Progress | Centre-left Labour politics

The priorities are all wrong

Alison McGovern lays out five tests the budget should have met

November’s budget was an attempt for politics to trump economics and did little for our country, or its people. If you work in the public sector and were expecting a pay rise, sorry. If improved childcare would mean you could go back to work or might offer you a stable career choice, there is nothing to see here. If you are trapped in low skilled work and want to better yourself, forget it. If, however, you already own a house and want a first-time buyer to pay the asking price you cannot get anyone to agree, you are onto a winner.

So how else did the chancellor fair? Here are five tests.

First, growth. Since March this year, the Office for Budget Responsibility has had to revise down its growth projections. The forecast for next year is down by 0.5 per cent to just 1.5 per cent. Every projection over the next five years is below two per cent growth. Compare that to the decade following 1997, growth levels were between 2.5 and 3.5 per cent.

This means, ultimately, there is less money coming into the Treasury as receipts fall. Even more worryingly, the fact the forecasts have changed so much in six months shows the uncertainty of our economic future. The OBR have even said that, ‘given the uncertainty regarding how the government will respond to the choices and trade-offs it faces during the [Brexit] negotiations, we still have no meaningful basis on which to form a judgement as to their final outcome and upon which we can then condition our forecast’.

Second, Brexit. Chancellor Philip Hammond announced that he is providing £3bn for Brexit no-deal preparation. It cannot just be me thinking that is a huge amount of money preparing for a scenario most of us – and supposedly he – want to avoid at all costs. That is more than the amount given to stop the National Health Service falling further into crisis, £2.8bn over three years.

That figure is also before the divorce bill, which as of this week looks to be around £40bn, and not including the £2.1bn already put in to the civil service budget for Brexit. Next to the NHS announcement, the staggering amounts of Brexit money is scandalous. It falls far short of the £4bn the NHS said it need. The NHS Trust chief executive told on Sky News, ‘It is not enough. We won’t even be standing still at that level’. The chancellor also announced £350m for the winter period, but literally days away from the winter peak, it is too little, too late. Let us not forget the £350m a week on that bus.

Third, stamp duty. The chancellor announced that the government will get rid of stamp duty for first time buyers on all properties under £300,000, and for the first £300,000 on properties worth up to £500,000. But it does precisely the opposite of helping young people buy their own homes. The OBR says it will do the reverse – put money directly in the pockets of homeowners and increase house prices. The chancellor has only made the problem worse, once again stoking demand and failing to increase affordable supply.

Worse, the biggest spend on housing is the £3bn afforded to this measure. This support for demand outweighs even the biggest measure to help the supply side, which is the Housing Infrastructure Fund. Hammond’s £44bn fund masks his inclusion of previous government commitments, fails to provide the affordable housing we need, or address affordable rent issues and the 100,000 social homes we need to build every year.

Fourth, productivity. Productivity projections are down by 0.4 per cent since march. Next year, productivity is set to grow by 0.9 per cent well below pre crisis averages. The effect of this is there is less money still. The figures now suggest a £20bn reduction in the tax receipts forecast by 2021-22.

So the chancellor has less money to spend, but that is why he should be doing more to boost productivity. Nonsense on technological change will never surpass the need to help businesses upskill their employees, invest in childcare and provide support to young people with opportunities and ambition.

Fifth, pay and poverty. There was no public sector pay rise. In fact, unions will have to concede on a new pay structure in order to get a raise for nurses, and it is unclear how much new money will be made available.

Those who work in public services have seen their pay capped, and NHS staff in particular have endured 14 per cent real-terms pay cut since 2010. Finally the government have started to address the univeral credit disaster by scrapping the seven day wait, but this is just the beginning. To ensure the system will work, we need to pause the roll out and see how the new measures help. And there are still billions more cuts from two years ago that the government is going ahead with.

Meanwhile, the chancellor is freezing alcohol duty and by next year the United Kingdom will have spent £46bn cutting and freezing fuel duty since 2010 – more than the entire current deficit. The priorities are all wrong.


Alison McGovern is member of parliament for Wirral South. She tweets at @Alison_McGovern

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Alison McGovern MP

is chair of Progress

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