My response to the Chancellor’s Autumn Statement – 29th November 2011
Mr Speaker, let me start by thanking the Chancellor of the Exchequer for advance notice of his statement and the Office of Budget Responsibility for ensuring that the Chancellor is today setting out to this House the truth about the state of the British economy and the truly colossal failure of the Chancellor’s plan.
Mr Speaker, let’s be clear what the OBR has told us today – though the Chancellor couldn’t quite bring himself to say it: growth flat-lining – down this year and next year and the year after too; unemployment rising; well over £100 billion more borrowing than the Chancellor planned a year ago; more borrowing than the plan which the Chancellor inherited at the last general election, and, as a result, his economic and fiscal strategy in tatters.
After eighteen months in office, the verdict is in: Plan A has failed and it has failed colossally.
With prices rising and unemployment soaring families, pensioners and businesses already know it’s hurting.
And with billions more in borrowing to pay for rising unemployment, today we find out the truth – it’s just not working.
Mr Speaker, the Prime Minister likes to say: “You can’t borrow your way out of a crisis”.
Can the Chancellor confirm that that is exactly what he has been forced to do:
Higher borrowing to pay for the crisis in growth and jobs in Britain, the higher unemployment and the higher benefits bill that his failing plan has delivered?
LAST YEAR’S MISTAKE
Mr Speaker, the Chancellor’s out of touch and complacent hubris of a year ago now seems such a distant memory.
The Prime Minister boasted that Britain was ‘out of the danger zone’. The Chancellor claimed that the UK was a ‘safe haven’. But we know the truth: cutting too far and too fast has backfired – and every one of the Chancellor’s claims of a year ago have completely unravelled.
And, Mr Speaker, it is not as if they weren’t warned – including by their coalition colleagues.
Before the election we said, like every country – and after the global financial crisis – we had to get our deficit down and that meant tough decisions on tax and spending cuts.
The question is not if you do it, but how you do it.
Which is why we on this side of the House warned if you try and cut spending and raise taxes too far and too fast, you risk choking off recovery pushing up unemployment and borrowing.
We said the Chancellor’s plans wasn’t cautious, it was reckless.
We said he was ripping out the foundations of the house leaving our economy not safe but deeply exposed to a brewing global storm.
Let me remind the Chancellor what the Managing Director of the International Monetary Fund warned this summer, she said:
“slamming on the brakes too quickly will hurt the recovery and worsen job prospects”
And Mr Speaker, what has happened?
Consumer and business confidence has slumped in the last year.
Our recovery was choked off over a year ago.
Since last year slower growth than any other G7 country except Japan – and they had an earthquake. Unemployment at a 17 year high. 1 million young people out of work.
And today the news that growth this year will not be the 2.3 percent the Chancellor so confidently predicted in the June Budget this year but just 0.9 percent.
Growth lower next year than this year Mr Speaker. And lower than forecast in the year after.
The fourth time that the OBR has downgraded the growth forecast in just eighteen months.
And Mr Speaker, now today we learn that even judged by the one objective this Chancellor set himself, to get the deficit down, he is failing.
Because with lower growth and rising unemployment pushing up the costs of failure, can the Chancellor confirm that compared to his autumn statement a year ago borrowing is now set to be not the £46bn more that he said it would be in March, can he confirm compared to his plans of a year ago he is now going to borrow a staggering £158 billion more in borrowing?
Higher borrowing than he promised a year ago – £158 billion more borrowing.
And can he also confirm – despite the pain of £40 billion of extra spending cuts and tax rises the Chancellor boasted about a year ago – can he confirm that compared to the plans he inherited at the last election because the recovery he choked off and because unemployment is higher he is now set to borrowing more at the end of this Parliament than the balanced plan inherited from Labour.
Mr Speaker, a year ago the Prime Minister told the CBI that:
“In five years’ time, we will have balanced the books.”
Not some kind of dodgy rolling target – but a clear commitment to eliminate the deficit by 2015.
