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1986/87 Budget and Finance Bill


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*takes a sip from a glass of Bruichladdich single malt*

 

Mr Deputy Speaker,

I rise in the House today to present the government’s fiscal programme for the financial year 1986/87.

 

I begin by reflecting on how our nation has reached this point. Mr Deputy Speaker, after several years of Labour government Britain was in a terrible situation. Inflation skyrocketed into double figures, Blackouts were regular, the streets were littered with refuse and the dead went unburied as a result of out-of-control strikes. Things were so bad that the country was forced to seek a bailout package from the IMF, something expected from the poorest nations – not this proud country. Years of socialism had left us the poor man of Europe, the legacy of Labour governments who were too cowardly and too ineffective to tackle the issues our nation faced.

 

Then, this party took power in 1979, and despite the overwhelming odds we faced as a result of Labour’s ineffectiveness and weakness, over the last seven years the nation has seen a truly remarkable change of fortunes. We now see that inflation is both low and under control, the economy continues to grow and at an accelerating pace. This is the result of successful policies that have cut taxes and ensured rising wages for Britain’s workers. The once overbearing nature of the state has been cut down. The change to popular ownership has allowed businesses once strangled by state power to successfully flourish and millions now have the security of owning their own homes as a result of the right to buy. These are the policies of the Conservative Party and it is a legacy I am proud to build on with this budget.

 

Economic growth for the coming financial year is projected to stand at 3%, this is the fifth consecutive year of growth. Inflation is projected to stand at 3.5%, with average wage growth in excess of this figure. Public sector debt will be 4.5% lower as a proportion of GDP than it was in 1978. 

 

And thanks to the decisions the government is making in this budget, public expenditure as a proportion of GDP and the tax take as a proportion of GDP will both shrink this year as we embrace a smaller, more efficient, more nimble state which unleashes private enterprise and which allows hardworking Britons to retain control over more of their own money.

 

Real growth in public sector spending under our plans will stand at 3% for the financial year 1986/87, matching the rate of projected economic growth and reflecting our long-term fiscal rule that the rate of investment in public services should not exceed the rate of growth in resources to pay for it - ensuring sound finances, a strong economy, and careful management of debt.

 

Overall this year the budget deficit will rise from £6.9 billion to £13 billion, and as a proportion of GDP from 1.9% to 3.4%. This temporary and managed increase in borrowing serves the purpose of meeting the Prime Minister’s commitment to reduce unemployment by at least 10% this year, and funds a £3 billion investment in public works and national infrastructure: as a capital rather than a systemic investment, it reflects a prudent decision to invest and is within the reasonable parameters of gilt sales which the Exchequer can afford.

 

But, before detailing the government’s spending decisions for the upcoming financial year, I must first address how we will pay for those investments. Mr Deputy Speaker,The government will raise £141.3 billion in tax revenue this year, the lowest level as a proportion of GDP since 1979. Our tax plans will put more money into the pockets of hardworking Britons, whilst still enabling the government to invest in the people’s priorities.

 

I can announce today that all income tax and national insurance thresholds will rise in line with inflation this year, and that the basic rate of income tax will be cut from 30% to 28%. All other rates of income tax will remain stable.

 

National Insurance Contributions will be frozen, except in the case of employer’s contributions, which will be cut by two percentage points to reduce the cost of recruitment and allow businesses to employ more people, tackling the unemployment burden head on as promised. The rates of corporation, capital gains and capital transfer taxes will remain fixed, with the thresholds rising in line with inflation.

 

The lower threshold for stamp duty will rise by £10,000 from £30,000 to £40,000, exempting the average home from the tax. The rate payable will double from 1% to 2%, raising an additional £600 million in revenue.

 

Reflecting the fall in oil prices, fuel duty will increase at a rate calculated to be equivalent to the projected fall in wholesale prices. This should preserve prices at the pump as stable, whilst protecting government revenues. Alcohol duties will rise in line with inflation.

