John McDonnell MP
Let’s talk about next week’s Budget, what to expect and what we need.
Philip Hammond had planned a relatively quiet Budget so as not to excite or upset any of his backbench colleagues before the major Brexit votes.
The Brexit votes were originally planned for a couple of weeks after the Budget. So the Tories moved Budget day to the Monday, a much quieter news day.
Plus, I also suspect his public relations advisers were dreading the prospect of a Budget on Halloween.
A trick or treat Budget was just too much of a reminder of past Hammond Budget fiascos.
Then what happened was, to the absolute surprise and consternation of the Chancellor and his officials, Theresa May announced in her Party conference speech “the end of austerity”.
Well, this Budget will show us whether she is true to her word or not.
So, is this neither trick nor treat?
It would be interesting to know what the Prime Minister meant by the end of austerity.
More importantly given that the Prime Minister and Chancellor obviously rarely consult each other, it would be even more interesting to know what the Chancellor interprets as the end of austerity.
So far, from both the Prime Minister and the Chancellor all we have had is a few random announcements on NHS and social care funding, plus lifting the housing cap and a fuel freeze.
Then there have been hints of post Brexit jam tomorrow.
The Office for Budget Responsibility has recalculated its tax receipt estimates and has given the Chancellor enough to cover his NHS announcement.
Plus some funding for social care, and we hear that our campaigning on Universal Credit has forced him into finding some funds to limit some of the damage of the Universal Credit roll-out.
Hammond will argue that this is all part of some grand spreadsheet plan.
No it isn’t.
The reality is that over the summer, and after Labour’s campaigning, naked panic began to set in amongst Tory backbenchers on a number of fronts, including the roll-out of Universal Credit, the collapse of social care and the growing prospect of a worse than ever NHS winter crisis.
Going back to their constituencies they realised that people have had enough of failed austerity.
For most it has been all pain and little, if any, gain.
The result was that by her party conference, May realised that she couldn’t resist her backbenchers on two fronts, both Brexit and austerity.
I think she also asked herself why she should take the political hit for Hammond’s ideological obsession with neoliberal austerity.
This is the Chancellor she had planned to sack anyway if she had secured a majority at the last election and someone who she feels has been undermining her ever since.
So with a bit of chutzpah, which I quite admire, Mrs May threw the architect of austerity, the man who back in the days when the Tories were in opposition designed the austerity programme, she threw him under the proverbial bus with her unilateral announcement of the end of austerity.
The result has been that in the weeks since Tory party conference the lights have been burning very late into the night in the Treasury as the quiet Budget gets dumped and the officials have to dress up existing announcements and a few off the shelf stunts into something much more grandiose.
The pretence of a big Budget. It really has become a trick nor treat Budget.
The problem for Phil is that he knows that the economy is hardly growing and the chaotic handling of the Brexit negotiations is putting what little economic growth there is in peril.
The OBR recalculation of tax receipts will assist him in paying for many of the promises already announced but not much further.
And certainly not enough to end austerity.
Actually they are little more than an accountancy adjustment exercise.
Hammond will try and claim that the OBR’s recalculation of tax receipts is all part of a grand plan and a result of the Tories’ management of the economy and corporation tax cuts in particular.
And as his own Treasury officials and the IFS have repeatedly pointed out to him, there is no link between cuts in corporation taxes and increased tax receipts.
To link the two is to mistake correlation for causation.
Much of the reason for increased corporation tax receipts is the growth in super profits being made by many corporations.
By any standard the management of the economy by the Tories over the last eight years has been a catastrophic failure.
Austerity was never going to work.
The inevitable result is the slowest recovery since Napoleonic times and the UK as the only economy where, when limited growth returned, wages were still falling.
As virtually every sound economist advised, cutting public spending as you go into a recession was only going to deepen and prolong the recession.
Of course, we will hear Hammond and the Tories trying to beef up their record of economic management.
They will boast about reducing the deficit.
Remember we were promised the deficit would be eliminated by 2015 not 2018.
The reality is that the Tories haven’t sorted the deficit.
They have simply shifted it onto the shoulders of NHS managers, headteachers and school governing bodies, local councillors, and police chiefs.
When Hammond also boasts about reducing the debt to GDP ratio, remember that under the Tories the country’s debt has almost doubled.
It’s now nearly a massive £1.8 trillion.
And again some of that debt has shifted onto families as household debt stands at record levels.
