Parliament Notes – Budget Debate 9 March 2021
[This is Ed Miliband’s speech against the budget. His standpoint is Ernest Bevin’s speech in 1944 advocating full employment; this is the ‘Bevin test’.
“We cannot build private sector success on the back of public sector austerity. The cuts of the last decade have made local services worse, squeezed demand and undermined the crucial infrastructure of business success.”
But on the question ‘How will you pay for it?’ Miliband has a (he hopes) crowd pleasing reply: ‘There IS money, since the government found money to redecorate a room in Downing Street and to give Cummings a pay rise’. Addressing Miliband on his own terms one could reply to that reviving the economy costs a lot more than redecorating Downing Street. But Miliband has framed his response wrongly; there is no national household budget for reviving the economy, the government can spend as much as it needs to achieve its objectives. Miliband accepts the Thatcherite terms of debate.]
I want to start by quoting a speech given in this Chamber 77 years ago, in June 1944, by Ernest Bevin, who was then the Minister of Labour. He said:
“With my right hon. Friend the Prime Minister, I had an opportunity of visiting one of our ports and seeing the men, of the 50th Division among others, going aboard ship…The one question they put to me when I went through their ranks was, ‘Ernie, when we have done this job for you, are we going back to the dole?’…Both the Prime Minister and I answered, ‘No, you are not.’”—[Official Report, 21 June 1944; Vol. 401, c. 212-13.]
The circumstances of this Budget are, of course, very different, but the sentiment is just as relevant. As we come through a very different national crisis, how do we in our generation do right by the British people? Some 120,000 people have died from covid. Our way of life has been dramatically restricted. Our key workers have stepped up and put themselves in harm’s way for all of us. Businesses have shuttered to protect our health and have faced incredible strain. The British people have been nothing short of heroic.
While the crisis has revealed the best of our country, it has also laid bare the deep flaws in the way our institutions and economy are run. In the words of the OBR [Office for Budget Responsibility],
“the UK has experienced higher rates of infection, hospitalisations, and deaths from the virus than other countries.”
We know that is partly because of higher deprivation, inequality and poverty. We know we are deeply unequal, both within and between our regions. Even before this crisis, 2 million of our fellow citizens faced destitution. That means they lacked at least two of the following basic essentials: shelter, food, heating, lighting, clothing or basic toiletries. That should shame us all in one of the richest countries in the world. We know our public services are deeply underfunded, from health to social care. We know, too, that the world of work is characterised by deep divisions of power, which meant some workers were safe and some were not.
This chasm between the spirit of the British people and the reality of how our country works demands from us that we face the Bevin question once again, of how we transform our country not just on jobs, but on public services and on inequality, too. This challenges us all, whatever party, to think bigger and more boldly. Of course that is hard, in the dire circumstances we face coming out of this pandemic—the public finances are under strain and the economy will take time to recover—but they are far less dire than those Bevin and his colleagues faced after 1945, and they thought big about the kind of country we could be. They raised their sights in the face of adversity.
While I would praise some of the measures taken by the Chancellor, I do not believe that a fair-minded observer would say that the Budget passes the Bevin test. On jobs, according to the OBR, even by 2025 unemployment never even gets back to pre-crisis levels. On welfare, the Budget tells people on universal credit that they need to go back to living on £74 a week from September, just as unemployment starts to peak. On the next crisis—the climate emergency—the Budget rejects a green stimulus and cuts green spending, as I will explain.
On public services—I do not think the Business Secretary talked about public services—the Budget appears to draw the extraordinary lesson from the crisis that public services need less resources, not more. In total, £17 billion has been taken out of departmental spending since Budget 2020, which was before the crisis, despite the greater needs and despite all that has been revealed in the pandemic.
What does building back better mean when unemployment is higher as far as the eye can see, the welfare state goes back to the way it was, the green revolution is ducked and public service spending is cut? This Budget fails the Bevin test and the build back better test. Why? I think it is because the Government have not truly learned the lessons of the past decade.
