Autumn Statement

Ed Balls Excerpts

Wednesday 5th December 2012 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

Today, after two and a half years, we can see, and people can feel in the country, the true scale of this Government’s economic failure. The economy this year is contracting. The Chancellor has confirmed that Government borrowing is revised up this year, next year and every year. The national deficit is not rising—[Interruption.] I will say it again. Our economy is contracting this year; Government borrowing and the deficit are revised up this year, next year and every year; and the national debt is rising, not falling. It is people who are already struggling to make ends meet, middle and lower-income families and pensioners, who are paying the price, while millionaires get a tax cut—a £3 billion welfare handout to the people who need it least.

Let me spell out the full facts to the House—[Interruption.] Government Members should listen. They might learn something. In June 2010, the Office for Budget Responsibility forecast that our economy would grow by 2.8% this year. In March this year, it said there would still be growth, but revised it down to just 0.8%. Today, we learn that the Chancellor has not managed even that. Growth has not only been downgraded yet again, but he has confirmed, following the double-dip recession, that our economy is now forecast to actually contract inside this year, by 0.1%.

Let me remind the House what the Chancellor promised over two years ago in the June Budget. He said:

“We have provided the foundations for economic recovery in all parts of our nation”.

He said:

“We have set the course for a balanced budget and falling national debt by the end of this Parliament.”

And he said:

“The richest paying the most and the”

most

“vulnerable protected”.—[Official Report, 22 June 2010; Vol. 512, c. 180.]

That was the promise, but far from the Chancellor securing our recovery, our economy has flatlined since the spending review in 2010. Over the past two years, he was expecting 4.6% growth, but he has actually achieved 0.6% growth, which compares with 1.7% in France, 3.6% in Germany and 4.1% in America. We are falling behind in the global race. We learn today that growth is being downgraded this year, next year, the year after, the year after, and the year after that too—the longest double-dip recession since the second world war now followed by the slowest recovery in the past 100 years.

The result of this stagnation—rising long-term unemployment and long-term damage to our economy, falling behind now as other countries move ahead—is that the Chancellor’s fiscal strategy has been completely derailed. The defining purpose of the Government, the cornerstone of the coalition, the one test they set themselves: to balance the books and get the debt falling by 2015, is now in tatters.

What we have learned today is that Government borrowing has been revised up this year, next year and the year after that. We now know that, compared with the Chancellor’s forecast two years ago, borrowing is now forecast to be well above the £150 billion of extra borrowing that he was forecasting in March—[Interruption.] Government Members should listen to this. The Chancellor has confirmed that the Prime Minister’s pledge to balance the books in 2015 is not met in 2015, it is not met in 2016 and it is not met in 2017. The fact is that there is more borrowing this year, next year and the year after.

The Opposition will look at the detail when we get the figures—it was disappointing that the Chancellor failed to give us the cash figures adjusted for borrowing this year, next year and the year after. The unusual thing is that, just a few weeks ago, the independent forecasters were saying that borrowing would be £6 billion higher this year. We will examine the detail of those figures to see whether there has been any dodgy dealing. We will find out in the coming hours. [Interruption.] I do not know because I have not seen the figures, but I do know that there is more borrowing this year, more borrowing next year and more borrowing the year after.

The result is that the OBR shows more borrowing and higher deficits means higher national debt. The national debt—[Interruption.] The Prime Minister should listen to this, even if it might be rather shocking to find out. National debt will be higher at the end of this Parliament than the level inherited; it will be higher at the end of this Parliament than forecast in the plans he inherited; and it is no longer falling as a percentage of GDP in 2015. It is rising in 2015 and rising again in 2016, breaking the fiscal rule for falling debt upon which the Chancellor said his entire credibility depended. In last year’s Budget, the Chancellor said,

“our deficit reduction plan is on course…we will not waiver”.—[Official Report, 21 March 2012; Vol. 542, c. 795.]

On course? Not waivering? He is not waivering, he is drowning.

The Chancellor is now trying to claim that his failure on growth, his failure on borrowing and the debt, and breaking his own fiscal rule, are not his fault—that no one could have foreseen it. What nonsense; he was warned. He was warned that a tough medium-term plan to cut the deficit, tax rises, spending cuts and pay restraint, which every country had to put in place, could work only if the Government first put in place a plan for jobs and growth. He was warned that it was a huge gamble to go too far, too fast, and to rely on exports to bail him out. He was warned that there was a hurricane brewing in the eurozone, and that it was not the time to rip out the foundations of the house here in Britain. Once again, the Chancellor is trying to blame high oil prices and the eurozone crisis for negative growth this year, but they affected all countries, so why, over the last—[Interruption.]

