My House of Commons speech on the Budget

Shortly after George Osborne made his Budget speech yesterday,John Denham spoke in the House of Commons to respond.  Here is a copy of what John said:

Mr John Denham (Southampton, Itchen) (Lab): My morning newspaper today said that the coalition parties were inviting me to regard this as a Robin Hood Budget. I enjoyed the stories of Robin Hood when I was younger, but I must have missed the bit where Robin goes back to Nottingham castle and says to the sheriff, “You look a bit hard up. Would you like some of your taxes back?” I must have missed the bit, too, where Robin went to the front door of the cottage, cash in hand, while the rest of the merry men went round the back and made off with the tax credits, the child benefit, the VAT and all the rest of it.

This Budget does not deliver what the Liberal Democrats or the Conservatives say it will deliver. The Government will fail on each of the three main tests that they have to meet today. Of course, just a few minutes after the Budget statement, it is impossible to make a comprehensive assessment of it, but I suspect that the detail of the pensioner tax changes will come as a deeply unpleasant surprise to Government Members who were waving their Order Papers so cheerfully earlier on.

Teresa Pearce: It came as a surprise to me to read through the detail of the impact assessment, which says that in 2013-14, 4.41 million people over 65 will be worse off because of the age allowance, and that 230,000 people will be brought into income tax. I wonder whether the Liberal Democrats will be proud of that.

Mr Denham: I am grateful to my hon. Friend: 4.41 people—4.41 million older people—[Interruption.] Government Members may laugh, but they have just cheered a Budget that is going to make more than 4 million pensioners worse off, because they did not understand what they were cheering.

The Budget has three tests. The first is the immediate action needed to create growth and jobs in the economy, to bring in taxes and to reduce the deficit. The second challenge—even if the Government get the first right, painful times cannot be avoided—is to ensure that the burden of the challenges is shared fairly; in other words, whether we get fairness in tough times. Does the Budget really say, “We’re all in it together,” or does it look after those already better placed to get through the next few years more generously than those who struggle hardest?

There is a third challenge for this Budget. The Institute for Fiscal Studies made presentations to MPs this week. It said that the slowing of growth since this Government were elected meant that even by 2016 the economy would be 3.5% lower than it would otherwise have been and perhaps 12% smaller in comparison with the growth rates of 2008. The Resolution Foundation, also drawing on the Office for Budget of Responsibility, calculates that disposable income for low and middle-income households will fall by 8% between 2008 and 2015. What that means is that our economy will have fallen behind, our incomes will be lower and our capacity to fund public services and social security will have been reduced. I hazard a guess that nothing that has happened today will change that grim picture by any significant degree.

The third question, then, that the public will be asking is how, after all this pain, we will pay our way in an increasingly competitive world? If we cannot compete and cannot create wealth by succeeding in global markets, we will never offer new opportunities and hope to those young people whom The Financial Times described on Saturday as “the jinxed generation”. The world economy will have moved on massively and the challenge of building British companies into those that can succeed in ever-tougher global markets will be harder than ever. If we do not lay the foundations for that success now, it will be harder to start later.

The truth is that on each of those three tests—the immediate future, fairness and laying the foundations for the future—the Chancellor’s speech gave little ground for optimism.

Caroline Lucas (Brighton, Pavilion) (Green): Would the right hon. Gentleman add a fourth test to the three that he has set out, which is whether or not this Budget takes us in a more sustainable direction? On that measure, the Chancellor started by saying that oil prices are of great concern, but what he has now done is to give a huge tax break for more oil drilling.

Mr Denham: I am happy to include that test. One of the missed opportunities will turn out to be in the low-carbon economy that will dominate the global economy in the 21st century.

Things have turned out so much worse than in the heady days of the new Chancellor’s optimism when he told us in his first speech that the economy was set to grow steadily; that unemployment would fall year on year; that the deficit would drop like a stone, yet front-line services would be protected; that the private sector would expand magically, more than filling the space left by public services; that the banks would lend; and that the whole tiresome infrastructure of regional investment, job guarantees for young people and a coherent planning system could simply be swept away. Well, the Chancellor, the Deputy Prime Minister, the Prime Minister and the whole coalition were wrong.