 

The government’s position is that reductions in the income tax burden are necessary and effective in increasing the disposable incomes of hardworking people: it is our view that to tax consumption is fairer and more effective than to tax income in the long-run, given that people are in a better position to adjust their spending than their wages. This also puts more control back into the hands of the British public. Most essential items are, of course, exempt from VAT. With this in mind, I can announce today that VAT will rise from 15% to 17.5% from 1st April, bringing in an additional £4.3 billion of revenue.

 

I anticipate Opposition histrionics regarding this decision; but let us be clear that the overall tax burden in this country will fall to the lowest level since 1979 as a direct result of this budget, and that the overall direction of this government’s policy is to tax less and spend responsibly. The figures speak for themselves, Mr Deputy Speaker, and I am proud of them.

 

Mr Deputy Speaker, having addressed taxation there is one more area of policy I need to address before moving on to government spending. That is the issue of popular ownership of formerly state-owned enterprises.

 

Since 1979, this government has successfully opened formerly state-directed firms to private sector investment and popular ownership, eschewing the command economy model and enabling the free market and the laws of supply and demand to define the success of a business. Doing so has considerably diminished the government’s liabilities, and reduced the theoretical burden on the taxpayer. This year, the government has identified three public corporations which are profitable, already operating in a competitive market, and well-prepared for privatisation. Therefore, I can announce today that the government will this year sell its shares in: British Airways, the British Airports Authority, and Rolls Royce. Her Majesty’s Treasury estimates that the revenues from the sales will total £3.4 billion. The government believes that these sales will enable the companies concerned to compete more effectively in the global marketplace, all the while reducing the liability of the taxpayer.

 

Mr Speaker, turning to public spending, I feel obligated to emphasise that the overall rate of increase in spending under our plans will be 3%, matching the projected rate of economic growth, and that public expenditure as a proportion of GDP will fall. These statistics are vital, as they showcase the stark differences in philosophy between this government and the Labour Party: whilst we spend the public’s money prudently, making sustainable investments and managing our liabilities, their programme would be one of reckless and inflationary spending, higher taxes, and more debt which as demonstrated by 5 years of previous Labour government will only serve to make life harder for the British public. 

 

Mr Speaker, the government is allocating £3 billion in capital investment to fund major public works and national infrastructure projects starting this year. Our best estimate is that these projects will create between 150,000 and 300,000 jobs in the short to medium term.

 

Mr Speaker, the government is also investing an additional £2 billion in training and employment schemes, almost doubling their respective funding, and investing in Unemployment Offices and Labour Exchanges with a £200 million package.

 

Taken as a whole with our decision to cut employers’ national insurance contributions and our commitment to preserve economic growth, it is my earnest belief is that the government will now exceed its target of reducing unemployment by 10% in this coming financial year.

 

Mr Deputy Speaker, I can announce today that every public sector will receive a real terms pay increase under our plans this year, with a 4% pay rise for everyone employed by the public sector. After years of necessary pay restraint, it is now time to reward our hardworking public servants for the diligence and commitment with which they carry out their duties, and I am proud to be able to confirm that we will do so today.

 

Mr Deputy Speaker, after the Westminster terror attacks and the Wakefield prison riot, home affairs and security have come under increasing scrutiny. I am therefore pleased to be today announcing today a £1.2 billion investment in Home Office expenditure, fully funding the of 5,000 new police officers and 2,750 new prison officers, as well as £50 million in additional funding for the security services and our landmark £200 million prison reform scheme. Keeping Britain safe is the top priority of any government, and this government is putting the money and resources in place to ensure the security of this nation and its people.

 

This government’s other top priority, alongside our nation’s security, is the health of its people. Despite years of opposition scaremongering, our National Health Service continues to go from strength to strength and this year the government will continue to invest in NHS services. I can today announce funding for 100 new primary care clinics across the country; 100 new doctors, 700 new nurses and a £200 million investment in primary and community care, matched by a £250 million investment in hospital care. Funding for dental and optical care will rise by £50 million, and the prescription charge will rise only in line with inflation. Overall, our investment pumps almost £1 billion in additional funding into the NHS, and sees healthcare spending in this country reach its highest ever level. As a former Doctor in the NHS I am incredibly proud to be making this commitment, and showing that as much as Labour claims to be the party of the NHS, it is in fact the Conservatives and this government who will ensure our people are kepy both safe and healthy.

