Economy: Budget Statement — House of Lords, 2018-11-13
Topic: Macroeconomics
Spencer Livermore (Labour, Centre-left): My Lords, the Budget presented two weeks ago by the Chancellor revealed a Government incapable of being honest about the true state of the British economy, about the real impact their Brexit plans will have or about the ongoing austerity the people of this country continue to face. Far from being a Budget for hard-working families, as the Chancellor claimed, it was a dishonest Budget with the sole purpose of delivering a dishonest Brexit In his Budget Statement, the Chancellor claimed he had an economic record "to be proud of", as he announced growth forecasts of 1.6% in 2019 and 1.4% in 2020. What he failed to mention was that in each of those years growth was forecast before the referendum two years ago to be substantially higher, at 2.1%. Neither did he mention that for the two subsequent years, 2021 and 2022, his forecasts are now actually even lower than they were just this time last year. He also did not mention that at no point since the Second World War have there ever been five consecutive years of GDP growth below 2%, until now. Nor did he say that, having been at the top of the G7 growth league before the referendum, Britain is now at the bottom or that we are now also at the bottom of the EU growth league The truth is, as the director of the IFS has observed, that these growth forecasts are dreadful compared to what we thought in March 2016, dreadful by historical standards, and dreadful compared to the rest of the world. The Chancellor in his Budget also sought to highlight the new fiscal forecasts from the OBR, and of course the improvements in forecast borrowing since March are very welcome, but what he again failed to tell the country is that borrowing this year will actually be £30 billion more than was forecast in March 2015. He did not own up to the fact that borrowing next year will be £40 billion more than was forecast in March 2016, immediately before the referendum, and neither did he say that while pre-referendum plans were for a £10 billion surplus next year, he now forecasts a £30 billion deficit. The reality, which the Chancellor at no point acknowledged, is that we have seen over the past two years an enormous Brexit-induced borrowing downgrade. The Chancellor has now given up any serious desire to eliminate the deficit by the mid-2020s, and he has also abandoned his fiscal objective of achieving a budget surplus in the next decade Throughout his Budget Statement, the Chancellor seemed intent on concealing the damage already done to our economy by the vote to leave the European Union, but nowhere was this desire to conceal more shocking than in his denial of the longer-term economic consequences of Brexit. His claim in the Budget that he would, "harvest a double ‘deal dividend’",—[Official Report, Commons, 29/10/18; col. 654.] must surely be one of the most egregious falsehoods ever spoken by any Chancellor. It was disgraceful to hear a Chancellor claim what he knows to be untrue. This Government’s own impact studies, produced by his own department, show a 5% reduction in GDP from leaving the single market. They show future trade deals making up only 0.2% to 0.7% of that reduction. They show a devastating hit to every nation and every region of the UK, with an 11% reduction in GDP in the north-east and an 8% reduction in both the north-west and the West Midlands, not from no deal, but from their own preferred Brexit plans Far from delivering a boost to the public finances as the Chancellor claimed, his own figures show that the Government’s preferred Brexit outcome would result in an increase in borrowing of some £40 billion a year—a cost of Brexit of some £615 million every week. These falsehoods were made not out of strength or confidence, but out of weakness and fear. The Chancellor is now too afraid of the Brexit extremists in his own party to be able to be honest with the British people about the real impact Brexit will have. So, rather than now preparing cautiously for such an uncertain future or showing the prudence that this moment requires, when he was handed a £74 billion windfall by the OBR he was so frightened that he gambled on the public finances and spent it all, acting not in the long-term national interest but in his own narrow short-term party interest, trying to persuade his own MPs to back a deal that he knows will make this country immeasurably poorer The Chancellor used that short-term spending to claim that, "the era of austerity is finally coming to an end".—[Official Report, Commons, 29/10/18; col. 653.] Yet he knows full well that this is not the case, either for the hard-working families of this country or for the public services on which they depend. While announcing tax cuts costing £2.8 billion—from which 90% of the gain goes to the top half of the income distribution, and nearly half of the gain goes to the top 10% alone—he chose to maintain £4 billion of cuts to working-age welfare over the next five years. As a result, a couple with children in the bottom half of the income distribution will lose £200 a year while a single parent working full-time on the minimum wage will be £1,940 a year worse off. Looking at the overall impact of tax and benefit changes since 2015, the IFS has calculated that the poorest decile will now be £1,100 a year worse off, while the poorest working-age families with children will lose £3,000 every year—15% of their income. This is hardly the end of austerity for those families In our public services, while extra money for the NHS is of course welcome, the Chancellor’s numbers imply ongoing cuts in other day-to-day public services, from prisons to schools and local government. Unprotected departments will see cuts in every year from 2020 and their per-capita real-terms budgets are set to be 3% lower by 2023 than in 2019. At the same time capital limits were cut in the Budget by £7 billion for 2021, further undermining long-term investment in our economy and infrastructure. Again, this is hardly the end of austerity, as the people of this country were led to believe The Chancellor cynically pretends that austerity is over, solely with the aim of delivering a Brexit deal that he knows will decimate the public finances, making further, far more severe and long-lasting austerity inevitable. Yet with every cynical, short-term, false promise that they make, this Government build expectations that they know can never be met, further fuelling the betrayal myth that unscrupulous politicians of both left and right are only too ready to exploit. What will the Chancellor tell the people of this country when he delivers not a "double dividend" but the destruction of jobs, living standards, livelihoods and public services Surely it is now time for an honest conversation about the real impact that Brexit will have. It is time for us now to ask: is this really the right path for our economy? Is it really the future we want for our country?