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Speech in debate on the Chancellor's 2018 Budget


Angela Smith speech in the House of Lords, Tuesday 13th November 2018

My Lords, Today’s debate takes place against a backdrop of huge uncertainty about the future of this country.  We’ve come a long way from the Prime Minister’s mantra of ‘Brexit means Brexit’ as, under the stewardship of this Government, no-one has a clue what Brexit will mean, or the implications for the economy.

Yet again we’re being told it’s ‘crunch time’ but then today’s Cabinet didn’t even discuss the so-called Deal. But we’re advised that there was cautious optimism – whatever that means.

But at one time the government had a long-term economic plan – it said would make public services more efficient, ensure work would pay, and promised to make our economy more resilient.

To provide this, we would all need to tighten our belts through an extended period of austerity. Times would be tough but we were all in it together and it would be worth it as we emerged into the promised bright economic future.

Now however, it is clear that the ideological commitment to austerity has failed our country, economically and socially’ and has brought misery to communities, families and individuals.

It is also clear that it has failed politically with Theresa May telling her party’s conference that austerity has ended. Yet again, addressing the internal problems of the Conservative party rather than the nation. The Prime Minister needed to shore up her support with her own MPs, many who defend the ideology of austerity but are unable to justify it to struggling constituents.

With that long-term economic plan now abandoned, the Chancellor had to deliver a budget, boxed in by a desperate political pledge when he really wanted to take a more pragmatic longer-term approach.

This was evident at last week’s Treasury Select Committee, where he displayed more realistic pragmatism than the Prime Minister – advocating a balanced approach to deficit reduction rather than an ideological commitment to austerity.

So my Lords, let’s examine the detail.

The OBRs forecasts are just slightly better than last year, although warn of slowing growth in business investment, and unsecured debt rising as a proportion of household income. It recognises that inflation remains slightly higher than forecast and has revised down its growth predictions. Also, whilst employment has marginally increased, there has been no significant improvement in wage growth.

Hardly a rosy picture. As one commentator concluded: “The Chancellor claims strong growth, but it’s mostly froth”.

However, reduced borrowing forecasts from the OBR provided flexibility for the Chancellor and more money to draw on this year. But it is described as a ‘gamble’ by the independent IFS, given that the OBR could easily reverse its decision next year. That would leave the Chancellor in a tricky situation – unlikely to re-impose austerity, he’d have two options: increase borrowing or raise taxes.

Despite that warning, the Chancellor has chosen to spend rather than save with decisions predicated on a smooth Brexit and a two-year transition phase. But does that spending help those who need it most or provide a coherent strategic approach to strengthen the economy?

Back in June, we welcomed the announcement of additional funding – £20 billion – for the NHS, which is repeated in this budget. But it is now clear that other public services will pay the price. Day-to-day public service spending, outside health, is 19% lower than 2010/11 and set to stay broadly flat between now and 2023/24.

No wonder the IFS has described the situation as unsustainable, with the likelihood of tax rises.

And despite extra funding for the NHS, how much of this could end up spent on existing loans and deficits? The NHS in England overspent the Government’s budget by £4.3 billion last year, while Trusts owe £7.4 billion in loans. That’s almost £12 billion – just under 60% of the new money announced.

Meanwhile, decisions on non-NHS health budgets – for social care, for public health, for training– are parked until the spending review.  How can we possibly address the crisis in social care unless we address these issues together and set out a broader strategic plan?

One of the most depressing announcements in the budget was the £400 million schools funding for those “little extras”. This is barely more than 10% of the £3.5 billion cut from education since 2010.

We’re still seeing a cut in pupil funding and however clever the Government tries to be with the figures, teachers know the real impact on our schools. And it continues post school with investment also lacking in skills and training.

It’s not just the futures of today’s pupils that the Government is stifling. It’s all our futures if we fail today to properly educate and train the young people that we need to build the society of tomorrow.