 

In education, the government is making a similarly large commitment to invest. Although most of the education budget is controlled by local authorities, subsidies to grant maintained schools will increase by £50 million this year and the assisted places scheme will be expanded with an additional £15 million in investment. Maintenance grants per student will be expanded by £200 per year showing that this Government is making valuable investments in the future of this nation.

 

Mr Deputy Speaker, turning to foreign affairs and defence, I can today announce that the government will be maintaining existing levels of manpower in the regular armed forces and recruiting 5,000 additional reservists to bolster our strategic ability to defend our nation and our interests. Funding for the BBC World Service will double, with an expanded remit to provide objective news and information to parts of the world living under the shadow of media censorship. 

 

The government is pursuing considerable reform of the foreign aid budget, with a zero-based budgeting approach and a competitive bidding process for foreign aid allocations. As a matter of first preference, Commonwealth countries will be prioritised in bids for foreign aid. By pursuing this reform, we are able to reduce our expenditure on foreign aid by £250 million whilst still providing much-needed support and assistance to our allies around the world and helping to promote Britain’s interests globally.

 

Mr Deputy Speaker, all social security payments will increase in line with inflation this year.

 

Investment in critical national infrastructure goes hand in hand with ensuring that our people can live in good quality homes near to their place of work. So, this government is today announcing an additional £200 million in housebuilding and maintenance and improvement subsidies, to ensure that our housing stock remains able to meet the needs of a growing population. We will invest an additional £100 million in bus subsidies, connecting our cities, towns and villages to one another and supporting mobility for those who depend on bus services, and an additional £100 million of investment in British Rail will seek to continue our programme of improvements and tackle the challenges on our railways.

 

Mr Deputy Speaker, I can today announce an additional £2.5 billion investment in grants awarded to local authorities, such that we now project the average increase in rates this year will be just 2%. I can further announce an additional £200 million in investment specifically intended for Northern Ireland, to support the peace process and go hand in hand with the work being done in Ottawa to support prosperity and peace in Ulster.

 

Mr Deputy Speaker, as I conclude the budget statement let me make this clear. This is a budget which reduces the tax burden and puts more money into the pockets of hardworking Britons. It is a budget which makes necessary critical investments in our public services, our industries and our infrastructure, and which will enable us to exceed our target of a 10% reduction in unemployment. It is a budget which keeps the size of the state under control, whilst investing in people’s priorities like the NHS and law and order. And it is a budget which safeguards and secures Britain’s future, keeping us on the path of low inflation and strong economic growth which enables us to compete at the top table with other economies. This budget, and this government, are driving Britain forwards: empowering working communities, enhancing our public services, embracing enterprise and industry and extending the opportunity of prosperity for all. 

Mr Deputy Speaker, I commend this statement to the House.

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Mr Deputy Speaker,

As the Chancellor of the Exchequer so kindly offered his reflection on the state of the nation, I too would like to reflect on Britain today and how we have gotten here.

For seven years this country has been beholden to the free market economics of the Prime Minister’s predecessor, an ideology focused solely on the dismantling of the state and the safety net put in place after the War, which has left Britain with eye-watering unemployment of over 11% and 3 million out of work. 3 million forced out of work by this Tory Government. With homelessness skyrocketing the Conservative party has left the country divided and scarred as Britain’s nations and regions have been allowed to fall behind

When I look at the economic forecasts from the Treasury I see a country that is struggling to afford the Conservatives.

Economic growth falling, unemployment sky-high, wage growth falling, house prices soaring, the balance of trade against us. All the while the social security net that protects us all is ignored widening the gap between the richest and the poorest again. This budget does nothing for anyone on benefits.

