Budget Resolutions and Economic Situation — House of Commons, 2015-03-18
Topic: Macroeconomics
John Healey (Labour, Centre-left): My hon. Friend characteristically anticipates one of the points I was going to make. He will know, because he will have seen the papers published alongside the Budget, that those papers confirm that over this Parliament public sector capital investment has fallen by 44%. His point is spot on. I want to turn to some other facts. When the Government took office, the economy was growing quarter on quarter at a 4% annualised rate. The combination of policies introduced in the emergency Budget in 2010, which the Chancellor reminded us of, meant that by the end of 2010 growth was zero and that over the years 2011 to 2014 the annual rate was just 1.7%, not the 2.4% we were told we would get when he made his Budget statement. They choked off growth because of the policies and cuts they introduced. This has been the slowest recovery from a recession in this country in 100 years On public finances, I remind the Government Front-Bench team of that 2010 Budget speech. The Chancellor claimed that "fear about the sustainability of sovereign debt is the greatest risk to the recovery".—[Official Report, 22 June 2010; Vol. 512, c. 166.] National debt then stood at 62% of GDP. Today’s figures confirm that it will be about 80% next year. On the deficit, the Chancellor issued his binding formal mandate in 2010 that the books "should be in balance in the final year of the five-year forecast period, which is 2015-16".—[Official Report, 22 June 2010; Vol. 512, c. 167.] The failure here is astonishing. Far from balance, the Budget figures tell us that we will be in deficit by £75.3 billion. The point of balance is not next year; it is at least three years later than that. It is a comprehensive failure of long-term fiscal and economic planning What has gone wrong? The OBR says that the severe cuts and the significant VAT hike—let us not forget that—resulted in a loss to GDP of 2% in those first two years. Other estimates put the figure at 3% to 5%, at least, over the Parliament. The most productive spending in a downturn is capital spending. That is why organisations from the International Monetary Fund to the OECD and the OBR itself have all said that reducing investment spending has the most serious effect on negative economic growth, yet that is exactly what the Chancellor did, as my hon. Friend the Member for Edmonton (Mr Love) has just said. Over the Parliament, public capital investment has almost halved. When the Chancellor was faced with the choice either to spend money on, for example, short-term income tax cuts for millionaires or to invest in the infrastructure this country needs for the long-term future, he chose the tax cuts for the millionaires The unprecedented wage squeeze has come partly from the cuts in services, tax credits and benefits. It has come, too, because of the inherently weak demand for labour in this country. Before a Government Member jumps to their feet and asks, "What about the headline unemployment rate?" I would say that it is good that it is down, but the weak demand for labour has meant that people cannot get the hours or the wages to meet the bills that they are struggling to pay. Weak growth has been reflected in real declining wages. The area of South Yorkshire that I represent has seen the average full-time worker take home £2,500 less than in 2010 Back in 2010, the Chancellor said he had a long-term economic plan. He said in that Budget statement: "Our policy is to raise from the ruins of an economy built on debt a new, balanced economy, where we save, invest and export".—[Official Report, 22 June 2010; Vol. 512, c. 167.]