Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
John McFall (Labour, Centre-left): My Lords, it is a pleasure to engage in this debate. I want to focus on three areas: first, the fantasy figures given by the Government in the Budget; secondly, the productivity puzzle; and, thirdly, the issues raised in Who is my Neighbour?, the Church of England document, which was welcome The Budget last week was nothing other than a party political broadcast with fantasy figures. The OBR was very clear: it is a rollercoaster by which public spending will fall to the floor for the first two years of the next Parliament, with cuts the gravity of which has not been seen to date. But miraculously, it will all recover the year before the next election, with £12 billion extra spending for largesse. It seems that the Chancellor’s reputation grows with every failure. Would he balance the books by 2015? Easy. He failed. In the Autumn Statement last year he predicted a £23 billion surplus. He failed; it is now £7 billion. He promised £12 billion in future welfare cuts. When asked to explain from where they would come, he could not explain. Notwithstanding all the rhetoric on social security, it has done nothing because the social security budget was £220 billion in 2010, and is still £220 billion. The policy in those areas has failed As the IFS has said, we are left guessing about radical cuts. The NAO’s Amyas Morse has said that the Government are performing radical surgery without knowing where the heart is. This has ensured that the election debate to come will be about spending cuts. The OBR has said that that sharper squeeze in 2016-18 is indeed savage. The IFS questions whether cuts on that scale can ever be delivered. This is against a background of the slowest recovery on record. Paul Johnson of the IFS was clear. He said that household incomes crawling back to pre-recession levels seven years after the crisis is no cause for celebration We have a Chancellor under whom consumption, rather than production, has defined the economic approach. The biggest failure has been mentioned: the lack of productivity growth between 2010 and 2015. It has been stable for the past 40 years, although not at great levels; but it was nonexistent from 2010 to 2015, thereby undermining wages and incomes. The failure to understand productivity undermines confidence in the accuracy of any figures produced by this Government. The economy normally grows at lower rates after financial crises, but stagnation in productivity is extremely rare, and that is what we have witnessed. The question for the next Government is: is this temporary or permanent? The answer will determine our future economic prospects There is a dissonance between what the Government state is a "long-term economic plan" and what is happening in the country. Help to Buy ISAs and pennies off a pint are insignificant compared to what is happening in the country, particularly when put against the big picture. That big picture, on which the Government have failed, is a lack of a national infrastructure board, a lack of decentralisation to ensure that local economies prosper, and a lack of a productivity plan. We need a 20-year productivity plan, with annual reports to Parliament, so that we get this right. The Government have gone on about supply-side policies, but such policies on transport, housing and skills have been wanting. I am a member of the Economic Affairs Committee, which today published a report on HS2. The £50 billion of public investment, with £31.5 billion in direct subsidy, should be set against the background of no national transport infrastructure plan. How can one plan for a country without that? When Sir David Higgins came before the committee he was very clear. He supported an east-west line for the north. I asked him why. He said, "I talked to people in Manchester, who told me that it was a good idea, and I accepted that". That is not the way to go about developing our transport and economic policies In 2013 we completed the lowest number of houses since 2010, and that includes a reduction of 5% in 2012. There was a time, in the 1950s, when a Tory Government under Harold Macmillan had an ambition to build 300,000 houses, and they did. Sadly, there is no ambition here on one of the most pressing problems facing people in this country, particularly young people This Budget is a manifesto for a meaner Britain. We need to re-inject a politics that is about beliefs and society. That is why I welcome the Church of England report, Who is my Neighbour?. It is very clear that today in Britain it is impossible to support a family on the minimum wage. The report notes burgeoning in-work poverty, whereby 75% of the welfare cuts are to the working-age population. The stark truth is that parents with low-wage jobs and young people have suffered most in this crisis. If we are to recommend a manifesto that is more tolerant, efficient and productive for the country, we could start with the six key values which the Church of England bishops have written in their letter regarding the general election The debates about the Budget have centred on the dry currency of figures, rather than on people’s lives. But we have a choice. A no less august body than the Financial Times was very clear in its leader when it said: "Nothing is inevitable about Britain’s fiscal path" We can: "Pursue an absolute surplus with further tax cuts", and thereby have, "deep cuts in welfare and unprotected departments", Or we can: "Raise £10bn in tax and allow borrowing for investment, and public spending austerity may come to an end next year" Those are the words of the Financial Times, not mine These are all feasible choices. No one can say at the next election, "There is no alternative". People’s future livelihoods are indeed at stake at a time when there is disengagement and disillusionment among the electorate. The centre is being questioned as to whether it can hold in Westminster. There is a duty to consider the human and the societal elements, and the sentiments embodied in Who is my Neighbour? are a good start "The care of human life and happiness, and not their destruction, is the only legitimate object of good government" Those words are not from the Church of England document or Labour, but Thomas Jefferson. That cry is still relevant hundreds of years later. The Government have failed in all three areas and it will be up to the next Government to tackle these important subjects after the election comes in fewer than 50 days.