Budget Resolutions and Economic Situation — House of Commons, 2016-03-16
Topic: Macroeconomics
Christopher Michael Leslie (Labour, Centre-left): Oh dear, oh dear—a bad workman always blames his tools. It is interesting that the Chief Secretary to the Treasury does not fess up to the big changes that have been made with the raids on public sector pensions. Some £2 billion will be taken from public service workers across this country—that was not really emphasised in the Chancellor’s speech. A whopping £6 billion, or 60% of the £10 billion surplus that the Chancellor is still claiming will be achieved, will go on all sorts of shuffles in when corporation tax is paid. That will potentially be very disruptive to businesses and firms across the country On the economic forecast, there is a problem not just with growth but with productivity. Despite the fact that the Chancellor has published productivity plans, it is stark to see how productivity has been significantly downgraded in the OBR document. On page 46, we see that, whereas in 2010 real productivity had 21.9% of potential, it has now fallen to 14.4% of potential—a massive faltering of Britain’s performance on productivity. Although the Chancellor has paid lip service to that issue, he has consistently failed to orientate his Budget measures around those economic necessities We also need to look at what has been happening to earnings in this country. Again, the growth in average earnings is downgraded not just this year but for every year of this Parliament. Page 91 of the OBR document paints a gory picture of what is happening to average earnings. Of course, that economic outlook has an effect on the numbers in the tax and spending decisions that the Chancellor has to make Let us look at what the Chancellor has had to do to try to keep his promises. He is trying his best to stay on course to deliver a surplus at end of this Parliament, but he has already had to admit that he has broken his promise on the welfare cap, and today he has admitted that he is breaking his promise on the national debt. Public sector net debt is up every year in the forecast for this Parliament—a theme that runs through the whole Budget statement. The heroic assumption that the Chancellor is still going to get that £10 billion surplus at the end of the Parliament feels implausible not just to me but to many of the economic commentators who are analysing the Budget statement. As I have said, that surplus is predicated on a £2 billion raid on public service pensions and the £6 billion shuffle in when corporation tax will be realised Then we get to some of the other changes that the Chancellor has decided to make. He did not really dwell on this very much, but cutting capital gains tax from 28% to 20% is a phenomenal giveaway to the very wealthiest people in this country. It applies not to residential properties but to those who have an accretion of capital wealth. Their tax will come down significantly, with a giveaway next year of £630 million. In the same year, he will take £590 million—from where? From the disabled—from the personal independence payment section of the social security budget. That is a straight transfer from those in most need to the very wealthiest in society—a tycoon tax cut, as I think it will be known as the days go by and people realise what has been announced in the Budget There are other spending cuts in the small print of the Red Book. Poor old local government services, particularly in areas where not a lot of Conservative party members reside—you might be surprised at my cynicism, Madam Deputy Speaker. Local government services received £10.8 billion of funding this year, but that will be cut by a third to just £6.2 billion in the last year of this Parliament. Just imagine the effect on libraries, leisure services, housing, social services and social care. Of course the Government will say that local councils can put up council tax, but they should not think that local residents will not place that council tax increase entirely on the Chancellor’s shoulders. They are the ones who have to pay the price for the cut in local services The transport budget will be cut from £2 billion to £1.8 billion by the end of this Parliament. How on earth will that help with the productivity issues we have to address? I have talked about the clear problems that emerge from the OBR Blue Book, and transport is one of the most important areas of infrastructure spend, ensuring that people can get from A to B and that goods and services can flow to markets. All those obstacles and impediments to business will be made worse by the Chancellor’s attitude to transport The OBR goes on to say that this era of cuts and Tory austerity will continue not only for this Parliament—never mind the previous Parliament—but will bleed well into the next Parliament. The OBR says that to achieve the surplus they want, the Government need a much bigger cut in current departmental spending of £8.1 billion in 2020-21, compared with the £1.8 billion that they have to cut in 2019-20. There are all sorts of statistical shifts and shuffles going on, all revolving around the Chancellor’s target, and what is that about? Not just the Chancellor’s European referendum anxieties but the leadership challenge from the Mayor of London. Everything in this Budget has revolved around the Chancellor’s political predicament We have a Budget that exposes many of the anxieties people have had about this Chancellor’s attitude. It is eminently political, with all sorts of shuffles that do not really have anything to do with the best interests of the economy. With growth down, debt up, productivity faltering, implausible surplus forecasts and a tycoon tax cut—a capital gains tax giveaway paid for by disability independence payments—it is not a Budget of which Government Members should be proud.