Budget Statement — House of Lords, 2020-03-18
Topic: Macroeconomics
Peter Hain (Labour, Centre-left): My Lords, I agree with what the noble Lords, Lord O’Neill and Lord Lamont, said, but by spending an extra £350 billion to deal with the dire consequences of the coronavirus and promising even more, Britain’s new Chancellor has blown a hole in all the dogma of the last 10 years of Tory austerity. Boris Johnson has been hailing the recent Budget as a cheerleader for the common citizen, targeted on left-behind towns in the Midlands and the north and making a clean break with the Cameron-May years of harsh austerity. But in reality, the Budget fell well short of the great Tory turnaround that his fan club believed it to be First, the Budget failed to undo 90%—I stress, 90%—of the damage done nationwide by an unnecessary decade during which George Osborne and Philip Hammond squeezed over £150 billion of spending power out of the economy. On top of the measly £12 billion of measures announced last week to deal with the coronavirus emergency, this Budget gave the economy only an £18 billion boost over two years, with the brakes coming on again in 2022. As singer Melanie Safka told her Woodstock audience in 1969, they are "only putting in a little To get rid of a lot that is wrong." Secondly, the big increases in public sector capital spending that the Chancellor announced caused many people to miss what is happening to the current public spending that pays for our public services. George Osborne’s first Budget in 2010 set the pattern for the next 10 years. He cut Labour’s public investment capital plans by £10 billion over five years but he cut Labour’s plans for current spending by over £80 billion. That is why 20,000 police jobs disappeared, the NHS in England is 40,000 nurses short today, and today’s social care budget is £12 billion lower than is needed to bring service standards back up to their 2010 levels. The numbers of elderly people needing care have rocketed in the meantime as the Conservatives have created a countrywide calamity of social care misery for the elderly. The Institute for Fiscal Studies reckons that outside of health, day-to-day spending on other public services is now only three-quarters of what it was under Labour in 2007, and that current spending per person for most public services will still be well below the 2010 levels in 2024 Thirdly, George Osborne chose an 80%/20% split between public spending cuts and tax rises, meaning that Tory austerity fell overwhelmingly on our most vulnerable citizens and on vital social infrastructure. The new Chancellor led a "Getting it done" chorus, blithely ignoring the fact that growth, which had been slowing in each of the past five years, had come to a complete halt in the final quarter of 2019. It did the same in January of this year; UK GDP did not grow at all for four months. That is why the IFS describes the forecast growth rates for the British economy for the next five years as feeble, why it denies that the UK is in a robust position to cope with shocks such as the coronavirus catastrophe, and why it says that a failure to agree an orderly move to a free trade agreement with the European Union would badly weaken an already weak economy The Budget speech, cheered by the Tory Hooray Henrys, included a long-overdue and desperately needed increase in public investment, which they have spent the past 10 years resisting; an expanding budget deficit, which they spent a decade promising to cut; a national debt today that is double what it was before the global financial crisis—80% of GDP in 2020 under the Tories, against 36% in 2007 under Labour—and some crumbs of comfort for the neediest, to whom they have shown only a cold shoulder and frozen or cut benefits for years Bailing out Britain’s banks to avert financial collapse and ruin after the global credit crunch cost UK taxpayers cash outlays which alone peaked at £133 billion, according to a June 2013 parliamentary banking report. Allowing for cash outlays, government guarantees and Bank of England support, the potential cost to UK taxpayers of saving Britain’s banks had reached £1,162 billion by July 2012, or 10 times the annual cost of the NHS, according to the National Audit Office In 2008, the Government had to act within hours to save the economy from a collapsing banking system. In 2020, the Government had to act within days to save the economy from the virus crisis. The small group of cheerleaders on the Benches behind the Prime Minister have been forced to concede that urgent action to stave off disaster demands big decisions that only government can take, because only the state can provide the resources required in a national emergency like this Yesterday, the Chancellor was right to reject 10 years of Osborne austerity and to throw the power of the state at the gravest crisis we have faced in 80 years. It has been an unexpected learning experience for him and his party, and 10 years overdue. But if the sudden extra £350 billion to beat the coronavirus pandemic can be produced like a rabbit out of a hat in the last few days of government panic, the question is why appropriate extra public spending was not found from the very start of Conservative rule in 2010 to deal with the aftermath of the financial crisis, instead of plunging the country into 10 years of savage cuts—driven by neoliberal dogma and not necessity—which have gravely damaged the country’s capacity, including to fight this terrifying pandemic.