Budget Resolutions and Economic Situation

Debate between Debbie Abrahams and Rebecca Pow

Monday 13th July 2015 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

That is good news, Madam Deputy Speaker, for someone who is always in a rush.

This is an illusion of a Budget of which even Dynamo would have been proud. Saying that it is going to make work pay defies all the evidence. Illusion No. 1 relates to the performance of the economy. The Government are borrowing £219 billion more than they anticipated in 2010, and there is a debt to GDP ratio of over 80%, when it was only 60% after Labour recapitalised the banks. Why is the economy at this level? Basically, because it was absolutely tanked under the coalition and that is now going to be carried forward under this Government.

In 2014, population-adjusted growth was 1.4% below its pre-recession peak, and in the first quarter of 2015 it was still below it, at 0.67% of the pre-recession peak. This reflects the particular issue that the Government have had with productivity, which is the second worst in the G7. Now that we have a productivity plan, will the Minister identify the specific measures that are going to support small and micro-businesses to access finance and to deal with all aspects of late payments, which are an absolute blight on small businesses? How is he going to harmonise taxation and make the tax system more consistent, particularly for self-employed sole traders?

Since 2008, nearly three quarters of the increase in all employment has been down to the increase in self-employment. According to Office for National Statistics data, self-employment has increased by nearly 40% since then, and is now at a 40-year high. There are many benefits from being self-employed: people get to be their own boss, and can choose when and where to work, but there are issues with taxation. We also know that the average income of someone in self-employment is half that of an average employee. It has fallen by 22% since 2008. Last year, Demos undertook research to establish the reason for the sudden increase in self-employment, and concluded that the level was artificially high because there were no jobs for people to move into, and people often moved backwards and forwards between employment and self-employment. There were no real jobs about. There is also the issue of false self-employment. Many large companies in the construction industry, for instance, sub-contract rather than employing brickies, joiners and plumbers. How will the Government deal with those issues?

Another illusion is that the Budget is fair and will make work pay. We know from an analysis conducted by the independent Institute for Fiscal Studies that the poorest 20% of the population will lose proportionally more of their income from tax and benefit changes than any other income group—between £800 and £1,300 a year—and that 3 million people are set to lose £1,000.

The increase in the national minimum wage is welcome, although it is not a living wage as the Government have tried to suggest. It is something, but it does not begin to compensate for the cuts in tax credits that will be suffered by the low-paid. Let me add to the examples that have already been given by many of my hon. Friends. The income of a lone parent with two children who works for 16 hours a week will increase by £400 a year, but that will be accompanied by a tax credit cut of £860, so that person will be £460 worse off. A couple with one partner working full-time on average income will lose £2,000 in tax credits, and will not benefit from the increase in the national minimum wage. According to data published by the International Monetary Fund last month, raising the income share of the poorest 20% of the population increases growth by 0.38% over five years. What the Government are doing will harm the chances of a sustained recovery.

[Rebecca Pow]

It is interesting to note that we hardly ever hear the word “business” mentioned by Opposition Members. It is businesses that must pay the £7.20 that may rise to £9, and that will cost many of them a great deal, but they agree that it is worth it to give people better living standards. Surely we can discuss some of those issues.

[Debbie Abrahams]

If the hon. Lady had listened to my earlier remarks, she would have heard me talk about small businesses then. I have done a significant amount of work with small businesses.

The Government are trying to persuade the public, and to justify what they are doing to working people. We know that, on the whole, it is working people who will be affected. Half the 13 million people who are living in poverty are in work, and two thirds of children in poverty are in working families. The Government are trying to construct a narrative to justify the tack that they have taken—the “divide and rule” narrative about people being feckless—but it is the working people who will be affected most.

Another thing that the Government regularly do is a source of immense frustration. Although I have consulted the Ministers’ code of conduct and many other sources, I have been unable to identify a responsible use of statistics on their part. The Chancellor, for example, tried to suggest in his Budget speech that we were one of the most generous welfare-spending countries in the world. That is simply not true. It is absolute rubbish. If we compare the UK’s spending as a percentage of GDP with that of developed countries in the European Union —as my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) tried to do earlier—we find that it is ranked 17th out of 32.