Financial Statement — House of Commons, 2015-03-18
Topic: Macroeconomics
George Gideon Oliver Osborne (Conservative, Centre-right): The British economy is fundamentally stronger than it was five years ago, and that is reflected in the latest forecasts from the Office for Budget Responsibility. It seems remarkable that until this Government came to office, our national forecasts were manipulated by Chancellors, to be fiddled and fixed in pre-election Budgets. Today they are produced with independence and integrity by Robert Chote and his team, and I want to thank them for their work. The OBR confirms today that, at 2.6%, Britain grew faster than any other major advanced economy in the world last year. That is 50% faster than Germany, three times faster than the eurozone and seven times faster than France. There are some who advise us to abandon our plan and pursue the French approach. I prefer to follow the advice of the secretary-general of the OECD, which he gave to us all last month. He said: "Britain has a long term economic plan" and "it needs to stick with it." "A long-term economic plan"—now there’s someone with a way with words. We need to stick with that plan, at a time when global economic risks are rising The biggest development since the autumn statement has been the further sharp fall in the world oil price. This is positive news for the global economy, but the overall boost this provides has not yet offset the rising geopolitical uncertainty it causes, and the eurozone continues to stagnate. So at this Budget, the OBR has once again revised down the growth of the world economy, revised down the growth of world trade and revised down the prospects for the eurozone. It warns us that the current stand-off with Greece could be very damaging to the British economy. I agree with that assessment. A disorderly Greek exit from the euro remains the greatest threat to Europe’s economic stability. It would be a serious mistake to underestimate its impact on the UK, and we urge our Eurozone colleagues to resolve this growing crisis The problems in Europe remind us why Britain needs to expand our links with the faster growing parts of the world. We have made major progress in this Parliament. I can report that the trade deficit figures published last week are the best for 15 years, and we will do even more, so today I am again increasing UK Trade & Investment’s resources to double the support for British exporters to China. We have also decided to become the first major western nation to become a prospective founding member of the new Asian Infrastructure Investment Bank, because we think we should be present at the creation of these new international institutions Mr Deputy Speaker, you would expect weaker world growth, weaker world trade and weaker European growth to lead to weaker growth here in the UK. However, the OBR has not revised down Britain’s economic forecasts; it has revised them up. A year ago, it forecast growth in 2015 at 2.3%. In the autumn statement, that was revised up to 2.4%. Today I can confirm that GDP growth this year is forecast to be higher still, at 2.5%. It is also revised up next year, to 2.3%. That is where it remains for the following two years, before reaching 2.4% in 2019 The OBR reports growth revised up, and its numbers confirm that growth is broadly based, for we are replacing the disastrous economic model we inherited. Between 1997 and 2010, investment accounted for less than one fifth of Britain’s economic growth—four fifths came from debt-fuelled household consumption. Meanwhile, manufacturing halved as a share of our national economy, and the gap between the north and the south grew ever larger I can report that since 2010 business investment has grown four times faster than household consumption; Britain’s manufacturing output has grown more than four and a half times faster than it did in the entire decade before the crisis; and over the last year, the north grew faster than the south. We are seeing a truly national recovery Let me turn now to the rest of the forecasts. This morning we saw the latest job numbers. It is a massive moment. Britain has the highest rate of employment in its history—a record number of people in work and more women in work than ever before—and the claimant count rate is at its lowest since 1975. For years, Governments have talked about full employment. This Government are moving towards achieving it Unemployment today has fallen by another 100,000, and compared with the autumn statement, the OBR now expects unemployment this year to be even lower. It is set to fall to 5.3%, down almost a whole three percentage points from the rate we inherited from the last Government. When we set out our plan, the Leader of the Opposition predicted that a million jobs would be lost. Instead, over 1.9 million new jobs have been gained, because our long-term plan is based on the premise that if we provide economic stability, if we reform welfare and make work pay, and if we back business, then we will create jobs too. Today’s figures show that under this Government 1,000 more jobs have been created every single day. The evidence is plain to see: Britain is working again What about all those who say, "The jobs aren’t real jobs; they’re all part-time; they’re all in London"? Nonsense. How many of the jobs are full time? Eighty per cent. How many of the jobs are in skilled occupations? Eighty per cent. Where is employment growing fastest? In the north-west of England. Where is a job being created every 10 minutes? In the midlands. Which county has created more jobs than the whole of France? The great county of Yorkshire. We are getting the whole of Britain back to work with a truly national recovery It is only by growing our economy, dealing with our debts and creating jobs that we can raise living standards. To the question whether people are better off at the end of this Parliament than they were five years ago, we can give the resounding answer yes. We can measure it by GDP per capita, and the answer is, yes, it is up by 5%. Or we can use the most up-to-date and comprehensive measure of living standards, which is real household disposable income per capita—in other words, how much money families have to spend after inflation and tax. This is the living standards measure used by the Office for National Statistics and by the OECD. On that measure, I can confirm that, on the latest OBR data today, living standards will be higher in 2015 than in 2010. They confirm that they are set to grow strongly every year for the rest of the decade The British people for years paid the heavy price of the great recession. Now the facts show that households on average will be about £900 better off in 2015 than they were in 2010—and immeasurably more secure for living in a country whose economy is not in crisis any more, but is instead growing and creating jobs Because we have strong growth and a strong economy, we can also afford real increases in the national minimum wage. This week we accept the recommendations of the Low Pay Commission that the national minimum wage should rise to £6.70 this autumn, on course for a minimum wage that, as the Prime Minister just said, will be over £8 by the end of the decade. And we have agreed the biggest increase ever in the apprentice rate. It is the oldest rule of economic policy: it is the lowest paid who suffer most when the economy fails and it is the lowest paid who benefit when you turn that economy around Household incomes also go further because we now have the lowest inflation on record. The OBR today revises down its forecast for inflation this year to just 0.2%, and revises it down for the following three years. It is driven by falling world oil and food prices, not by the kind of stagnation we have seen on the continent. But we will remain vigilant I am today confirming that the remit of the Monetary Policy Committee for the coming year remains the 2% symmetric CPI inflation target. I am also confirming the remit for our new Financial Policy Committee, so that this time we spot the financial risks in advance The fall in food prices is good for families, but it reminds us of the challenge our farmers face from volatile markets. The National Farmers Union has long argued they should be allowed to average their incomes for tax purposes over five years. I agree and in this Budget we will make that change We will also use this opportunity to lock in the historically low interest rates for the long term. I can tell the House that we will increase the number of long-dated gilts that we will sell. We will also redeem the last remaining undated British Government bonds in circulation. We will have paid off the debts incurred in the South Sea bubble, the first world war, the debt issued by Henry Pelham, George Goschen and William Gladstone; the debt issued by Gordon Brown will take a little longer to pay off. [Interruption.]