Budget Resolutions — House of Commons, 2017-11-28
Topic: Macroeconomics
Paul John Sweeney (Labour, Centre-left): I am grateful for the opportunity to contribute to this important debate on the Chancellor’s autumn Budget, which has truly exposed the appalling reality of the Tory party’s failed austerity experiment. The UK economy is now forecast to be £72 billion smaller than under the spring 2016 forecast, and average earnings are not expected to recover to pre-crisis levels until 2025 In a major shift in their assessment of the UK’s growth outlook, the OBR has forecast that growth will remain below trend until 2022. This is the first time in recorded economic history that growth projections have been so low. That in turn significantly weakens the UK’s fiscal position, because it reduces revenue forecasts, household incomes and therefore the ability to reduce the deficit, which let us not forget was the Tory party’s primary test of economic success on coming into government in 2010. That now will not happen until 2031. The reality could not be more stark now: austerity is a vicious cycle of self-defeating decline. Real wages are lower than they were in 2010, and the Budget confirmed a further hit to living standards, with disposable income set to fall in 2017. Working age benefits have been frozen since 2015. Meanwhile, prices measured by CPI have risen by 6.9%. Under this Government, it is clear that the poor are getting ever poorer, while an increasing share of national wealth flows to the richest in our society. That is a betrayal of my generation, which is the first in recorded history in which people are seeing their living standards falling below those of their parents The key reason for this downward revision in growth was the major shift in the OBR’s outlook for productivity. In the past, its prediction was that productivity growth would return to pre-crisis rates, but it now believes that the slowdown is evidence of structural weakness. That structural weakness is a result of the Government’s self-defeating policies, which have created a cycle of weak earnings and cheap labour, with firms using low-cost labour rather than investing in more efficient processes and plant that would drive productivity growth The industrial strategy White Paper that was published yesterday demonstrates that the Conservatives have once again missed the opportunity to take the radical action that is needed to meet the UK’s productivity challenge. Raising research and development investment to 2.4% of GDP by 2027 will only bring the UK in line with the OECD average, after years of lagging behind, but we need to be above the average, not below it. World leaders such as South Korea and Japan spend over 3% of their GDP. That is why Labour is committed to that target There is the key question of ensuring that UK firms are leading this effort and that it is balanced across all UK regions. In Scotland, for example, 70% of R and D activity is undertaken by overseas-owned companies, but there is nothing in the industrial strategy to address that. The country stands on the cusp of a great disruptive opportunity as the fourth industrial revolution emerges, but this lacklustre Budget and industrial strategy prove beyond doubt that the Government are simply not up to the huge economic challenges facing the country. Only the Labour party has the true ambition and vision to harness our nation’s industrial potential.