Can the Chancellor tell the House – will he meet his fiscal mandate to eliminate the structural deficit by 2015?
Isn’t this the truth, Mr Speaker: with unemployment up and borrowing up, going further and faster has been utterly counter-productive and self-defeating.
It has backfired.
We’ve had all of the pain, but none of the gain.
Mr Speaker, I have to say, these OBR forecasts show that the Government’s entire economic and fiscal strategy is now in complete disarray.
And yet all we get are excuses.
Blaming anyone and anything: Labour, the snow, the royal wedding, the Japanese earthquake, higher inflation, VAT, the Eurozone, low paid dinner ladies a nd teaching assistants; anybody but himself.
When it is the Chancellor that is to blame. It is his failing plan that has pushed up unemployment and pushed up borrowing. It is his reckless gamble that has made things worse here in Britain – not better.
Mr Speaker, of course if eurozone countries continue to fail to sort out their problems, it will have an impact here.
But Britain’s economic recovery was choked off over a year ago –before the euro crisis.
Look at the OBR forecast – they’ve downgraded growth in Britain this year; they’ve upgraded growth in the euro area this year.
Out of 27 countries in the European Union, only Greece, Portugal and Cyprus have grown more slowly than Britain in the last year.
REPEATING THE MISTAKE
I have to say Mr Speaker, it is not only not too late for the Chancellor to change course. The deepening Euro crisis makes it even more important that he sees sense.
But instead, he is clinging to the fantasy that any change of course would make things worse.
And he still clings to the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility and not, as they were in Japan in the 1990s or in America today, a sign of stagnant growth in our economy.
They don’t like it but it is the truth Mr Speaker. They set up the OBR, maybe they should listen to their forecasts Mr Speaker.
This summer the head of the IMF warned the Chancellor:
“Growth is necessary for fiscal credibility”.
But the Chancellor says a change in his plans would lead to a loss of credibility – even as he is forced today to confirm that his growth and borrowing targets are now wildly off track.
Last month the IMF advised the Government and let me quote:
“if activity were to undershoot current expectations and risk a period of stagnation or contraction countries that face historically low yields (f or example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”
Mr Speaker with the world darkening and with today’s news that here in Britain we are set to see stagnant growth not just this year but next year too, let me ask the Chancellor:
Isn’t it now time for the Government to listen to the IMF?
How much worse does it have to get – how many more young people need to lose their jobs , how many more businesses go bankrupt – how many more times will he have to downgrade his growth forecasts and upgrade his unemployment forecasts, how many billions more in borrowing do we need to pay for failure – before the Chancellor finally sees sense?
Mr Speaker, these would be difficult times for any Chancellor.
But our fear is that once again the Chancellor is making a catastrophic error of judgement in his statement today.
He is refusing to learn the lesson of history or economics
He is refusing to shift to a more balanced plan.
He got it wrong eighteen months ago. He is getting it wrong again today.
Repeating the mistakes he made last year will only make things worse.
Isn’t now the time to act to listen to the IMF, to cut taxes and have a slower pace of spending adjustment?
Isn’t it time that the Chancellor changed course before it is too late?
A GROWTH PLAN?
What do we have instead, Mr Speaker?
A cobbled together package of growth measures which he must know – and which the OBR forecast confirms – do not address the fundamental problem that his rapid, reckless and deflationary plan that is choking off the recovery and pushing up borrowing.
Mr Speaker, we have been here before.
This is the third emergency growth package in a year.
The last thing our economy needs is yet another fantasy growth package.
Honourable members do not have to take my word for it, let‘s look at t he OBR’s own forecast:
Does the OBR think the Chancellor’s plans are going to boost growth?
No, they’ve revised growth down.
Next year from 2.5% to 0.7% – and in the following year they’ve revised growth down from 2.9% to 2.1%.
And does the OBR think the Chancellor’s plan is going to increase employment and cut unemployment?
Let me tell the House two things in the OBR forecast which the Chancellor did not choose to tell the House.