That is not an economy that is working for the working man and woman. This is an economy that benefits the richest and expects the working class to continue to struggle. I have no doubt Tory donors are thrilled with his budget, it keeps them sweet and the money rolling in for the Tory election fund.

Mr Deputy Speaker, in the run up to this budget the Government was incredibly tight-lipped, not wanting to leak anything to press – which is a definite change from their predecessors – with the only information gleaned from them was their willingness to follow Labour’s leadership when we called for the cut in Employer’s national insurance contributions. At first, I thought this new found silence from the Chancellor and the Treasury was a signal of a change of leadership and practice, but unfortunately I was mistaken.

The absence of leaks was purely to cover up the fact that the Prime Minister intended to call the General Election. A cynical move some would say - a cynical move that exposes his weakness as a leader, his inability to tackle the challenges Britain faces as a country and his desire to not act in the national interest but the political interest of the Conservative party.

All in all, Mr Deputy Speaker, this budget is a damp squib. With one hand the Chancellor attempts to give but with the other he snatches it away.

Let’s start with taxation. The income tax allowance cut is completely swept away by the hike in VAT. A 2.5% increase in VAT will disproportionately hit working families harder than it does the wealthiest, meaning British households will pay on average around £200 more for voluntary purchases per annum. So when a family wishes to take their holiday abroad for the first time in years, they will be paying more. When a family wishes to replace their television set they’ve been saving for, they will be paying more. When a working man or woman finally gets a new job after suffering years of unemployment and they want to buy themselves a new suit, they will be paying more.

I don’t expect the Chancellor to understand the pressure increasing VAT will have on families, I doubt he’s never had to worry about paying a bill in his life.

VAT hikes don’t just hurt the consumer, they hurt business across the entire economy. When VAT goes up, costs go up. Products, services, output all will cost more thanks to the Chancellor’s regressive tax hike. This cost will have to be accounted for somewhere, and for many businesses struggling to survive they will either force it onto their customers or reduce their already shrinking profits.

This Government is standing in the way of the aspirations of the British people.

Mr Deputy Speaker, I’ve been told that the Chancellor believes there is a universal and collective version of the personal unconsciousness that binds us together. He’ll be in for a shock when he realises it’s a universal disdain for his unfair tax rise.

And this tax they’re levying on hardworking people is not even being put to good use. Investment announced in training and unemployment schemes are woeful, social security has barely been acknowledged by this Chancellor, and departmental budgets are generally rising by inflation only. This VAT hike is set to bring in 4 billion pounds in revenue and I cannot for the life of me see what he hopes to achieve with it. The British public are lucky the election has been called, because they desperately need someone in the Treasury that has a plan to turn this country around.

Mr Deputy Speaker, I guess that is slightly good news that after seven years of cuts and lack of investment by this Conservative party they have finally listened to the Labour party’s calls for action. But like all things from the Conservatives, if it doesn’t present the opportunity to be sold off to their mates in the city, then the investment you do get is pitiful.

I think what is emblematic of this lack of vision is the health service in this budget. I don’t even know where to begin. No new hospitals, large or small, a pittance in the budget for procurement of new equipment, no real investment into the health of our nation bar a hundred new clinics - and only hiring 100 new doctors. So each of these clinics are to be staffed by a single doctor, and that’s a generous assessment.

Not only will you not be getting a new hospital, probably no new GPs or practice nurses once these few hires get used to fill existing gaps in staff levels, you will be saddled with the extra cost to your medicine. After taxing working people once with VAT the Chancellor is doing it again with prescription charges. It’s no wonder British people can barely afford to live, they can hardly afford the Government they’re saddled with.

It seems, now unsatisfied with the managed decline of Britain’s communities, the Chancellor has decided he wants to preside over the managed decline of the health service. Whether you live in Fulham or Croydon, Edinburgh or The Wrekin, the Chancellor has made it clear he is unwilling to invest the funds necessary to cut rising waiting times or to build a hospital in your area.

