Budget Resolutions and Economic Situation
Debate between Geraint Davies and Simon Hoare(8 years, 9 months ago)
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Geraint Davies (Swansea West) (Lab/Co-op)
It is a great pleasure to follow my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq), who made an excellent speech underlining the cruel regressivity of this awful Budget. She particularly mentioned the impact on child poverty, families and women, and the inter- generational poverty that will scar families for life. It is also a pleasure to follow excellent speeches by colleagues from the Swansea Bay city region, my hon. Friends the Members for Aberavon (Stephen Kinnock), for Llanelli (Nia Griffith) and for Swansea East (Carolyn Harris), and a number of maiden speeches, particularly that of the hon. Member for Paisley and Renfrewshire South (Mhairi Black).
This was a Sheriff of Nottingham Budget, robbing from the poor and giving to the rich. In fact, The Economist has commented that taking from the very poorest through tax credit changes and giving to the very wealthy through inheritance tax changes is “indefensible”. That is not some sort of left-wing ragbag but a keenly focused magazine that says it as it is.
We have the Sheriff of Nottingham, the Chancellor, living within his castle walls and feeding his fat noble friends with inheritance tax reductions, while the ordinary people just outside are being hoaxed. With one hand they are being given higher tax thresholds, but with the other they are being pick-pocketed, with something like £16 billion of stealth taxes on things like insurance for housing and cars, and with the vehicle excise duty changes. Even the withdrawal of climate change subsidies will come back and hit them through energy prices, and the withdrawal of BBC funding will hit them through the licence fee.
The Sheriff of Nottingham is also trying to persuade the ordinary people around the castle walls that the poorest people in the forest will not be painfully abused by the tax credit cuts. Instead he is trumpeting the minimum wage increase, which of course will not compensate families on tax credits. In 2012 the Chancellor gave a speech describing the “strivers” and the “skivers” and asking whether it was fair for a shift worker to get up in the morning to go to work and see the closed blinds of his neighbours who live off benefits. Of course, skivers are not eligible for working tax credits and child tax credits, because they are only given to people in work. They are based on the American earned income tax credit, as an incentive to work. Their withdrawal will undermine not only the individuals who are paid the money but business start-ups. The change is thoroughly regressive and counterintuitive to economic growth.
The Budget was more about politics than economics. On the minimum wage, the Chancellor has taken the Labour party’s clothes and hoped that people will not notice what he is doing to working families, and the Opposition cannot support him in that. Of course, the cost of tax credits has grown to something like £30 billion, but that is because productivity in the British economy has been so woefully poor that wages have gone down, leading to tax credits going up. In fact, 800,000 fewer people are earning more than £20,000 than was the case in 2010, which is an appalling failure. That is why this Government have borrowed more in five years than Labour did in 13. The Government should have focused on productivity growth in the Budget, rather than on fiddling around with tax and spend so that the Chancellor can position himself against the flamboyant part-time Mayor of London as the next Tory leader.
There is also the appalling situation whereby the third-born in each family will have their tax credits taken away. I wonder if that will be extended to education and health. When the third child, Johnny, has a broken arm and goes to the NHS, will he be told, “Sorry, we can’t treat that, you’re the third-born. Oh, don’t worry, your oldest sister has just died—so it’s alright now”? What is the change about? Is it an incentive for poorer people in society not to breed? Is some sort of positive eugenics returning to the Tories? It really is appalling.
Geraint Davies
No, I will not. There is a time limit, and it is not really worth the air.
The overall welfare budget is £220 billion, only £2 billion of which is spent on people on the dole. A great amount of it is spent on pensioners, who are protected because they are more likely to vote. The political calculation is that poorer people are less likely to vote, and certainly less likely to vote Tory. This is a cynical Budget.
Oxford University has suggested that the number of people going to food banks will increase by 1 million to 2 million. I pointed that out to the Prime Minister, and he said, “Oh well. It doesn’t really matter. We won the election.” When I pointed it out to the Work and Pensions Secretary, he said, “Oh well. What can you do? Lots of people in Canada and Germany use food banks.” The Chancellor said, “Well, you know, we’ve got 1% of the people and 3% of the wealth of the world, and we spend 7% on welfare,” as if we should be ashamed and not proud that we, as a developed country, invest in the most vulnerable people to help them into work.
What sort of future is the Chancellor suggesting? Is he suggesting that we cut our welfare down to the levels of developing countries and provide taps and buckets at the ends of streets? What are the values of this Tory Government? The answer is that their values are squeezing the poor because they will not vote Conservative, and squeezing the state with a fraudulent proposition as a backcloth—that minimum wages can replace tax credits that are focused on poor families. The reality is that, under the last Labour Government, the economy grew by 40% in the 10 years to 2008. The banking crisis caused a problem, but by 2010 there was growth in the economy. Since then, debt as a share of the economy has grown from 55% to 80%, basically because a low-wage, low-productivity, austerity-driven Budget does not work.
The Government have driven down wages at the same time as they are putting up tax thresholds, which is obviously not a way of generating significant tax revenues. Therefore, the business model is bust. We need investment in productivity, skills and infrastructure. Why are we seeing another situation? Why has the train infrastructure in the north of England been removed or delayed? Why are the poorest given loans rather than grants to go to university?
The Budget is not the way forward for a high-skilled, high R and D, high-productivity and high-wage economy to pay its way. It is flawed economically and it is a political stunt. The sooner we get a Labour Government the better.