[Mr Speaker]

Order. I apologise for interrupting. Members must calm themselves. Mr Byles, I thought you were normally a model of restraint and civility. Good heavens man! I do not know what has come over you. Calm yourself—take a pill if necessary, but keep calm. Take up yoga.

[Ed Balls]

Growth down, borrowing up, debt up—they don’t like it, Mr Speaker, do they? They don’t like it at all.

Once again, the Chancellor is trying to blame high oil prices and the eurozone crisis, so let me ask him: why, over the past two years, has Britain grown at just one tenth of the average growth rate of the G20 countries? Why has growth here in Britain been even slower than in the eurozone? It is not the rest of the world’s fault—it is his policies that have failed. He claimed that rising VAT alongside accelerated spending cuts would boost confidence, secure recovery and get the deficit down, but they depressed confidence, choked off our recovery and borrowing has been revised up. Let me ask the Chancellor: whatever happened to his Treasury view—his theory of expansionary fiscal contraction? Expansionary fiscal contraction? It is the economy that has contracted and the borrowing and the debt that have expanded. That is the truth.

When the latest figures show business confidence falling, when the world economy is slowing, when the eurozone is in such chronic difficulty, and when on current plans the Chancellor’s fiscal straitjacket tightens further next year, it is simply reckless and deeply irresponsible of this Chancellor to plough on with a fiscal plan that we all know is failing on the terms he set. That is the truth.

What a wasted opportunity this statement was. Can the Chancellor confirm that the independent OBR looked at the measures he has announced today, and that its verdict is that growth is revised down this year, next year and the year after?

Let me congratulate the Chancellor on taking our advice and stopping January’s fuel duty rise, even though Government Members all voted against it just a month ago. We welcome the U-turns on flood defences, in part, on regional pay bargaining in the NHS, and on capital allowances. After churches, charities, pasties, skips, fuel and caravans, I think this U-turning is catching on, but whatever happened to the plans for the business investment bank? As for yesterday’s announcement on infrastructure spending, the extra money for schools is just a fraction of the cut from the cancellation of Building Schools for the Future.

We have been here before. A year ago, the Prime Minister boasted of a national infrastructure plan; 12 months on, not a single road scheme has even started. Why cannot he see that he will not get the deficit down without a plan for jobs and growth? Why is he not using the 4G money to get 100,000 new homes built? Why is he not offering a national insurance holiday for small firms? Why not have a temporary tax cut for families? Even the Mayor supports that. Why is the Chancellor not repeating the bank bonus tax? The Chancellor says he cannot do any of that because it would lead to higher borrowing. Even his political attacks are backfiring, because this Chancellor’s failed plan has given us more welfare spending, higher borrowing and higher debt too. That is the reality. The truth is that the Chancellor has failed on growth and the deficit, but what is his answer? More of the same.

Let me remind the Chancellor what he told the House in the Budget of 2011. He said that

“we have already asked the British people for what is needed, and…we do not need to ask for more.”—[Official Report, 23 March 2011; Vol. 525, c. 951.]

But 18 months on the Chancellor has come back for more, and who does he think should pay? Not the 8,000 millionaires set to get more than £100,000 each in April. I have to ask the Liberal Democrats: whatever happened to the mansion tax? Do they not realise that, even with the changes in the personal allowance, as a result of the other things they have supported the average family with children on £20,000 is worse off—and that is before the VAT rise?

The Chancellor claims that his decision to restrict pension tax relief will make the tax system fairer at the top. Can he confirm that the £1 billion he is raising is less than the £1.6 billion that he gave back in pension tax relief in June 2010? And it is just a fraction of the top-rate tax cut—a £3 billion top-rate tax cut at the same time as the Chancellor is cutting tax credits for working families, cutting child benefit for middle-income families, raising taxes on pensioners in April and cutting benefits for the unemployed.