To be fair, the Government have been remarkably open about the failure of the last decade. The Business Secretary referred to the “Build Back Better” document that they published. It is a very interesting document, perhaps not for the reasons intended. There is a striking chart that shows the long-standing productivity gap between ourselves and our competitors, but it shows something else. In the past decade, we have not addressed our long-standing weaknesses, but fallen further behind. The productivity gap has doubled with Germany and is up by three quarters with France and one quarter with the US. Government getting out of the way did not work. Markets left to their own devices did not work and austerity did not work, so the question for the Government is: what are they going to do differently in the coming years from the last 10?
We needed first of all—the right hon. Members for Maidenhead (Mrs May) and for Tunbridge Wells (Greg Clark) have made reference to it—an industrial policy that intervenes at scale to help growth sectors and industries to succeed. There is one pre-eminent test on that, which is the green stimulus. To give some context, President Biden has pledged a $1.7 trillion green plan over 10 years. Germany has committed €40 billion over two years and France €30 billion over two years. Even what the Business Secretary claims—I will come to that shortly—is a fraction of that amount over the decade.
Let us take the infrastructure bank, as the Secretary of State talked about that. The OBR is highly revealing on the infrastructure bank: the annual spending of the bank is going to be just a third of the amount of its predecessor, the European Investment Bank—£1.5 billion a year versus £5 billion a year. So, not more investment, but less. What is the OBR’s verdict on the infrastructure bank? It says that
“given the scale of its operations (at around 0.1 per cent of GDP a year) and the fact that it replaces only some European Investment Bank activity, we have not adjusted our economy forecast.”
In other words, the bank has absolutely zero effect on growth, from all of those green measures that the Business Secretary talked about.
One of the most interesting things about the Budget—but which has perhaps been less remarked on—is that the growth returns to trend is up just an anaemic 1.7%. That is incredibly low by historical standards. This is low growth and low ambition.
A green stimulus could have helped our crucial manufacturing sectors, but instead they were left out in the cold. On steel, where is the £250 million clean steel fund, which was promised two years ago? There is no mention of steel in this 110-page document. On offshore wind, we are way off the Government’s target of 60% domestic content, and the negligible resources in the Budget simply do not measure up. On the automotive sector, I want to say something positive: it is good that the Government have brought forward the date of the petrol and diesel phase-out to 2030, which is what we called for. But I say to the Business Secretary that the rhetoric of ambition is not matched by financial support for this crucial sector. The Society of Motor Manufacturers and Traders said in reaction to the Budget:
“This is an opportunity lost”.
Germany is investing a total of €7 billion for transformation; we are way off that. The Government seem almost allergic to support for these sectors.
Let us take another area that everybody agreed could create hundreds of thousands of jobs, and I do not think the Business Secretary mentioned this either. It could help people in every community in our country: home insulation and retrofitting. We need a transformation of our housing stock. People may forget that the flagship policy of the Prime Minister’s 10-point plan was the green homes grant. The Business Secretary was given personal responsibility, as the Minister of State, for the green homes grant. He told us the Government would learn the lessons of the green deal, which had been a complete disaster:
“We’re completely focused on trying to make this a much better roll-out, and we’ve learned our lessons…We need to make sure that the right projects are identified, and that we can get the money out”.
It would “pave the way”, he said, “for the UK’s green homes revolution.”
What has happened? The project has been a complete fiasco on his watch: contractors not paid; installers forced to make lay-offs; homeowners unable to get the grants—not a long-term comprehensive plan, but a piecemeal, privatised approach characterised by shambolic delivery on his watch, and he said not a word about it. He would be welcome to come in and say something about it now; he obviously does not want to. And no wonder: now the Government are cutting more than £1 billion from the green homes grant scheme as it has been such a disaster.
Is this just an accident? No, it is not. The failure on the green homes grant and on green manufacturing is all part of the same problem. The Government are good at talking about a green revolution; they will the ends, but not the means—a proper, thought-through industrial strategy. Indeed, tragically, we now have a Secretary of State for Business, Energy and Industrial Strategy who does not believe in industrial strategy. If I can put it this way, he is half the Secretary of State he once was. Any self-respecting organisation would have asked him in the interview when he was applying for the post of Secretary of State for Business, Energy and Industrial Strategy—although Secretaries of State do not exactly apply, they are offered the job—“Do you believe in industrial strategy?”