The spending cuts, drawing billions out of the economy, were too far and too fast. The Government’s gloomy talk first unnerved and depressed consumers; then the VAT hike took money from them when we needed them to spend. Now the cuts are really beginning to bite. The Government were so cocksure and complacent that they strung together, purely for cynical political purposes, a series of half-baked, ineffective measures that were more or less abandoned as soon as the last press release had been issued: the national insurance holiday; the regional growth fund that does not pay out any money for months or years; the business growth fund with few investments; the special support for exporters with a handful of users; the Work programme that does not work; Project Merlin; and the youth contract that has not even started two years after the future jobs fund was scrapped. Any right hon. or hon. Member who gets excited by any measures announced in a press release for this Budget should remember what happened to the last lot.

Opportunities were missed—to tax bank bonuses, to fund real jobs for young people, to cut VAT for families, to cut national insurance contributions for small businesses taking on staff, to bring forward infrastructure spending. But what did we get? Just a feasibility study on Monday of this week, two years after the need was first identified. No, the short-term measures have failed, and we have seen no change.

Fairness has been well debated today. Let us remember one point—in April, families with children, taking into account the personal allowances and all the other changes, will be £530 worse off on average. When we look at next year’s personal allowances, I am sure it will also be clear, when the dust has settled and the IFS has done the figures that take into account all the other changes, that those families will still be worse off. Hon. Members should look at the Red Book and see which families are going to pay a higher proportion of their income, and it is those on low incomes.

This Government have been mired in unfairness from the beginning. We should remember that one of their first actions was to cancel changes to pension tax relief, which would have brought in £1.6 billion from the very highest earners in this country. We did not hear the Chancellor reminding us of the things he has already done to tilt the system to those best able to get through the next few years. I believe that the Government will pay the price for that.

The truth is that it is not a matter of whether stamp duty brings in more money or whether the anti-avoidance measures—the Government should tackle avoidance in any case—brings in more money. The challenge for this Government and this Budget was to devote every single available penny to raising the incomes of hard-pressed low and middle-income families and to get the economy growing. There was no justification for singling out the highest rate of income tax on earnings over £150,000 a year. The average person in work in my constituency will have to work for seven and a half years to earn £150,000. To single out that higher-earning group and to cut their tax was wrong.

This was not the fairness in tough times that the country needed, but the other failure in the Budget was the failure to lay the foundations for the economy that we need in the future. The truth is that despite the pressure on the public finances, there is no shortage of money to rebuild the economy. UK companies are cash-rich. Sovereign wealth funds are out there. There are pension funds, closer to home, with money to invest.

Charlie Elphicke rose

Mr Denham: I will not give way, because I have only a few minutes left. The problem is that those bodies are not investing, or at least not investing in Britain. The reasons are clear: in the short term, Government mistakes have caused the economy to stagnate, and there is also no certainty—no “compelling vision”, as the Secretary of State for Business, Innovation and Skills rightly put it. Some of us thought it was his job to come up with a compelling vision, but he is right that it is not there. There is no predictability.

Goodness knows it took my Government long enough to take a decision on Heathrow. That decision was then cancelled, and then ruled out. Today in the Budget, we find that Heathrow is back on the agenda. Billions of pounds of business investment cannot take place because of the failure of Governments to take that decision, one way or another. That uncertainty and unpredictability runs through the Government’s business failures. Low-carbon energy manufacturing and services will dominate the 21st-century global economy, but the Chancellor says that he does not like the environmental policies, while the Deputy Prime Minister says that he does. We had illegal flip-flops on feed-in tariffs, which means that a whole group of investors will never come back and invest in green energy again. Those on the Government Benches have no idea that business needs certainty and predictability, not short-term changes.

We have today heard all that stuff about the oil industry. In last year’s Budget, the Government massively increased the risk penalties for investing in the North sea by means of a last-minute political gimmick that changed the tax regime that applied there; again, that meant uncertainty and unpredictability. Despite the Chancellor’s words, there is no serious attempt to identify the technologies and capabilities that will give us the ability to compete in future. The odd speech here and the odd announcement and press release there does not match up to the job—not when we look at what our competitors are doing.

Today, we again heard about broadband, but what did the former chief operating officer of BT say about the Government’s broadband strategy in another place just a couple of days ago? He said that it was so weak that this country will be

“frozen out of the next industrial revolution”.

Just because there is a mention in the Red Book about the broadband strategy does not mean that there is one, or that it is good enough, so it is a no on that third test, which is probably the most crucial.

The next few weeks, months and years will be hard for everybody. People in this country are stoic. They will tolerate a lot if they think that the right things are being done to build a future for their children and families, and to give us long-term security. The Government do not have a clue how to create the conditions in which investment will take place, business will grow, and we pay our way and have the jobs and wealth that the people of this country desire. The Budget is unfair, has missed opportunities, and will fail the country.

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