Last year households spent on average £900 more than they earned, with the poorest households spending the most relative to their income.
As a result British households are more indebted than those in the US, France, Germany, Italy or Japan, with unsecured debt at over £300 billion.
No economy will thrive without stable investment leading to consistent growth, high productivity, and, as a result, high level employment and good pay.
According to the OBR’s most recent figures, UK business investment is the lowest in the G7. Public sector investment is over £18 billion lower today than in 2010.
Cuts to corporation taxes have not encouraged firms to invest. Instead they have relied on cheap labour whilst hoarding over £700 billion of earned income.
It’s no wonder economic growth remains so low.
Because of low levels of investment Britain is missing out on the new technological revolution.
This country has the lowest rate of use of industrial robots in manufacturing of any OECD country.
Employment growth in tech services has crashed to its lowest level since the financial crisis.
It’s also no wonder we are experiencing an ongoing productivity problem, with workers in France and Germany producing in four days what it takes a UK worker to produce in five.
Output per hour is 15% lower in the UK than in the rest of the G7.
The result is wages remain below the level of 2010.
The geographical distribution of investment is also biased. Britain is the most regionally unequal country in Europe, having six of the 10 poorest regions in Northern Europe.
With an ongoing current account deficit of £ 20 billion we continue to rely upon what Mark Carney describes as the kindness of strangers.
Recent No 11 briefings want us to think that we are witnessing a wise Chancellor holding back expenditure so that the economy can cope with the economic hit that would follow from a no-deal Brexit.
And that all will be well when a Brexit bounce occurs after a deal is sewn up.
The Chancellor can’t distance himself from the mess this Government is making of the Brexit negotiations.
He is a leading member of the Cabinet’s negotiating team.
His failure to stand up to the fanatical no dealers in cabinet and in his own party makes him as culpable as the Prime Minister for this unholy mess that is putting our economy at risk.
It is no use him trying to stand on the side lines throwing out the occasional statistical analysis from the Treasury when it was him who was among the first to publicly threaten a no deal.
A temporary bodge to get the Prime Minister and him through the next couple of months with no permanency to the deal will not alleviate the fears of investors and business leaders.
Far from a Brexit bounce, we will see an ongoing draining of future resources from our economy.
For the immediate future it is clear that none of the planned expenditure announcements in the Budget will go anywhere near the scale needed genuinely to end austerity.
The IFS has calculated that simply to halt the planned cuts in departmental spending will cost £19 billion by 2023 and a further £7 billion of welfare cuts are planned on top of this.
The Resolution Foundation has estimated that ending the already planned austerity cuts will cost £31 billion.
But the real end of austerity is also not just halting future planned cuts.
It’s also reversing the cuts inflicted on our community by the Conservatives over the last eight hard years of austerity.
First step is to acknowledge the scale of austerity.
If there is to be a genuine end to austerity, the first step the Conservatives need to take is to acknowledge the scale of the hardship eight years of Tory austerity has inflicted on our people and our communities.
The Labour Party is publishing today a dossier summarising very briefly just some of the austerity measures and their impacts on our society.
Let’s just look at what it’s meant for people, the human cost of austerity.
For children: there are over four million children living in poverty, with the Child Poverty Action Group saying another million children will be forced into poverty as a result of Universal Credit cuts.
Over 500 children’s centres have gone and nearly 500 children’s playgrounds will have been closed by 2019.
There are over 123,000 children living in temporary accommodation, up 65% since 2010.
Children’s services are facing a £2 billion funding gap. Cuts to early intervention to support families has resulted in the highest number of children being taken into care since 1985.
The Chair of the Local Government Association’s Children’s and Young Person’s Board said that unless new funding is found these services which keep children safe from harm and the worst abuses of society are at tipping point.
For young people: the YMCA reports that spending on youth services has fallen 62% since 2010.
Six hundred youth centres have closed, 3,500 youth workers have lost their jobs and 14,000 places for young people have gone.
The pressures on young people are immense.
The average graduate coming out of university has a £50,000 debt, with the poorest graduating with debts in excess of £57,000.
In-work young people between 16 and 25 are significantly more likely to be on a zero hours contract, with 36% of all zero hours contracts taken by young people.
The IFS describes home ownership amongst young people having collapsed.
Rough sleeping has more than doubled, rising for the seventh year in a row.
