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Budget Resolutions - Amendment of the Law

Part of the debate – in the House of Commons at 10:36 pm on 13th March 2017.

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Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury) 10:36 pm, 13th March 2017

It has been a privilege to listen to the Budget debate today and to be able to respond on behalf of the Opposition. We have heard 32 Back-Bench speeches, two thirds of which have come from the Labour Benches, but in many ways it is understandable that so few Conservative Members wished to speak today. It was surely quite an achievement that the Chancellor managed to deliver a Budget that was so thin on announcements yet could generate so much criticism in response. In many ways, it was a Budget that pleased no one—apparently, not even the Prime Minister or, as we have learnt, the former Prime Minister.

For those of us hoping to see real help for public services, especially health and social care, there was only disappointment. For people who wanted to see how the Government would tackle the squeeze on living standards and persistent low pay, there was only consternation and outright anger at the national insurance rise. For anyone wondering what the path to prosperity will be for this country as we leave the European Union and seek a new place in the world, there were no answers at all. The Chancellor may be known as “Spreadsheet Phil”, but on this occasion he certainly did not Excel.

The Chancellor did, however, surprise us all by revealing that he likes to make a joke himself. I particularly liked his opening anecdote about Norman Lamont delivering his last spring Budget and being sacked as Chancellor just 10 weeks later. However, I imagine that that started to feel a bit less funny when the Chancellor saw his own headlines the next day.

Let me begin by considering the most controversial item, which has been mentioned by many hon. Members today: the significant hike to national insurance for the self-employed. On the Labour Benches, we simply do not accept the Conservatives’ belief that self-employed people now receive the same rights as employees. Self-employed people do not receive sick pay, maternity pay or paternity benefits. They are not eligible for industrial injuries disablement benefit and they cannot be auto-enrolled into a workplace pension scheme. The law may now give them similar access to state pension benefits, but receipt of that is decades away for most. Simply put, while they are in work, they are on their own. Most significantly, as one of my constituents said to me on Friday, if they lose their business, they are not even eligible for contributory jobseeker’s allowance. So to increase the tax burden on them, without a commensurate increase in benefits, is simply unfair and we will oppose the Government on it.

We recognise absolutely that there is a need to tackle bogus self-employment. I have constituents who are construction workers who have been forced to register as self-employed, who are paid the minimum wage and then receive the remainder of their salary as dividends. I believe that to be completely wrong. But it seems clear to me that an arrangement such as that is primarily designed to avoid liability for employers’ national insurance and for other benefits, and that is surely where the Government’s attention should be. To punish the self-employed, beginning with those earning above just £16,250 a year, while at the same time pressing ahead with very large reductions to corporation tax, to inheritance tax and to the bank levy, is a sign of a Government who simply have the wrong priorities—and to break a manifesto commitment to do that represents a profound lack of judgment.

Those misplaced priorities were also evident elsewhere. Social care in this country is in crisis—although, to be frank, the word “crisis” does not seem strong enough. As several Members have said today, that view is widely held on both sides of this Chamber. In the last Parliament, over £4.5 billion was taken out of adult social care alone. The King’s Fund and the Nuffield Trust say that the social care funding gap for just this coming financial year is £1.9 billion. We did get that from the Chancellor, but spread over three years with nothing additional scheduled after that. I say this to the Conservative MPs who make speeches about tough spending choices: yes, the decisions we make here in this place on a Budget are not easy, but they are not where the toughest decisions lie. The toughest decisions are actually taken by people on the frontline: by professionals struggling to reconcile their budgets with the real people and the real need they see in front of them.

This year, public spending on social care in real terms was less than it was 2009-10. As we have an ageing population, it is fairly clear that that is a not a sustainable position. Some 400,000 fewer adults are receiving publicly funded social care today than in 2010. Age UK says over 1 million older people have to get by without the support they need.

Of course, this is not just about older people: a third of social care spending goes on adults with learning difficulties—a situation that directly affects me and my family, so I declare an interest in that. These are all areas where we, as a society, should come together and ensure that we are willing to protect and take care of vulnerable people. There can be no area more in need of a long-term consensus than this one, so I reiterate again the offer from the Opposition to the Government: that we would join formal cross-party talks aimed at finding a sustainable and long-term solution, as many Members have asked for in this debate.

On the biggest issue of all—Brexit: what it will mean and how we will prepare for it—there was almost nothing. In fact we could be forgiven for thinking that the Chancellor does not think very much is going on right now, but we face some fundamental decisions, at a time when living standards for many people have taken a real hit, and they do not feel the economy works in a fair way for them.

This is the worst decade for pay in 70 years. Real pay rates are still lower today than before the financial crisis. We have 6 million people earning less than the living wage, and 4 million children living in poverty, two thirds of whom have a parent who is in work.

Against that backdrop, this Budget was simply inadequate. Where was the contrition that this has been the slowest recovery since the 1920s? Where was the recognition that we need to see a much greater and fairer distribution around the UK of investment in things like transport, so that we can ensure that each region fulfils its potential? Where was the plan to increase business investment? Fixed capital formation is lower today than it was in the 1970s.

There has been speculation that the Chancellor did so little because he wants to keep a Brexit “failure fund” as a war chest in case things go wrong, but surely it is his job to make those decisions now, to ensure that things do not actually go wrong to begin with. At a minimum, with changes to immigration rules almost certain, we might have thought that the Government would rethink cuts to school budgets and focus on the education of people here in the UK, but no such commitment was forthcoming.

On the issue of spending choices, I understand that when the Government are taking a hit for their poor decisions they always seek to deflect the attention back to the Opposition, but the accounting envelope for the decisions taken in this Budget is very clearly set out in the Government’s own documents. To take just one example, on page 30 of the Red Book it is clearly stated that the decision to further cut corporation tax will cost £2.2 billion in 2017, a further £2.2 billion in 2018, £3.1 billion in 2019, £4.9 billion in 2020, and £5.2 billion in 2021. Of course we want a globally competitive rate of corporation tax, but there is such a thing as a diminishing return. The average rate of corporation tax in the OECD is 25%, and a bargain basement level of corporation tax will do us no good if we do not have sufficient infrastructure across the country or we lack a workforce with the skills that businesses need, or if we have to fund that low level of corporation tax by hammering small businesses with unreasonable business rates or increase the tax burden on the self-employed.

To take another example, on the big cut to inheritance tax, phasing in the new couples’ allowance of £1 million in 2017 costs £265 million this year, £565 million next year, £610 million in 2019, £650 million in 2020, and £725 million in 2021. Incidentally, of the nearly 3,000 houses sold in my constituency last year, only six were sold for values above the current inheritance tax threshold of £650,000. I thank my hon. Friend Rachel Reeves for her research and campaigning on that issue. This is a Budget dictated not by poor financial constraints but by poor Conservative choices. It is defined by the unfairness of the choices it makes, by the hypocrisy of a broken manifesto commitment and by its total, abject failure to offer a coherent plan for the UK’s prosperity and for our future place in the world.