We got suspicious when in one of his first acts he tore up plans for the industrial strategy White Paper, and we thought, “How curious.” Then on Thursday we found out he had abolished the Industrial Strategy Council set up by the right hon. Member for Maidenhead. I hope the right hon. Lady will not take it amiss if I say that I admired some of her work, and this is one of the things I admired. I pay tribute to her and the right hon. Member for Tunbridge Wells; they learned the lessons of our history and said, “We need Government, business and unions working together on this joint enterprise, coming together to address the challenges our country faces.” And, goodness me, do we need this now as we seek to recover from coronavirus.
I have to say to the Business Secretary, who is new to his job, that this decision has caused consternation—I do not think that is too strong a word for it—in businesses up and down the country. Make UK said that it causes
“significant concern and frustration within manufacturers of all sizes across the UK.”
The director general of the British Chambers of Commerce said that the strategy’s demise was a
“short-sighted step that ministers will come to regret”.
All around the country, thanks to the work that was done, local chambers of commerce and local enterprise partnerships have spent years working on local industrial strategies. Now they are wondering what they are supposed to do with them, because the strategy seems to have fallen out of favour.
People might think that is just an accident. It is not an accident. I know that the Business Secretary dismisses his past pamphlets as the work of a maverick Back Bencher, but it is not a coincidence, because this—it is very interesting—is what he wrote:
“The draining of effort from our psyche has been replaced by a sense of entitlement.”
I do not know quite what that means. He continued:
“It has also led to a false belief in the value of industrial policy.”
I thought he had put all that behind him, but clearly not. He is so ideological—so dogmatic—about the free market that he had to get rid of the industrial strategy, and therefore he cannot deliver the partnership between Government and business that the country needs.
Let us turn more generally to business support. Businesses have made huge sacrifices in this crisis, as I said, and they face huge challenges in recovering from the pandemic, added to which are the billions of pounds of red tape as a result of the implementation of the Brexit deal. Even when the health crisis is over, businesses will take a long time to recover. We welcome some of the measures talked about by the Business Secretary, but there are still important groups that I believe are left out: two thirds of the excluded self-employed are not helped by this Budget, including limited companies, many freelancers and others; supply chain businesses are still left out; and whole sectors, such as the wedding industry, are ignored. Their plight will hold back the recovery.
We know that business debt is one of the biggest threats not just to individual businesses but to the recovery as a whole. Some £70 billion of business debt has built up during the crisis. In December, the Federation of Small Businesses reported that the proportion of those businesses describing their debt as “unmanageable” was 40%. The OBR says that, on current plans, the Chancellor will have to write off £27 billion of those loans.
In these circumstances, a sensible Chancellor would have been creative, yet he still refuses to budge. We have a scheme from the Chancellor with no links to profits, no ability to restructure and no ability for management or workers to develop creative solutions. He is just leaving it to the banks. Well, even the banks are telling him that that is very risky. If we face a wave of insolvencies, it will be at the Chancellor’s door. The danger is that this holds back the recovery, and it certainly fails the Bevin test.
Many of the businesses facing those debts are on our high streets, in retail. What is the single biggest long-term change that those businesses require? It is to address the deep unfairness that high street shops face against online retailers. I am sure that the Business Secretary is familiar with that problem. The Government launched a review of business rates not in the last Budget, not in the Budget before, not in the one before that, but six years ago. In fact, they launched the review so long ago that I was Leader of the Opposition when they did so—it is that long ago! A long-term Budget would have finally taken action in this area, but instead we got more delay.
I turn to the measures that were taken. On the so-called super deduction, we will welcome any measure to help business, but I point out, as we think about our capital stock and investment, that the OBR says that that measure
“does not affect the long-run level of the…capital stock”.
