The Resolution Foundation has done a cumulative analysis of all the tax and social security decisions from 2015 to 2023. It shows that the people in the first five income deciles—the five poorest groups of people in the UK—are set to lose out by between £100 and £500 a year, on average and in real terms. Of course, some families will continue to get hammered to an even greater extent, as I have already pointed out. The top income deciles, however, will all see an increase in their incomes. So when the Chancellor chose to bring forward a tax cut that disproportionately benefits higher earners the most—instead of stopping the benefit freeze, which is the single biggest cash grab from low-income families, or stopping the most draconian cut to universal credit, which is the disgusting two-child cap, which targets children with austerity—it was clear that his priorities were skewed. He keeps up an income squeeze on the many to pay for the biggest tax cuts for the few. That might have been a line from the shadow Chancellor, but of course Labour is supporting this disgrace.
The tax shambles that Labour has got itself into was compounded yesterday by Scottish Labour putting out a statement asking the Scottish Government to do the exact opposite of what the Labour Front-Bench team here wants to do on tax. For Scottish Labour, it is the old Groucho Marx line: “Those are my principles and if you don’t like them, well, I have some more in London.” Of course, the Scottish Government are already plotting a different, progressive path on taxation, leaving 70% of all taxpayers paying less this year than in 2017-18. I am confident that that will continue in next week’s budget.
Let me return to the impact that Tory austerity is having on families. The OBR has warned that unsecured debt has risen as a share of household income. In other words, people are relying more on loans and credit cards to stay afloat. We know that from the evidence that the Trussell Trust and Citizens Advice have provided about food bank use and people seeking help. The OBR falls just short of saying that the growth outlook is dependent on an unsustainable debt-fuelled increase in consumption, but even its need to mention that in the report should be a warning to the Government and their Front-Bench team. Their squeeze on living standards and family incomes is pushing people into debt, and that has not just social but economic consequences.
Most fundamentally, we should struggle to believe that any of the Budget will be delivered anyway. The OBR has struggled to do its analysis because the Government failed to provide the figures in time. I wonder why that was the case. The Chancellor himself essentially said that his Budget was a wish list—and a wish list that is entirely contingent on Brexit. The OBR’s blue book quotes studies from the Centre for European Reform and the Centre for Economic Policy Research that say that, by the middle of 2018, the UK economy was 2% to 2.5% smaller than it would have been had it not been for the Brexit referendum. In other words, the Brexit referendum itself almost halved the already slow annual economic growth enjoyed by the UK. I doubled checked this with the Library, and UK annual GDP is around £2 trillion, so 2% to 2.5% of that is worth £40 billion to £50 billion. That is £40 billion to £50 billion lost from the UK economy thanks to David Cameron’s failed Brexit gamble and the Vote Leave campaign that broke the rules. The Schadenfreude for the Prime Minister, who claimed that austerity was over, is further compounded by the fact that the estimated cost of ending austerity ranged from £19 billion for the IFS to £31 billion for the Resolution Foundation. Had there been no Brexit, the Chancellor could have ended austerity while staying within his own fiscal rules and still had enough money to fix the roof while the sun was shining.
On Monday, the Chancellor let us all believe that the space he had to loosen the Tories’ vice-like grip on the financial purse strings was down to austerity economics. Let us have a little look at what the Chancellor did not say on Monday and provide bit of the cautionary detail referred to by the right hon. and learned Member for Rushcliffe. Many Tories point to cuts to corporation tax as the reason for greater-than-expected tax receipts. Sadly for them, that does not appear to be the case. Last year, the IFS discussed recent trends in corporation tax receipts and said:
“Weak investment post Brexit is forecast to boost receipts in the short run because it is expected that firms will make less use of tax-deductible capital allowances.”
Analysis in the Financial Times in April last year made basically the same point:
“Companies can offset some of their investments against their profits to reduce their tax bill. The idea is to give them a tax incentive to make more investment. For this reason the OBR has a rule of thumb that a 1 per cent increase in business investment leads to £50m less in tax receipts…But business investment fell by 2 per cent in 2016, according to the ONS. This was good news for the public finances, which received more in corporation tax revenue, despite being bad news for the overall economy.”