Mr Deputy Speaker, the budget also fails to grasp the nettle we are facing in our education system. Like most of this budget the Chancellor is attempting to spin this as turning the tide after years of spending restraint, but with minimal increases to match inflation they completely ignore the fact that for years our public sector has been underfunded and under-resourced. The increases the Chancellor has provided for do not go far enough to reverse the damage that has been caused.

Our nation’s children are languishing in schools that are crumbling around. Schools should be institutions of learning where every child can achieve a good education to set them up for their adult life as productive members of society, but this Chancellor has decided that he would rather spend millions on the assisted places scheme that subsidises already wealthy families rather than deliver real investment for all families.

It is the same with unemployment. When coming to power the Prime Minister set a target of reducing unemployment by 10% yet he completely ignores the easy win that Labour has set out. By investing into our public sector, with more money for roads, utilities and capital projects we could revolutionise the economy for hundreds of thousands of workers with new, well paid jobs. Alas, the Chancellor just settles for matching inflation. Is that the best this Chancellor can come up with?

Through increased investment we would take those workers off the dole and into meaningful work, and when they are earning they are paying tax, they are also off benefits. It is a programme that would reap incredible benefits of bringing our nation’s infrastructure up to date and also cutting our deficit through more tax receipts coming into the Treasury. He can’t see that, and it is a shame he is so blinkered.

The claims that the provisions in this budget will exceed the 10% target will be highly scrutinised by this Opposition, and if we win this election we will be far bolder in our approach to tackling the scourge of unemployment. To have 3 million unemployed is a national scandal and the Conservatives should be utterly ashamed, but that is their record and that will be the record they will be judged on by the British people in the election.

It seems, from the Chancellor’s adherence to this Government’s ideology that he can’t see a good thing when it is staring him in the face. His adherence to privatisation will leave this country’s industrial heritage decimated, but that has been the order of business since his party came to power.

Today we learn that three more British Industries are to be sold off. Now these industries are not unproductive, in fact they have been making continued profits for the British taxpayer and the Chancellor thinks that robbing the treasury of that income is a prudent course of action. He covers it by saying he is reducing the liability of the taxpayer, but that is a smokescreen because what this will be is a massive sell-off for his investment banker friends and party donors to carve them up for a profit. Instead of that profit being to the benefit of the entire country they will only benefit shareholders. A real shame, Mr Deputy Speaker, that the Chancellor is cutting off his nose to spite his face.

Tories often criticise Labour by saying that eventually socialists run out of other people's money to spend, but I think this Government has taken it to a new level. With their radical selling off the family silver they soon will run out of profitable industries to sell off. And right now, they can sell off national industries to fill the gap of the falling price of north sea oil. But soon the oil revenue will dry up and Britain will be left with nothing to its name but the bad debts of a tory government

Public Sector pay is failing to keep up with the private sector. They disrespect public sector workers by not giving them a pay raise matching the increase in the private sector 5%. Under a Labour Government we would recognise the intrinsic value that public sector workers play within our economy and give them a fair wage, and a wage that is attractive to ensure we attract the very best into our health service, our schools and other public sectors.

On foreign affairs, defence and national security the Government fails once again. The cut in aid spending is ridiculous. One of Britain’s greatest strengths in foreign relations is our commitment to tackling global poverty and providing aid to country’s suffering from horrendous humanitarian problems. Not only is overseas aid a moral good, it is also an economic good, because the investments we provide through aid deliver increased returns to the British economy through increased exports and friendlier relations.

And after our nation’s most horrific terrorist attack in history the tiny increase to our intelligence agencies, whom we all owe a debt to for the foiling of the attack on this Chamber, is shameful. Tackling terrorism is a key task of the intelligence and security services, yet there is no real extra funding for them, but just enough to keep the lights on.

Mr Deputy Speaker, this budget is the Conservative’s attempt at turning back seven years of cuts and pain, and unemployment and managed decline of our public sector. But in reality, it is not good enough. The budget can be summarised for many areas with a few simple words “rising with inflation”. Our economy is in desperate need for investment, investment that will bring about a revitalised economy that tackles unemployment head on with precision targeting. We do not have that with the Conservatives, what we have is a Government hoping this will all go away. And with any luck, after this election, it will.

