My Lords, I enjoyed the spirited exposé of octogenarian privilege from the noble Lord, Lord Tugendhat. I noted that before the Budget George Osborne’s former chief of staff, Rupert Harrison, called for a “safety first” Budget. He thought the Chancellor could not afford another slip-up like the mess he made in March over self-employed national insurance contributions. The last thing the Tories needed was another bananadrama.
Mr Harrison got what he wanted. Nevertheless, it was a Budget that brought more bad news—very bad news—about Britain’s economic prospects. Just eight months ago, the Chancellor began his March Budget by claiming that the British economy had confounded critics with “robust growth”. He contended in November that it “continues to grow”. He should have said it “continues to slow”, because March’s “robust growth” proved to be a flight of ministerial fancy that melted away with the winter snow.
The stark reality is that Britain’s growth rate has fallen every year for three consecutive years and is set to plumb fresh depths next year, in 2019, and again in 2020. It is in their failure to get the economy growing at anything like the rate it did under Labour before the global financial crisis, let alone the growth rates achieved in the 30 years following the Second World War, that the Tories have done most damage. By the way, the debt bequeathed after the Second World War fighting Hitler was double as a proportion of GDP what my noble friend Lord Darling had to cope with after the global financial crisis.
The Tories have spent the past seven years sacrificing living standards, public services and our social safety net on the altar of their austerity policy. The Institute for Fiscal Studies says we face two decades without a rise in average pay, with average earnings in real terms £750 a year lower in 2022 than in 2007. What a total, shameful failure of Conservative economic policy.
The pedestrian pace of economic expansion since 2010 is the root cause of the hardship Britain has endured for years now. What has held growth back is the Tories’ savage tax and spending squeeze. George Osborne used to boast about having squeezed the UK economy tighter than any in the advanced world, all in the name of ending the budget deficit, but squeezing growth out of the economy has left the Tories well short of a balanced budget while doubling national debt. Having failed to end the deficit completely by 2015—their original target—they now say they will only halve it by 2022. By then your Lordships can be sure the goalposts will have moved yet again to maintain the illusion that their plan is still on track and to justify still more austerity. Clearly the modern Tory Chancellor is like the frog in a pond whose successive jumps only ever take him half way to the edge. He and the frog share an aim that they cannot realise unless they try a new approach. In the Chancellor’s case that means abandoning austerity and promoting faster growth, as Labour, in particular its shadow Chancellor, is indeed urging.
Some people think, mistakenly, that the Chancellor has already done so. The BBC economics editor Kamal Ahmed said that, compared to the March Budget, the Government are,
“doing more to stimulate the economy”.
I am afraid that is wrong. By making a smaller cut in the structural deficit than he had planned in March, the Chancellor is doing less to hold the economy back, not pushing it forward. There has been no U-turn. He still plans to take a big slice out of overall spending in the economy. More cuts are coming to departmental budgets, with real-terms cuts outside the NHS of more than 6% according to the Institute for Fiscal Studies. More cuts to working-age benefits are already in the pipeline—£12 billion on top of the £29 billion already made. Local government is being hammered. Head teachers are in despair. Further education colleges, surely key to any recovery, face even more cuts.
Their obsession with ending the deficit has blinded today’s Conservatives to the fact that bringing down Britain’s debt burden does not require a balanced budget. No Tory leader delivered more budget deficits than Margaret Thatcher—11 in her 13 years in power. Only one of the last six Tory Chancellors ever ran a budget surplus, the noble Lord, Lord Lawson, and he managed it in only two of his six Budgets.
At the Conservative Party conference Theresa May pledged to revive what she called the British dream. Perhaps her inspiration came from “The Island of Dreams”, the Springfields’ last hit before they broke up in the 1960s. That left Dusty Springfield to launch her solo career with two other features in the Prime Minister’s repertoire: “I Just Don’t Know What to Do with Myself” and “Wishin’ and Hopin’”. Ministers keep saying that they want to send a signal to the world that Britain is open for business, but all our friends abroad can hear is a garbled transmission on channel 16, the international distress frequency: “Mayday, mayday, mayday”. The British economy is in deep trouble. Frankly, that is because of primitive Conservative economic policies.
The Chancellor pledged to meet the challenge posed by Brexit and new technology, and to make whatever change is needed to fix Britain for the future. But by only easing his fiscal squeeze, instead of ending austerity altogether, he is cheating the challenge and faking the change. What the economy needs more than ever is a strong stimulus, not a weaker squeeze. Instead, all we are getting is austerity for ever, and that means failure for ever. Meanwhile, as my noble friend Lord Livermore pointed out so eloquently, Brexit grimly awaits to make the situation even worse.