We do need to reform and modernise our welfare state and reduce its cost. Those who can work should work—no ifs or buts. We support a benefit cap, done fairly, with a higher level in London, but let us be clear. The Chancellor claimed he would cut the welfare bill, but higher inflation and long-term unemployment mean that the benefits bill is forecast to be billions higher in this Parliament than he boasted. Let me help him: welfare to work—the clue is in the name. We cannot have a successful welfare to work programme without work, and we know that the Work programme has totally failed, with only two people in 100 going into permanent jobs.

We should require every young and long-term unemployed person to take a job—and make sure there is one there. Let me ask the Chancellor about a nurse, one of the thousands cut from the NHS in the past two years, who is now struggling to find a new job. For that nurse, he has announced today that he is cutting her jobseeker’s allowance for the next three years. How can that be fair when he is cutting the top rate of tax? How can it be fair when someone earning £228,000 a year will get a top-rate tax cut of £75 a week in April, which is more than the £71 the nurse gets to live on through JSA?

We learned today that the Chancellor is not just hitting those looking for work. The majority of people who lose from his cuts to tax credits are people in work—millions of families striving hard to do the right thing. What kind of Government believe that you can only make low-paid working people work harder by cutting their tax credits, but you only make millionaires work harder by cutting their taxes, Mr Speaker? I tell you: certainly not a one nation Government.

The Government must really believe that if taxes are cut at the top the wealth will trickle down. Let me remind the House what the Chancellor told the Conservative party conference in October 2009. He said that

“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs.”

Those were the Chancellor’s words. He continued:

“I think we can all agree that would be grossly unfair.”

What has changed? Nothing has changed. It was all a con and the mask has slipped. We now know that this Chancellor cannot say, “We’re all in this together” without a smirk on his face. They wanted us to think they were compassionate Conservatives. Now we find out that they are the same old Conservatives, and the Liberal Democrats have gone along with all of it yet again.

What a pity it is not to see the hon. Member for Mid Bedfordshire (Nadine Dorries) in her place, back from the jungle. She may not have succeeded in talking for the nation on many things but she did speak for the nation when she called the Prime Minister and the Chancellor

“two arrogant posh boys who don’t know the price of milk.”

It is no wonder the Prime Minister keeps losing his temper, because his worst nightmare is coming true—not snakes and spiders in the jungle, but the Government’s fiscal rule broken, their economic credibility in tatters, exposed as incompetent and unfair. Yes, he’s the Chancellor; can’t someone get him out of here? Growth down, borrowing revised up and the fiscal rules broken: on every target they have set themselves, they are failing, failing, failing. They are cutting the NHS, not the deficit; they are borrowing more than £212 billion more than they promised two years ago; and they are cutting taxes for the rich, while struggling families and pensioners pay the price—unfair, incompetent and completely out of touch.

[Mr Osborne]

There is only one person in the Chamber who is drowning, and it is the shadow Chancellor. That was the worst reply to an autumn statement I have ever heard in this House. If one thing changes as a result of this statement, it might be a shadow Cabinet reshuffle.

The shadow Chancellor said one thing that was true. He said it right at the beginning—he said that the national deficit was not rising. It was a Freudian slip, but it betrayed the fact that he had written his response before he heard my autumn statement and before he looked at the OBR forecast. Let me tell him that we do not fiddle the numbers in the Treasury any more—that is what happened when he was there. We have an independent Office for Budgetary Responsibility, and that is the problem he has. His whole policy was about complaining that borrowing and the deficit were going up, but that is not what the OBR forecasts show. Indeed, his prescription is to borrow even more. He complains about debt, but he wants to put it up. It is completely hopeless.

The shadow Chancellor talked about the substance of policies. Here are some simple questions that the Labour party will have to answer. If it is against the cut in the income tax rate from 50p to 45p, will it reverse it? It is the simplest possible question. [Interruption.] The Leader of the Opposition says it has not come in yet. It is coming in—it has been legislated for—so, if he is so against it and thinks it a moral outrage, will he commit to reverse it? Yes or no? That is hopeless position No. 1.

The shadow Chancellor railed at welfare benefits. I have another simple question. Will the Opposition support us or vote against a welfare uprating Bill? What are they going to do? Will they vote for or against the Bill? It is a simple question. For the first time, we have spending plans for 2015-16. He said nothing about whether he supported those plans, even though he hopes to be Chancellor that year. Does he support those spending plans? He talked about 3G. [Interruption.] They are shouting at me.