Budget Statement — House of Lords, 2017-12-04
Topic: Macroeconomics
Spencer Livermore (Labour, Centre-left): My Lords, this Budget reveals an economy that is weaker, less resilient, and unprepared as we approach the biggest economic challenge faced by our nation in decades. It confirms that the Government’s economic plan is failing; that the price of Brexit is severe damage to our economy; and that those who can afford it least will be those who pay the most The independent Office for Budget Responsibility has set out the facts: growth has been cut sharply, and will now average just 1.4% a year. Indeed, growth will stay below 2% in every single year of the forecast period for the first time in history. Productivity growth has been cut to just 1.1%, making this the worst decade for that crucial measure since 1812. Household incomes are set to fall for an unprecedented 19 successive quarters, the largest fall in living standards since records began. On the public finances—the centrepiece of the Government’s economic strategy and the metric on which they have repeatedly asked to be judged—borrowing is up yet again, this time by an additional £30 billion by 2021-22. As a result, the Chancellor has abandoned his goal of reducing debt as a proportion of GDP, and it will now stay at around 80% for the entire forecast period. Even these debt levels, as the Resolution Foundation points out, are dependent on avoiding another downturn The Chancellor was also forced to abandon his overall fiscal objective—indeed, it was a manifesto commitment—to reach an absolute surplus by the middle of the decade. That target has been pushed back to 2030, meaning that Britain is now only one-third of the way through an unprecedented 20-year programme of austerity, with growth and productivity falling, wages stagnating and borrowing rising. The Government’s economic strategy keeps failing; their targets keep sleeping, and their austerity keeps biting. The sun has barely shone, the roof has not been fixed, and now the Brexit storm clouds are beginning to gather. Indeed, this Budget makes crystal clear that this fragile and failing economy is utterly ill equipped to withstand the challenges Brexit will bring In this Budget, the price that we are already paying for Brexit is clear: Britain has now officially fallen from fifth to sixth place among the world’s largest economies. Before the referendum, Britain was the fastest-growing economy in the G7; now we are the slowest. While the UK is slashing its growth forecasts, the global economy is enjoying the most synchronised recovery since 2007, with the EU seeing its fastest growth in a decade. Our GDP per capita will now be 3.5% smaller than forecast before the referendum, a loss of £65 billion to the economy. Before the referendum, a surplus of £10 billion was forecast by 2022. That is now predicted to be a deficit of £35 billion, a £45 billion deterioration, with the deficit now lasting 16 years longer than planned. Average earnings will now be £1,400 a year lower than expected before the referendum. With inflation higher following the sharp devaluation of the pound, disposable income will be £540 lower per person. The ONS has confirmed that business investment fell to just 0.2% in the last quarter, and the OBR has remarked that the renewed weakness of productivity is exacerbated by Brexit Our nation is poorer and its people are poorer, now and for years into the future. But this is no accident, nor the result of bad luck—it is a direct consequence of the Government’s determination to pursue the most extreme interpretation of the referendum result and the hardest possible Brexit, a determination driven not by the economic needs of the nation, but by the ideological needs of the Conservative Party. So the Government continue to spend billions of pounds in order to damage our economy even further—another £3 billion for Brexit in this Budget, on top of the £700 million already spent, the £2.1 billion for extra civil servants and now, apparently, a £50 billion divorce bill. We are surely entitled to ask: what are we getting for our money? We are getting nothing. In fact, we are getting worse than nothing. We are paying billions of pounds to make our country and its people poorer, weaken our economy, diminish our influence as a nation and leave the world’s largest free trading area, leaving us with a far worse deal than the one we have now. This is an unforgiveable waste of money on an act of monumental self-harm. The Chancellor began his Budget speech by repeating the asinine claim that leaving the European Union would bring new opportunities to Britain. I am sure we would all like to know who these opportunities will be for, because they certainly will not be for Britain’s working families. This Budget confirms that working people will now pay the heaviest price for this deteriorating Brexit economy and shows that many of those who voted for Brexit in the greatest numbers will be among those who suffer the most from the outcome We have heard much from the Prime Minister and the Chancellor about their concern for those struggling to make ends meet. However, the Institute for Fiscal Studies has spelled out the reality: the entire bottom half of the income distribution will see their incomes fall; the second-poorest decile will lose £1,500 a year, a 10% fall, while the second-richest decile will gain £600, a 2% rise; the poorest working-age families with children will see an extraordinary 20% fall in their income, losing over £3,500 a year; a lone parent in work will have their income cut by 10%; and an out-of-work couple with children will lose over 17% of their income, some £4,000 a year. By their actions and because of their values this Government have shown that they cannot govern for all in society. This Budget from a faltering Government reveals an economic plan that is failing, with downgraded forecasts, falling living standards and a poorer country. With the price that we are paying for Brexit now so high, it is a plan that can lead only to a deeper and still more devastating failure in the years ahead.