past, and I would suggest that in the UK we are closer to the next one than we are to the last Before I entered this place, I worked in the City of London, and I can report to the House that the culture of risk taking, short-termism and excessive pay and bonuses remains as prevalent today as it was before the crash—although I hasten to add that I was not privy to such excessive pay.