Unemployment is not only higher next year than this year but higher the year after than this year Mr Speaker.
And employment is expected to fall by 100,000 next year.
We were promised a ‘game changer’ of a statement, we were promised a growth plan that would secure the recovery.
Instead he has a plan for growth that means lower growth and higher unemployment Mr Speaker.
It’s not a game changer, it’s just more of the same.
Let me turn to the measures that he has announced:
He’s announced a new youth jobs fund but why ever did he abolish the Future Jobs Fund in the first place? They abolished it in their first month in office and this replacement won’t take effect till well into next year.
He claims to have increased the bank levy, so why is he still cutting taxes on the banks this year compared to last year – down from £3.5bn last year to £2.5bn this year? And why won’t he also repeat the bank bonus tax to invest properly in youth jobs?
He’s announced a sensible halt to January’s fuel duty rise, but can he confirm, as a result of last January’s VAT rise, motorists are now paying 3p a litre more on petrol?
He’s belatedly announced a plan on Labour’s Enterprise Finance Guarantee under the new label of Credit Easing but why did he wait so long and why did he put his in a Project Merlin deal which has patently failed, and as the Bank of England confirms today, has seen net bank lending to small businesses fall over the past year?
And as for his equally belated decision to set up a new Infrastructure Fund this from the same Chancellor who abolished the Building Schools for the Future programme at a cost of tens of thousands of construction jobs.
Let me ask him, how much of this investment will happen next year or the year after? how much is actually pre-announced funding from the next Spending Review after the next general election? And can he confirm that this new ‘off-budget’ infrastructure fund will be subject to a National Audit Office value for money test to ensure projects are not more expensive to the tax payer than direct government borrowing?
He’s also announced a rebate for energy intensive industries to correct the chaos caused by his botched carbon floor price.
He’s reinstated just 10% of his planned £4bn cut in housing investment.
But even in the last few minutes as we have studied the small p rint, and despite all the bluster about new measures, because this Chancellor is so determined not to break from his failing plan, he is once again giving with one hand and taking with the other.
How are these new growth measures paid for? By hitting families and savers Mr Speaker.
Let me ask the Chancellor:
How much will his cut in tax credits cost a working family on average incomes?
And with inflation so much higher, is the Chancellor still meeting the Prime Minister’s pledge to deliver real terms rises in NHS spending in this Parliament?
And as a result, and taking into account pre-announced measures in his budgets and spending review, is the Government:
Still hitting women harder than men?
Are they still increasing child poverty and not reducing it?
And given that he has already cut childcare support by £1.6bn, is he helping women who want to go out to work or is he making it harder?
Mr Speaker, if we are all in this together, why with this Government is it always families, women and children who pay the price?
Mr Speaker, it is clear that this Chancellor’s plan is not working.
The OBR knows it, the markets know it, the IMF knows it, we know it, so, increasingly, do the Chancellor’s coalition colleagues. His arch-rival the Mayor of London certainly knows it Mr Speaker
But we all know why the Chancellor cannot change course.
We know why he cannot accept the IMF’s advice.
We all know why, even as the Euro crisis deepens, even as he is borrowing £158 billion extra this oh-so-political Chancellor will not budge.
Because to change course now would be to admit that he has got the key economic judgments of this Parliament absolutely catastrophically wrong.
Mr Speaker, if after eighteen months his plan is leading to falling growth, rising unemployment and £158 billion more in borrowing, the country either needs a new Chancellor or it needs a new plan.
A balanced and credible plan on jobs, growth and the deficit.
We need real tax cuts.
A real plan for jobs, growth and deficit reduction, Labour’s five point plan for jobs, growth and deficit reduction.
Real action now before it is too late.
Protecting our economy, businesses, jobs and family finances is more important than trying to protect a failed plan.
For his sake, for his party’s sake and in the national interest, the Chancellor needs to change course and he needs to do so now.Posted November 25th, 2015 by admin