Osborne’s fantasy budget
Britain’s potential must be Labour’s cause
—Britain is well placed to prosper in the 21st century. Along with blue chip global brands, we can boast a mid-sized business sector to rival Germany’s Mittelstand and a growing army of self-employed entrepreneurs, as well as world-class public institutions that are key to our economic strength such as our universities, the BBC, and the NHS.
But for too many people our economy is not working – it is holding them back from realising their potential and making their contribution.
Jobs are increasingly insecure, and in some cases just disappearing, threatening the living standards and life chances of growing numbers of people on middle incomes as well as the lowest paid. Despite having a fantastic university sector and research institutions we are not good enough at turning ideas into successful businesses, partly because of skill shortages and issues of access to finance.
George Osborne has failed to deliver his promise to ‘rebalance’ the economy, which in many respects is now weaker and more exposed than before the global financial crisis.
Britain’s productivity gap with the G7 average is now the widest it has ever been. Official growth projections are reliant on rising consumer debt. Property prices are moving beyond the reach of most young people, and increasing numbers of families have nothing set aside for a rainy day.
We are still too dependent on the City of London for our traded services and tax revenues, while our under-supported manufacturing sector struggles to maintain its position in export markets. For all the talk of the ‘Northern Powerhouse’, regional growth rates are diverging, with cities and regions denied the powers and resources they need to make the most of their potential.
Added to all this is the uncertainty over the risk and impact of Britain leaving the European Union under David Cameron, adding to market turbulence. Child poverty, working poverty, and income inequality are predicted to worsen over the years ahead as a result of the Tories’ unfair choices and failure to build a fairer, more inclusive, economy. Median wages are a long way from recovering the ground lost since 2010 and there are signs that wage growth may even be slowing down again.
And, while many families and businesses are still feeling squeezed, the government is not standing up to businesses making big profits here but treating tax as optional, or tax havens that are exploiting mobile capital. As a result everyone else has to pay more as some do not pay their fair share.
I hope this month’s budget addresses some of these issues.
On savings and wealth inequality, I have called for radical reform to support saving by people on middle and lower incomes by replacing our unfair system of pension tax relief with a simple savings bonus, widening access to workplace pensions through auto-enrolment, and limiting Isa tax breaks for those with over £500,000 in savings so we can do more for basic rate taxpayers.
I also want the government to do more to compensate women now approaching retirement who have been hardest hit by the government’s unfair decision to push back their state pension age without giving them adequate time to adjust their saving and retirement plans. Protecting those with the lowest incomes and savings by giving them the right to claim pension credit is the least it could do.
Another urgent item on the agenda is the unfinished business of the chancellor’s brutal cuts to support for working people on low incomes, which, despite his U-turn on tax credits, will be back with a vengeance as people are moved onto universal credit.
And to underpin a fairer approach to deficit reduction, in this budget and beyond, we need bold and ambitious action to build a more resilient and inclusive economy where we make the most of our country’s potential by investing in our collective future and giving everyone a chance to turn their talents, ideas and hard work into a profitable business or rewarding career.
Priorities include, first, increasing investment in critical infrastructure from broadband to flood defences – recognising that this can help deal with the deficit by boosting growth and deliver positive returns to taxpayers.
Second, improving access to finance for small and growing businesses – with a more competitive banking sector, reforms to open up equity markets, and a regional network of business banks.
Third, a smart industrial strategy, working with businesses to boost investment, productivity, exports and job creation in key sectors where Britain has comparative advantage or significant growth potential – from renewable energy to new digital.
Fourth, a renewed focus on adult skills and vocational education – so that no one is left behind, and so that Britain’s businesses can recruit the workers they need.
And fifth, real devolution of power and resources to cities, counties and regions so that businesses and workforces, citizens and elected leaders can work together to take control of their own futures.
We should stay in the EU because we know it is good for jobs, investment and business. We should ensure that everyone pays their fair share of tax, coming down hard on avoidance and the use of tax havens. And we should protect the most vulnerable, targeting and tackling child poverty as we so proudly did when we were in government.
We must not miss the chance to make the most of Britain’s potential in the years and decades ahead, with more opportunities for British businesses, more security for British workers, and exciting prospects for the next generation.
And if, as I fear, the chancellor’s ideological attachment to laissez-faire doctrine and ‘trickle-down’ fantasies means he cannot take up this challenge, we in Labour must make it our cause.
Rachel Reeves MP is a member of the Treasury select committee
broadband, Budget 2016, devolution, economy, George Osborne, industrial strategy, infrastructure, small business, vocational qualifications