It’s time for change, and Labour will deliver that change.

Mary Temple MP

Leader of HM Most Loyal Opposition

Labour and Co-operative MP for Vauxhall

Leader of the Labour Party

 

 

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Mr Speaker,

The media has called the Government’s budget “a gamble.” I think it would be more accurate to call it a busted flush.

It is a busted flush because the budget shows potential. Most notably, it dispenses with the previous Prime Minister’s phobia of public spending. It is very encouraging for the Government to finally abandon monetarist dogma that requires mass unemployment and wholesale industrial destruction. The very large investment in employment and training schemes is a step in the right direction, even if it is insufficient for the scale of the crisis we face—a crisis the Tories created. But after that, the budget goes wrong.

First, it continues the trend of shifting the tax burden from those best equipped to afford it to ordinary, hard-working people. The 2.5% rise in VAT has been called shocking, but it is more accurately immoral. A tax on goods hits hardest for those with the least ability to pay. I see several honourable members opposite standing, no doubt to say that many essential goods are exempt from VAT. I will only say that what goods are considered “essential” are not always black and white and depend on circumstances. Moreover, discouraging consumption during an economic downtown is precisely what we should not be doing. Mass unemployment means people are saving money, and fewer goods will be purchased if we raise the prices on consumer goods. Companies will see their profits decline and more redundancies will be created. So, this monstrous VAT hike is not only regressive taxation but also one that will contribute to more unemployment.

Second, the trend of selling off state assets to sustain the fantasy that the Government is “not borrowing” also continues. No doubt privatisation will once again mean that, after enormous public investment, a fire sale will take place, and these assets will be sold off well below their actual value. Take, for example, Rolls-Royce, an important company in our aerospace industry. No sooner has the sale of Westland fallen through, leaving thousands of British jobs in doubt, than the Government proposes to sell Rolls-Royce to people whose interests may not be known to the British public, employees, or even to the Government itself. Additionally, there are no assurances that Rolls-Royce will not fall into receivership as it did in 1971 when it was nationalised. Indeed, the high cost of research and development—on which aerospace companies rely—means there is a very high likelihood of this happening. Therefore, the only party that will benefit from the privatisation of more state enterprises will be the ultra-wealthy who will snatch up shares at bargain prices, rather than the ordinary hard-working British people.

Third, the extent of Government cruelty is embodied in the flippant statement made by the Chancellor regarding social security. Simply raising spending in line with inflation shows they do not understand the human cost of mass unemployment. After closing so many pits and factories and putting so many workers out of work and on the dole, does the Government not understand how many people are now facing poverty? The rise in VAT will almost guarantee that those on the cusp of impoverishment will soon tip over into new depths of misery. If the Chancellor is going to increase the cost of goods by so much, can he not find the decency to increase the unemployment benefit for those out of work or the supplemental benefit for those who are underemployed? If the Tories care so much about “traditional families,” where is the substantial increase in the child benefit? Where is a major increase for pensioners who are too old for work or re-training? The obvious answer is that the Government does not care. They have no priorities beyond maximizing the profits of their friends in the City. Perhaps they resent the British welfare state because it is fundamentally a Labour project. Whatever their reason, their budget is an insult to working parents, elderly pensioners, and those who have borne the brunt of their war on jobs. It is shameful and deserves stern reproach.

This budget represents a break from the rightward drift of the Conservatives, and for that is welcome. But as a prescription for getting Britain back on course, it is inadequate economically and disastrous socially. Splashing the cash on re-training workers is nice, but not nearly enough when the Government would proceed with hiving off successful and important public enterprises while simultaneously raising taxes on consumers. And there is nothing redeemable about ignoring the extensive damage done to the social fabric of our country perpetuated by the previous Prime Minister. The spending when it comes to social security and health services treats our most vulnerable with contempt.