Tragically, under mounting pressure, a decades-long decline in suicides amongst men has reversed since 2010, with research linking the impact of austerity to 1,000 extra deaths and an additional 30 to 40,000 suicide attempts amongst young men since 2010.
For older people: there are more than a million elderly people living with their care needs unmet as a result of the social care crisis.
More than 400,000 people can no longer access social care altogether.
And well over 150,000 elderly people are in arrears on their social care payments.
The latest research shows there over 31,000 excess winter deaths among the over 65s. Deaths which Age UK have linked to the strain facing our NHS and social care system.
For women: we know that austerity has fallen hardest on their shoulders.
Women’s Budget Group analysis has consistently demonstrated 86% of net savings to the Treasury through tax and benefit measures since 2010 have come from women.
According to the Equality and Human Rights Commission, women have lost considerably more from changes to direct taxes and benefits since 2010 than men. Their research indicates women are set to lose about £400 per year on average, and men only £30.
And it is particularly the most vulnerable women that are the hardest hit.
It should shame our Government that almost a fifth of specialist women’s refuges have been forced to close under the Tories and, according to Women’s Aid, over 400 women, often with children, were refused a space at a refuge last year.
The victims of possibly the most callous cruelty inflicted by this government have been disabled people.
A UN inquiry into the rights of persons with disabilities has found this Government guilty of the “grave and systematic violations” of their rights.
We know that many have taken their own lives because of this Government’s welfare reforms.
A 2018 report for the Equality and Human Rights Commission found that overall changes to taxes, benefits, tax credits and Universal Credit will leave a lone disabled parent with at least one disabled child £10,000 per year worse off by the end of this Parliament.
If you are a teacher, the impact of austerity has been that teachers’ pay fell by £4,000 between 2011 and 2016/17.
A recent study found a large proportion of teachers having a diagnosed mental health condition, with workload and financial pressures both given as reasons for this.
So it’s hardly surprising 36,000 teachers left the profession last year, the highest level since records began.
According to Government figures more teachers are now leaving the profession than joining.
If you are a health worker you are having to cope with the biggest financial squeeze in the NHS’s history.
NHS Trusts ended the last year with a deficit of £960 million.
The result is what the British Medical Association describes as an NHS at breaking point.
Last year 2.5 million people waited over four hours in A&E compared to 350,000 in 2010. The waiting list has reached 4.3 million. The number dying on the waiting list has risen by 10,000 in five years.
If you are a police officer, you will have seen over 21,000 of your colleagues’ jobs go since 2010.
According to the National Audit Office funding for police services has fallen by up to 25% in real terms.
And police officers are now being forced to take the Government to court to secure a wage rise awarded to them by the independent pay review body but reneged upon by the Government.
The Government is also putting at risk future generations.
The IPCC report gave us all a stark warning of the threat of climate change if we do not act now and act decisively.
And yet analysis of the Government’s planned infrastructure investments, the “Infrastructure Pipeline” shows that there is a 95% decline in planned investment in renewables from 2017 to 2020.
The Environmental Audit Committee inquiry heard expert evidence attributing the decline directly to Government policy, including removing subsidies and privatising the Green Investment Bank.
Investment in renewable energy fell 56% last year following cuts to essential subsides. The UK’s is the biggest fall in the world.
Annual clean energy investment is now the lowest it has been since 2008.
Eight years of Tory austerity have undermined much of the social fabric of our society and is putting our future at risk.
Faced with this scale of damage inflicted on our community we need decisive action to end and reverse austerity not some vague promises for the future and a few financial conjuring tricks.
Last year in the general election we set out the principles upon which a modern economy can be successfully managed so that we can invest in our public services, grow our economy and enable people to share fairly in the prosperity we will create.
These basic principles of our approach still apply.
They include the introduction of a fair taxation system to provide the investment needed in our public services.
An investment programme to grow our economy harnessing through a Strategic Investment Board and a National Investment Bank the expertise and talent of our finance and manufacturing sectors.
An entrepreneurial state implementing an industrial strategy with a mission-based approach prioritising innovation, tackling climate change and regional growth.
And sharing the prosperity we create by ensuring decent wages, trade union rights, representation of workers on boards and spreading ownership within our economy.
Next week’s Budget, and the prospect of more confusion and chaos in Government over Brexit, confirm for us the pressing need for change, a general election and a new government.
Labour stands ready to form that government and I stand ready to bring forward a Labour Budget that will create the new prosperous, fair and sustainable economic settlement we need.