Budget Resolutions

Debate between John McDonnell and Desmond Swayne

Thursday 9th March 2017 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I hope that the good humour continues, Mr Speaker, but we will see. I admire the hon. Member for Broxbourne (Mr Walker) for his creativity at all times in raising matters.

You and I, Mr Speaker, have watched Budget debates in this Chamber for more than 20 years now. As you probably know, I have referred to the iron law of Budgets: the louder the cheers for the Chancellor on Budget day, the greater the disappointment three days later at the weekend. I am revising that iron law—this Budget did not last three days; it lasted less than three hours.

I will address some of the main policy announcements in the Budget, but I believe that overall the Chancellor’s statement evidenced a fundamental difference between the values of our two parties. What we saw yesterday was a Conservative Chancellor boasting about tax cuts to corporations and the rich while refusing to effectively tackle the crisis in social care for the elderly, refusing to properly fund the NHS, and increasing the national insurance burden on many middle and low-income self-employed earners, while at the same time breaking a clear manifesto promise.

Our values are these: we believe in a fair taxation system, in which everybody, no matter how rich and powerful they may be, pays their way; and we believe that through a fair taxation system and collective endeavour, the elderly and the disabled should be cared for, the sick should be treated and children should be educated to develop their talents to the full. That was not what we saw in yesterday’s Budget statement. In addition, we adhere to manifesto promises.

On the state of the economy, I saw from the Chancellor’s press briefings that all the talk before the Budget was about the aim of providing a positive backdrop for Brexit. That is not the real-world experience of millions of people. Yesterday the Chancellor boasted about economic growth, but what is positive about Britain being the only large developed economy in which wages fell when economic growth returned? What is positive about rising GDP if most people are worse off? What is positive about the national living wage being revised down again? What is positive about yet more downward revisions to wage forecasts?

How can anyone describe an economy as “match fit”, as the Chancellor did, when people in that economy are seeing their standard of living fall and fall again? Wages are still worth less than they were nine years ago. The disposable incomes of non-retired households are less than they were before the financial crisis. The official forecasts are clear: working people, as a result of the Government’s choices and this year’s Budget, will be worse off. According to official forecasts, they will be £500 a year worse off in 2021 than was predicted in the autumn statement. Average earnings are expected to be £200 lower by 2022 than they were before yesterday’s Budget. According to the Resolution Foundation, average earnings are set to return to their pre-crisis peak only by 2022 at best.

The Chancellor claimed in one press release that ours is an economy built on resilience; it is, to be frank, an economy built on sand. The fact that unsecured borrowing by households has shot up to levels not seen since before the financial crisis should be a warning sign to us all. Office for Budget Responsibility forecasts show unsecured household lending rising to a shocking 47% of household income by the end of the decade. For many people, such extra borrowing will be done out of desperation—as prices rise but wages fail to keep up, many people dig themselves deeper into debt just to get by. The Chancellor says that he does not want to put the economy on a credit card, but that is exactly what he and his policies are doing—forcing ordinary people into dependence on their credit card.

There is no resilience in an economy that is failing in its fundamentals. Business investment fell over the past year for the first time since the depths of the last recession. Companies are cancelling planned investments because they are so terrified of what the future holds under this Government, particularly with the risk of Brexit. They have seen seven wasted years pass without the investment or industrial strategy that they need from the Government, and they are now fearful of the Government’s plans for Brexit.

Productivity growth—the engine of prosperity—has stagnated. We now lag far behind similar economies. A typical British worker takes five days to produce what their German or French counterpart produces in four. The Chancellor, in a moment of lucidity, recognised the scale of the problem, but he failed to provide any new funding to deal with it. Worse than that, public sector investment will be £2.3 billion less over the next five years than was planned in the autumn statement.

Yes, people celebrated International Women’s Day, but while there were calls for a Budget that works for women, they have been ignored. Women are still bearing the brunt of this Tory Government’s failed austerity agenda, with 86% of cuts falling on women—that figure is unchanged since last year—and the Government have yet again ignored the hundreds of WASPI women who turned up yesterday to lobby Parliament. Things are just as bad as ever for women under this Government. Labour calls on the Government to publish urgently an analysis of the true impact on women of their Budgets and spending announcements, and to explain how they intend to reverse this disproportionate impact. Under a Labour Government, all economic policies will be gender-audited to ensure that we have an economy that works for all.

Let me turn to some of the policy announcements in the Budget, such as on self-employment. The Chancellor’s decision to push a £2 billion tax rise on to low and middle earners who are self-employed makes little sense.

[Sir Desmond Swayne (New Forest West) (Con)]

I would be the first to say that we need to find new ways to reward entrepreneurs and risk takers in our tax system, but does the right hon. Gentleman accept that the difficulty is that at present there is no way of distinguishing between such a person and a professional such as a journalist who has sought an arrangement with their editor to be paid as self-employed? On the low-paid, 60% of people who are self-employed will see a reduction if we take into account the change in class 2 contributions.

[John McDonnell]

The right hon. Gentleman raises a valid point about bogus self-employment. We thought that the Chancellor might have mentioned that in his statement, but he never referred to it. That needs to be addressed, because many people are forced or manipulated into self-employment. Bogus self-employment needs to be tackled, and we have campaigned for that along with a number of organisations, including several trade unions and the Federation of Small Businesses.

We saw middle and low earners hit yesterday. Someone on £20,000 will lose about £250 a year, while someone on £40,000 will lose nearly £650 a year—those are the consequences. I do not think that those people are high earners; they are middle to low earners. They should be protected, particularly at a time when, to be honest, there is frailty in the economy, with consumer spending just dipping on the latest figures. Those at the forefront of the impact of the dip in consumer spending are largely existing sole traders and small traders—the window cleaners, drivers and others—and they will be hit. The policy is wrong, and this is also the wrong time to put their careers and jobs in jeopardy.

The justification for yesterday’s policy just does not stand up. The Government cannot demand more taxes from people without offering something in return. The Labour party are fully behind looking at how the labour market is changing—the right hon. Gentleman is right about that—and the shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), spoke last year about the principles that should guide such changes. We have regularly raised the problem of bogus self-employment.