If the Chancellor’s budget is a gamble, it fails. I would refer him to the 1978 song “The Gambler,” released by our American cousin Kenny Rogers: “You've got to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.”

Mr Speaker, this is a budget the Government should walk away from, if not run.  

Stephen Armstrong MP

Shadow Chancellor of the Exchequer

Member of Parliament for Tooting (1974-present)

Labour Party

Nikita Khrushchev: The difference between the Soviet Union and China is that I rose to power from the peasant class, whereas you came from the privileged Mandarin class.
Zhou Enlai: True. But there is this similarity. Each of us is a traitor to his class.

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Mr Speaker,

I’m not sure I necessarily agree with the Labour benches when they say that this represents an abandonment of monetarist dogma. More accurately, I think, it is to be described as an attempt to rehabilitate said dogma in the eyes of the public. 

The overwhelming message of this budget is thus: that the government continues to insist upon the same failed economic policy that caused such grief and has torn apart so many communities, but they will every now and then try and mitigate some of its worst impacts with ad hoc spending proposals. That is the economic philosophy that we heard from the Chancellor today. These ideas are all in the realm of temporary solutions, stopgap measures, attempts to paper over the most egregious cracks in the social fabric of our nation. Even treated as stopgap measures, these proposals are wildly inadequate and grossly insufficient. But as investments in our nation’s future? Even more so. 

At no point in this budget does the government actually address the root causes of what ills our country. At no point in this budget does the government actually deliver lasting progress on fixing the manifest injustices plaguing Britain, or humbly recognise that the policies of the prior government have fuelled said social crises. At no point in this budget does the government place our economy on a more sustainable and equitable path for long-term growth. 

Perhaps I would be able to be more sanguine about this budget if it had been presented as a temporary fix: if the Chancellor had stood before us today and admitted that monetarist dogma was no longer working, that we needed a wholesale reorientation of economic policy, and that this budget was just to pave the way for that. I would argue this budget is still inadequate, but at least the underlying philosophy would be sound. But that is not how this budget has been presented. The budget has instead been presented as a commitment to staying the course, with just minor adjustments made to pacify the most transparently awful consequences of bad government policy. 

Our nation’s social fabric and economic stability cannot bear budgets like this becoming the norm. We need a government that works to fix problems, rather than just sloppily dealing with them once they get too big to ignore. 

What do we need instead? 

The government had a chance to ensure growth and a pro-business climate for years to come. They did not take this opportunity. The list of potential reforms is long. The government could have created new regional development agencies and bespoke new local employment schemes to help bring out the economic potential in every community. They could have replaced the general rate system with new and fairer means for funding local government services, helping local businesses and strengthening local government budgets. 

They could have addressed the inadequate levels of productive lending to businesses and commerce, creating new and reliable funding sources for businesses in need of patient capital, high-risk investments, and countercyclical lending from both the public and private sectors. They could have delivered reforms, and serious long-term funding sources and commitments, to increase housing and infrastructure construction. They could have adopted objective criteria for privatisation, rather than an ideology-first approach, and not pursued the ill-advised privatisation of British Airports. 

They could have delivered on modernisation and diversification of our energy mix, providing new investments in renewable energy and energy efficiency. They could have announced a new industrial strategy that prioritises innovation, research, science, and manufacturing, rectifying the tragically low investment levels in civil research and science. They could have invested in some of our greatest assets as a nation: our universities, our rural communities and natural assets, our heritage and culture. 

These are all measures a good budget would have contained. Instead, the government opted for short-term measures, measures that do not secure our future prosperity, measures that do not address the underlying inefficiencies in our economy.

And, of course, there was an appalling lack of vision when it came to investing in the NHS, in our nation’s schools, in public sector pay, and in matters of social mobility and social justice. 

There are many other glaring mistakes in this budget beyond just the broad lack of vision. 