The Government talks of devolving powers and responsibility. But it’s really about ‘passing the buck’ because those given that responsibility can only operate within those financial constraints handed down by Government.

Local councils – having already borne the brunt of so many austerity cuts – are being hit again with reductions next year of a further £1.3 billion, leading to a funding gap of £7.8 billion by 2025. Prisons meanwhile, face cuts of £510m through to 2023 – on top of the 21% reductions since the start of this decade.

And unprotected departments will still face real day-to-day cuts of 2.9% per person through to 2024.

Elsewhere the Government isn’t even trying – not a penny in the budget for regular policing where the impact of cuts continues to be felt in all of our communities. With the loss of 21,000 staff, 999 calls not being responded to and police making decisions about the crimes they can or cannot investigate – we all pay the price, because of a lack of resources.

Then there’s a sleight of hand in other areas, from defence to pothole repairs, where new money doesn’t extend beyond a year.

Does the Noble Lords the Minister really understand the depths of frustration of police officers, teachers, those working in social care and other public servants? Pushed to the brink, they are unable to fulfil their responsibilities because of the failed austerity policies of this Government.

So a lack of strategy for welfare, a lack of strategy for health and care, a lack of strategy for education and skills, and a lack of strategy for defence, roads and policing. And a lack of anything resembling a strategic vision for the future of our country.

Just a blatant attempt to apply sticking plasters to open wounds.

The government has made much of plans to reverse intended cuts to welfare benefits – but in reality, it’s only a quarter of the £12 billion cuts planned by 2020. The other 75%, as announced in 2015, remain government policy – with half the amount yet to be rolled out impacting directly on families.

Not only does the benefits freeze remain, but the tax cuts will cost far more than changes made to Universal Credit. As demonstrated by the Resolution Foundation, those tax cuts will see 84% of gains go to the top half of earners in the country, with 37% going to the top decile alone. And when you take the tax cuts and Universal Credit changes together, that top 10% of households will see a 14 times greater benefit in cash terms than the bottom 10%.

The impact of austerity may not have reached Downing Street, but it has reached millions of our citizens – including many in low and medium paid employment. For those workers, pay packets are not expected to return to pre-crisis levels until the end of 2024. So, any extra money in their pockets is welcome given the hit they’ve already taken – but the balance is wrong.

So my Lords, this budget failed to live up to the anti-austerity hype. In reality, there will be no meaningful end to austerity for hard working people and their families.

So, where are we now?

Looking at this budget, alongside the disorderly approach to Brexit, it feels like the Government is approaching a blind corner at speed.

In proclaiming the end of austerity, then failing to deliver or offer any alternative other than disjointed give-aways, the Government has destroyed its own self-proclaimed assertion of economic competence.

It has abandoned its long-term economic plan, with nothing credible in its place.

With talk of an emergency budget in the event of a ‘no deal’ outcome, it inspires little confidence that Ministers are prepared for what could happen to our economy and public services in such a situation. Or indeed are effectively prepared for any Brexit outcome.

The principle objective of the Government appears to be its own survival, with short term decisions that do nothing for the longer term future of public services or the economy.

Paul Johnson from the IFS has said: “If I were a prison governor, a local authority chief executive or a Headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.”

He could have said much the same about a parent or a carer.

The first priority of a Government to its citizens is security and safety. But it must also offer hope and optimism.

Hope and optimism that the future will be brighter. Hope and optimism that our children will have greater opportunities, that hard work, training and education will pay off.  That taxes will be fair and public services good. And that when things go wrong there is a reliable safety net and support.

But the Government has spectacularly failed to even acknowledge this, and to understand how its policies, lack of competence and direction impacts on that hope and optimism.

This has to change.

Anything less is a dereliction of duty. We should start by getting government to not just talk of ending austerity, but to offer a new strategic, open and forward-looking approach that, invests in our people, invests in our economy and most of all gives a genuine reason to be optimistic for the future.


Baroness Angela Smith is Shadow Leader of the House of Lords. She tweets @LadyBasildon





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