Budget Resolutions and Economic Situation — House of Commons, 2015-03-18
Topic: Macroeconomics
Austin Vernon Mitchell (Labour, Centre-left): I will not follow the hon. Member for Braintree (Mr Newmark) into his fantasy world; the Government seem to be in danger of moving into a fantasy world where it is as if all the nation’s problems have been solved by the miraculous efforts of this Chancellor. The Budget seemed to me to be a matter of the Government moving furniture around a room in which they have just had four years of a very painful S and M party and inflicted 50 shades of austerity on the country, and they are now trying to clean up the mess for presentation to the electorate. It is a Budget of pathetic measures backed up by endless promises of a glowing future The fact is that the economy is better—we have to concede that—but not because of any Government long-term plan. I am getting fed up of hashtag politics and the endless mentions of the Government’s long-term economic policy. It is as if they think that, if they mention it for long enough and as many times as they can, people will believe that they actually had a long-term economic policy. But they did not: they came in with a fiscal policy of slash, cut and burn, and to roll back the state. It was an ideological policy, not an economic policy—that was the essence of what they offered the British people. The policy was designed to reward the rich, because if the state is rolled back and welfare and public spending cut, then taxes can be cut to reward the rich and start the trickle-down effect, but the trickle-down effect is what horses do to roads. That was the Government’s hope for the British people as a result of the money going to the rich On the basis of those expectations, the Chancellor made two promises right from the start: to pay off the debt, which he has singularly failed to do; and to eliminate the deficit, which he has also failed to do. Those two priorities have given us four wasted years of futile austerity in particular, and of pain, which has hit the poor and the north and cut the living standards and household incomes of people in this country. It has been four years of misery Growth in that period has now come about not because of the Government’s long-term economic plan but thanks to the efforts of the Bank of England. The Bank of England has been doing what the Government were not doing and has saved the Government’s bacon. If interest rates are kept flat to the floor for six years and £375 billion is pumped out, printed and shoved into the banks without any revival or economic benefits, the patient is dead. That is what has produced the economic revival, not the Government’s measures. It worked and now the Chancellor is trying to claim credit for it, by giving us a few pathetic tax cuts which he claimed were impossible a few years back; by benefiting the north, which he has been hitting for four years; and through glowing promises of a better future that has now been postponed until 2020. I have news for the Chancellor: that future will not come under this Government, fortunately, and it could not come from this Government’s policies. The Government are essentially the trade union of the rich, implementing policies to benefit the rich, and they will be thrown out by the people who have not benefited from those policies The Chancellor tells us that we are better off, but the nation does not believe him. The nation feels squeezed, as its living standards are being cut. It feels that it is still suffering and that it has been betrayed, and it does not like the spectacle of rewards being showered on the rich as a result of cuts to benefits and penalties on the poor. This has been the slowest recovery ever from any recession in this country and it has essentially been slowed by the cuts and reductions in demand introduced by the Government. The Government will not produce a glowing future because their policies cannot work. This is not a real recovery. A real recovery would involve building up British manufacturing strength so that Britain was able to pay its way in the world, and that has not happened and is not happening at the moment All the Government have done is repeat some old tricks for making people feel better off. For example, with rising house prices, everybody who owns a house feels better off, whereas the people who do not own houses feel and are worse off. Rising house prices, stoked by the Help to Buy scheme, have helped to produce a better feeling, as has the high pound. The pound is grossly overvalued at the moment, which means cheaper imports, even if it damages exports on a considerable scale. Falling food and fuel prices are transient factors and we can add the spending bonanza that the Government hope to see having given pensioners the freedom to spend their pension pots. Whatever the consequences in the future, that would produce an economic boost and a stimulus now This is not a recovery that will work and be sustained. It cannot, because the productivity gap has widened and investment is lower than it needs to be, in the private sector and, in particular, in the public sector, where it has been slashed. Programmes that were cut in 2010 have not yet been fully restored. This is not a real recovery because there is no substantial manufacturing revival on the scale that we need and it will not lead to a real recovery because we are still not paying our way in the world. The deficit has been 4%, 5% or 6% of GDP and has been rising. It came down in the past month, but that was a small dent in a long-term rise. We are paying our way only by importing capital, wealth and businesses and by people buying up British businesses, British land, British houses and the country in general. The profits from those buy-ups will eventually have to be exported. Those people will not want to stimulate demand here and it will be exported, dragging down our economy. Investments will be dictated by the long-term needs of overseas boards that take less account of the needs of this country Effectively, this has not been a revival in our ability to pay in the world and to stand proudly on our own two feet. The only march of the makers that has taken place seems to me to be the march of the Chancellor and the Prime Minister around factories, wearing hard hats and appealing pathetically for support from factory workers whose living standards have been reduced by their Government It is true that we are doing better than Europe, but that is because Europe has embarked on the folly of deflation to make the euro work. Europe has become the low growth, high unemployment blackspot of the west, so to be doing better than that is no great advance or commendation The Budget will not lead to the prospects the Chancellor was holding out. We need a real recovery in manufacturing and jobs. Let us remember that, although unemployment is falling, it still stands at 1.86 million, which is very high, and that people who are receiving benefits are not paying taxes. So unless we get a real recovery and a substantial increase in earnings to boost demand in the economy, it follows as night follows day that this Government—if they are re-elected—will have to go in for a massive programme of cuts to achieve their promise to get rid of the deficit by 2020 This Budget foreshadows an enormous programme of cuts. Welfare cuts of £30 billion have been talked about, and defence cuts have also been mentioned. The Government are not committing themselves to maintaining the defence spending target of 2% of GDP. They have, however, committed to making cuts in local government spending. The Public Accounts Committee has stated that the cuts in welfare and social security are not sustainable That is the future that this Government are offering the country if they win the election, but the country will reject that future. It is instead going to accept Labour’s offer to invest to grow, to put people back to work so that more people are paying taxes and fewer are receiving benefits, and to bring down the deficit in that way by reviving the economy. I think that people will accept that offer at the election because they have been so badly bruised and betrayed by this Government, and because they want a party that will offer them hope.