Yesterday’s’s budget needed to provide an economic and political narrative for the voters of middle England who gave David Cameron the benefit of the doubt – with many misgivings – three years ago, and who have tolerated grim times since. Instead, it reinforced the Tories as the party of the rich, pitting the public against the business community, with the misguided belief that monetary policy can solve the complex malaise that has settled over the British economy.
Never was a budget delivered by such a spectacularly toxic chancellor responsible for an economy in an unprecedentedly long and deep recession. Britain’s economy has grown only 0.7 per cent on George Osborne’s watch, unemployment has risen in the past three months to 2.53 million, and interest rates are at record lows, leaving no lever to bear down on creeping inflation. Quantitative easing has delivered liquidity for the financial system, but has not put money into the pockets of the voters who have been squeezed by the government’s fiscal austerity. And it has been to no avail, as was clear from the budget: growth figures revised down, debt-to-GDP ratios worsening, austerity extended.
Labour’s job is not just to provide some strategies for rebuilding the economy from this record low. Ed Miliband and Ed Balls have provided some solid policies: regional development banks, a temporary VAT cut, the welcome commitment to bring back the 10p starting rate of tax and support for youth employment. An uplift to the threshold at which the 40p tax rate becomes payable would help release pressure on the ‘squeezed middle’.
The party’s job is also to provide a political narrative that will make sense of what the public are experiencing, and inspire sufficient confidence in a political strategy that will deliver economic recovery – something which the Conservatives have notably failed to do.
The Tories’ biggest failing has been in trying to convince people that ‘we are all in it together.’ The experience of middle England voters on average salaries with families is that it is their hard-earned incomes that are hit the most by the government’s austerity programme. Tax and benefit cuts for a couple with one earner and two children stand at nine per cent compared with losses of 1.5 per cent for a couple with two incomes and no children. Osborne’s budget reinforced this message.
The help for homeowners in shared equity loans for anyone buying a property up to £600,000 is well beyond the aspirations of first-time, middle-income buyers. Meanwhile, mortgage support will raise mortgage-to-value ratios – risky for people with limited funds.
Higher state pensions for the majority will be paid for by an increase in national insurance contributions, which will counter the increase in personal tax allowances.
In the face of polling data which shows they are particularly disliked by women, the Tories’ latest support for childcare is nevertheless derisory. Having taxed or taken away child benefit completely from households where one parent earns over £50,000, they are now going to give it to parents with children under five in households with a combined income of up to £300,000. Not so much wallet to purse as Aldi to Gucci. Recently a couple living in a modest ex-council home in Northampton complained to me furiously about how hard the husband had worked to get on to provide for his family so his wife could look after the children, only to be stripped of their child benefit. He worked hard, he got on, he aspired and achieved, and his reward is now to see his child benefit redistributed to the seriously rich to help pay for their nannies.
But, while our economic strategies appear more sympathetic to the public mood, the public still needs to be won over: we still need to overcome the legacy of ‘tax and spend’ and explain how we will redirect spending to achieve growth. If there is pressure on public spending then, instead of having protection for some budgets, redirect some funding into a ‘Britain’s Future’ fund to invest in skills training, small business and enterprise start-ups as well as infrastructure.
And we still have some convincing to do about fairness; people remember the inequalities of New Labour. A recent High Pay Centre report showed that 10 per cent redistributed from those earning over £150,000 would equate to an average 55p-an-hour pay rise for the bottom 25 per cent. A cap on public sector pay, either in aggregate – pooling and limiting the pay of the highest-paid public servants – or individually for those earning over £125,000, would be a start.
This was a standstill budget for the economy, with only a nod to the private sector in the shape of a modest increase in capital spending. No doubt it will be deployed strategically – there is a raft of infrastructure schemes planned for my marginal town of Northampton. We have two years now not just to provide some good policies – we already have them – but to weave them into a coherent narrative and win public confidence that Labour offers the future they want.
Sally Keeble is PPC and former MP for Northampton North
Progressive centre-ground Labour politics does not come for free.
Our work depends on you.