On 26 March, I spoke in the Budget Resolution and Economic Situation debate in parliament following the Chancellor’s budget. The full text of my speech is below.
You can read the entire debate on the parliamentary website here.
Last week’s Budget did little to address the current issues of a flatlining economy and rising unemployment. In my constituency long-term youth unemployment has increased by 137% in the past six months, with 13 people chasing every job, and there is the highest unemployment rate for women in 17 years. Housing repossessions have increased by 10%, with more than 300 mortgage and landlord repossession claims this year. Those are the tragic consequences of that devastating economic policy and ideologically driven cuts.
The Chancellor put a positive spin on a worsening economic and fiscal forecast, when in reality he is meeting his borrowing forecast this year only because the £5 billion lost in tax receipts has been offset by a more than £6 billion under-spend in Government. He failed to disclose last week that, at a time when nursing posts are being cut, waiting times are increasing and there is an unprecedented top-down reorganisation costing billions of pounds, that figure includes £500 million being clawed back from the NHS.
According to independent analysis, the Budget includes £900 million less for the NHS than the 2010-11 comprehensive spending review, with £500 million being used on the deficit reduction programme. With increases in debt interest, rising public sector pension costs and social security payments, it is estimated that annual management expenditure will grow by 1.8% a year in real terms, leaving the total pot for public services falling by 3.8% a year in real terms in 2015-16 and 2016-17.
The Chancellor appears to be storing up further pain for an already beleaguered public sector while failing to address the real issues of the financial sector, and he has also failed small businesses. Instead of cutting corporation tax, which benefits the largest companies, in the hope—and it is just a hope—that that will lead to business investment, why did he not delay the rise in business rates? His latest scheme to boost credit to small businesses whereby banks pay a fee to the Treasury to access £20 billion-worth of funding at a low rate, in turn passing it on to SMEs for cheaper loans, suffers from serious design flaws. First, the £20 billion is to be released over two years. Secondly, the scheme has no targets. The previous attempt to boost lending to small business, Project Merlin, under which the UK’s five biggest banks agreed to make £76 billion of credit available, did not achieve the Government’s goals, even though it had targets attached, and the new plan is not compulsory. HSBC has already said that it will not be taking part. The scheme’s biggest flaw is that it does not address the real problems facing businesses. It will not be available to SMEs that have already been refused finance.
I want to put on the record my dismay at the Chancellor’s priority of cutting from 50% to 45% the highest income tax rate for those on incomes of over £150,000. His explanation for doing so was that, because people were so successful in avoiding paying this tax, HMRC had recouped less than anticipated. In other words, he was saying, “Let’s not bother with collecting the tax at this level; let’s reward these people’s behaviour by cutting the rate by 5% and just hope that they see the light.” The Chancellor may say in response that he is clamping down on stamp duty avoidance. However, his commitment to address what he refers to as “morally repugnant” tax avoidance rings hollow given that on the day before the Budget he did a deal with Switzerland to block the EU savings tax directive, which is specifically designed to help to deal with tax evasion. Through that bilateral deal, the Chancellor has, in effect, set up a tax loophole that any dodgy accountant would be proud of in allowing people to carry on evading paying their tax.