In other words, it will make a difference to the timing of business investment, but in fact, according to the OBR, business investment is expected to fall significantly in 2023 and 2024, and there are real questions about why this measure is targeted just at plant and machinery, which is only one fifth of business investment. Then we have freeports, which have been tried for 30 years. I am afraid that all the evidence is that, at best, they may displace economic activity from one area left out of prosperity to another a few miles away.
The problem is that the Government simply do not get that we cannot build private sector success on the back of public sector austerity. The cuts of the last decade have made local services worse, squeezed demand and undermined the crucial infrastructure of business success. People might wonder, “Well maybe they’ve learned their lesson.” I fear they have not. Again, this was not very clear from the Budget on the day, six days ago, but in a year’s time, for many of our public services, it will be austerity all over again. Next year, for current services in transport, housing and local government, and other so-called unprotected areas, public spending will be cut in real terms by £2.6 billion. Let us be clear: growth is anaemic, because their measures are so weak, so they turn to a strategy they tried from 2010 of cutting current spending and raising taxes on ordinary families. I fear they have not learned the lessons. They cannot grow the economy if they are giving tax cuts with one hand, but cutting the services that communities and businesses rely on with the other.
The issue is not just about resources, but about who spends them and where they are spent. We are the most regionally unequal country of any major developed economy and the most centralised. The levelling-up fund is a centralised pot of money to be determined by Ministers, and we are starting to discover where the money is actually going.
Salford is the 18th most deprived area in the country, but it is placed not in the category of most need—category 1 —but in category 2. Barnsley is the 38th most deprived area and is also in category 2. Richmond is 256th out of 317 for deprivation, but it happens to cover the Chancellor’s constituency, so it has found its way into category 1. The Government have said this is based on objective criteria, so what are they? Again, I am very happy to give way to the Business Secretary if he wants to explain what these objective criteria are. If it is all above board, why have they not published the criteria? Of course, they have form on this—the towns fund, the crony outsourcing of contracts to donors. The British people have a right to expect that the money meant for the most deprived areas is spent in the most deprived areas.
Ministers do not get the role for Government, they leave it to the market; they cannot tackle the inequalities we face; and, far from leaving austerity behind, for many it will look like austerity, feel like austerity and it will be austerity.
Of course, we have the most egregious example of all in the decision to cut the pay of nurses and NHS staff. They more than anyone have been the heroes of this crisis: they have put themselves in harm’s way for all of us. The Government promised a pay rise in the NHS plan. They did not just promise it; they legislated for it and they walked through the Lobby a year ago to vote for it. The Business Secretary was put up on “Question Time” on Thursday, as this decision was breaking, to try to justify this broken promise, and this is what he said:
“When I look at people in the hospitality sector, in aviation, in retail, many of them are very…worried they won’t…be in a job in two or three months.”
He nods. As if that is somehow a justification for cutting the pay of nurses. What is the world in which their plight justifies cutting the pay of our nurses? I have never heard anyone, in a year of discussions, in any of those sectors say to me, “I’m finding it hard, so Government should cut nurses’ pay.” People would only say that if they believe in a race to the bottom or they believe in levelling down.
Before the Minister says everybody needs to tighten their belts, he should be careful, because it turns out there is plenty of cash to spend millions on a Downing Street makeover for a media briefing room that has not been used; to spend hundreds of thousands of pounds to pay off the man the Home Secretary was accused of bullying; and to give Dominic Cummings a 40% pay rise. The truth is it is one rule for them and another rule for everyone else. Let them not ever try again to tell people in this country that we are in this together.
Beneath the rhetoric, the Government cannot be the answer to the problems of the country. They may have produced a document charting 10 years of failure on productivity, but they have not changed their view. The answer to 10 years of failure cannot be more of the same. This should have been a Budget with a plan to respond to the climate emergency by creating the jobs of the future; and a Budget with a plan to help business through the crisis and beyond with debt restructuring, providing a decent pay rise for our key workers and dignity in the social security system, rather than plunging the most vulnerable into deeper poverty. This is a Budget of low ambition for Britain. The post-war generation would never have accepted such a meagre vision as that presented by the Chancellor and the Government. They never would have, and neither should we, and that is why we will vote against the Budget tonight.