A budget for a fairer, stronger Britain
When George Osborne delivered his first Budget in June 2010, he promised a ‘new model of economic growth’ and a ‘progressive’ approach to deficit reduction in which ‘everyone will be asked to contribute’ and ‘everyone will share the rewards’. ‘When we say we are all in this together, we mean it’, he promised.
Almost two years later, as Osborne prepares his third budget, there are few rewards to share. The UK economy has growth just 0.2% since his 2010 Spending Review. Unemployment has risen to its highest level for seventeen years – with women and young people especially hard hit. And those in work have seen their wages stagnate while the costs of food, fuel, and fares continue to rise.
Most damningly, stalling growth and rising unemployment means weaker tax receipts and a growing benefits bill – meaning Osborne is now on course to borrow £158 billion more than he said he would, meaning more tax rises and spending cuts, and extending his deficit reduction timetable two years into the next parliament.
But far from ensuring that the costs of his economic failure are borne by those with the broadest shoulders, Osborne has loaded the heaviest burden onto working families with children, with those on middle and low incomes suffering the most. Analysis of the Chancellor’s deficit reduction measures shows he has taken twice as much from families with children as he has from the banks. The squeeze is set to continue this year – families with children will be, on average, £530 worse off as a result of changes to things like tax credits due to come into force next month.
Britain urgently needs a budget that delivers jobs, growth, and fairness for ordinary families.
Cutting too far and too fast hasn’t just hurt family finances and local communities – as Ed Balls warned in his Bloomberg Speech eighteen months ago, it’s also choked off the recovery and so added to planned borrowing.
Jump-starting growth in the short term is essential to getting the deficit down over the medium term. It will also limit the damage now being done to our economy’s long term potential. Lost years of low growth and high unemployment also mean businesses losing opportunities to invest and succeed in the global economy, and young people losing chances to develop their talents and make their contribution.
Labour’s alternative plan for jobs and growth would get the recovery back on track by using a tax on bank bonuses to guarantee a job for every young person out of work for more than a year, that they would have to take up. We’d also give a tax break to small firms taking on extra workers – using money left over from the government’s failed scheme to help new businesses.
We’d use a temporary cut to VAT to give a boost household budgets and business confidence – a faster and fairer way of stimulating demand and supporting living standards than Nick Clegg’s policy of increasing the income tax personal allowance, which won’t help pensioners or those on lower incomes.
Deficit reduction will require tough choices on tax, spending and pay. But that means our values and priorities matter all the more.
A Labour budget this week would reverse the pensions tax cut which the government gave to those on incomes over £150,000 to restore cuts to Working Tax Credit and Child Tax Credits that the Chancellor announced in his Autumn Statement – which would get an extra £300 to a low income working family with two children.
We’d also end the avoidance of stamp duty on the purchase of properties worth over £1 million, using the funds to reverse perverse and unfair changes to working tax credit rules, due to come in next month, which mean that hundreds of thousands of couples with children could be plunged into poverty – and left better off quitting work – if they can’t increase their working hours at a time when most employers are cutting hours, not offering extra shifts.
We’ve said we’d support the Chancellor if he introduces a mansion tax if its purpose is to ease the squeeze on low and middle incomes. And we have been consistent in calling for tougher action to reduce tax evasion and avoidance.
But a tax cut for the top one per cent on incomes of £150,000 a year, which seems to be the preoccupation of this Conservative-led government, cannot be the priority for Britain right now. To be focused on finding money for a measure like this at a time when small businesses are struggling, the living standards of the majority are falling, and the hopes of a whole generation of young jobseekers are in danger of fading, is nothing short of callous complacency.
The need now is for a budget that creates jobs, gets growth going again, and takes tough, but fair, decisions to ease the squeeze on household budgets. That would also help us get the deficit down over the medium term. And it would put in place the firm foundation we need to build a fairer, stronger economy for the future.
Rachel Reeves is MP for Leeds West and Shadow Chief Secretary to the Treasury.