The VAT increase, for example, must be opposed in the strongest possible terms. We know this to be a regressive move. We know that it will impact struggling families the most - those families and individuals already suffering most with the cost of living, unable to get onto the much-vaunted ladder of social mobility that this government claims to exist, the lowest earners in our society and the over 3 million unemployed. Those people will be the ones hurt most by the VAT hike. 

It will hurt businesses too. It will both dampen demand and raise costs. Businesses in communities hurt most by unemployment will feel these impacts the most. In a community rife with unemployment, it is not just the unemployed individuals who will be hurt by this tax hike. The local neighbourhood shops, dependent on their custom, will be hurt too. This merely aggravates the decline in such communities, a decline that is now more than ever looking like a deliberate government policy. 

Over £4 billion is raised from this measure. But for what? A government with even a base sense of social responsibility and moral propriety would - if they were to decide a VAT increase is necessary - use some of these proceeds to soften the blow. Increases in the social security safety net, targeted support for families and businesses, serious capital and systematic investment in tackling unemployment. The government has failed to do these things. 

And so for the job-seeker, for the precariously employed, and for the just-about-managing household whose finances hang on by a thread, the government has nothing serious to offer. Just higher taxes. There is no compensatory tax cut. No compensatory welfare measure. No compensatory guarantee of a hand up. 

The government preaches the dogma of low taxes. The Chancellor boasts of the government’s record here. “Policies that have cut taxes and ensured rising wages for Britain’s workers. The once overbearing nature of the state has been cut down.” Those are his words. A budget which “allows hardworking Britons to retain control over more of their own money.” That is his claim. 

To the ordinary Britons hurt by this VAT increase, these claims will appear to be nothing more than cruel fictions. The government’s desire to let hardworking Britons “retain control over more of their own money” seems to come with an awful lot of exceptions. 

And it is worth emphasising how little the government has done with this increase in revenue. There are, certainly, some investments that they can point to. I have already explained why I see no reason to be impressed with these investments. But as a whole, many government departments have seen either no real-term increases or pitiful increases. 

Let us take the National Health Service as an example. There are no new hospitals. The equipment and medical device budget largely stagnates. Only 100 new doctors, a meagre increase that is somehow meant to also adequately staff 100 new clinics. The public health, medical research, and training and education budgets - the items that can perhaps best preserve the NHS for future generations - are left without the increases they need.

Many more areas see no substantial real-terms increase in funding. The government’s ideological opposition to public investment is still here, make no mistake about it. Heritage. Rural communities. Environmental protection. The London Transport Grant. Innovation and research councils. Business and investment grants. Crime prevention. Further education. These are important issues, all ignored by the Chancellor, neglected by the government. 

Another mistake within this budget is the privatisation of the British Airports Authority. I believe this decision encapsulates the government’s flawed and ideological approach when it comes to questions of state ownership. The BAA is, indeed, a highly profitable body, but as a virtual monopoly, the arguments for privatisation from the standpoint of efficiency and competitiveness are just not there. Indeed, there is a compelling public interest argument for such a monopolistic institution to instead remain under public control. We can, yes, bring private finance and private capital into publicly-owned companies, and that this route has not been taken is perplexing. We should also be encouraging municipal airports as a form of local enterprise - privatising the BAA undercuts that. 

The cuts to development aid also deserve an unequivocal rebuke. Though the Chancellor dressed these cuts up with euphemism, these are some brutal cuts. These funds could have saved lives. I think the Chancellor underestimates the political backlash to this move. There is increasing awareness of the moral import of development. Humanitarian concerns must be at the centrepiece of any foreign policy. For so many to face destitution and deprivation in our world is a moral outrage. The people of Britain understand that. It is also catastrophically short-sighted, hurts our long-term economic and security interests, and denies us an easy chance to rebuild our international credibility and prestige after the Prime Minister jeopardised it over the Anglo-Irish Agreement. 

Mr Speaker, this budget bakes in and doubles on so many failed policies. The British people need a change. Only the Alliance can deliver the prudent long-term fiscal framework that this country needs.

Laurence Foltyn, Liberal MP for Colne Valley

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