Government Ministers should be ashamed of their record. Instead as we completed the debate on the budget in the House of Commons this week they asked for congratulations. But even by their own standards and targets they have been a complete failure and overseen seven long years of failed economic policy.
In 2010, they promised to balance the books by 2015. They failed. In 2015 they set a new fiscal mandate to achieve a surplus on public sector net borrowing by the end of 2019-20, with a new supplementary target requiring public sector net debt to fall as a percentage of GDP in each year to 2019-20. A year later, they were already en route to failure. Last November, for the third time, they set new targets to “return the public finances to balance at the earliest possible date in the next Parliament”. Last week the independent OBR said they are unlikely to meet this objective by 2025/26, as Ministers originally envisaged.
They said these economic policies would lead to higher growth and lower debt, but their plan has achieved the precise opposite of what they promised. In 5 out of their 7 years of office, GDP growth has come in at less than 2% and GDP growth will come in at under 2% for every year of the current forecast period to 2022, the first time in modern economic history this has happened. And this at a time when world GDP growth has been revised up to 3.6%. The debt to GDP ratio when Labour left Government was 57.1%; it is forecast to be 86.5% in this their seventh year in office, higher than the EU average.
The government then exacerbated this catalogue of failure by then holding a referendum on our EU membership without making any plans whatsoever for the scenario where the country voted to leave. The impact of the aftermath of that vote has already turned the country from the G7’s fastest growing developed economy into its slowest – and we haven’t even left yet. In March 2016, the Office for Budget Responsibility was forecasting that our economy would grow by 2.2% this year; now, they say it will be just 1.5%, a pattern set to continue in the coming years.
The referendum outcome has already affected inflation, wages, living standards and business confidence – it is every day families who are paying the price. The largest inflationary effects, caused by the depreciation in the pound, are the basics for every household: bread and cereals; milk, cheese and eggs; coffee, tea and so on. Average earnings have likewise fallen into negative territory. Growth down, productivity down, earnings down – a Brexit triple whammy that is making us all poorer, something nobody in the referendum voted for.
And having been promised by the Foreign Secretary and others that a vote to Leave would result in billions more going into public services, now tax payers’ money is being swallowed up by Brexit. We were told that it would lead to £350m extra per week going into the NHS. There was no sign of that in the projections of government spending in the Budget Red Book that relates to 2019 through to 2022. Instead the £2.8bn the Chancellor announced in emergency funding for the NHS is far exceeded by the more than £3bn to prepare for Brexit.
So in Ministers’ handling of Brexit, we see incompetence on a gargantuan scale when it comes to economy. But what should the Government do next?
First, abandon austerity and invest for the future economy, by changing the fiscal rules to allow borrowing for investment purposes so we can make prudent and smart investments. It will pay for itself in the long term.
Second, overhaul the skills system to ensure people have the technical, vocation and STEM skills required by the new economy. We need to urgently address the 59% fall in those taking up an apprenticeship since their new levy was introduced. It is not just about the quantity of apprenticeships but quality – we need far more people doing level 3 qualifications and above. Give people access to skills provision throughout their careers so they can reset themselves for new careers as technology changes during their working lives.
Third, sort out the country’s infrastructure. We need a national fibre-to-the premises 5G network to equip the entire country with digital basics. Planning and access to land will need changing to ensure rapid rollout without unfairly disrupting the lives of people. The same big bang approach is required to ensure we have enough affordable housing to both buy and to rent.
Fourth, we need to stimulate investment in Research and Development to encourage innovation. This will all help spread opportunity and growth to every part of the country.
This non-exhaustive list, are all key parts of an industrial strategy which must operate nationally across sectors and locally, appropriate for every community, through a more federal UK.
Above all, we need a policy approach that reduces the sheer gravity of social injustice around us.
I am proud that when Labour left office, both absolute and relative measures of income poverty fell markedly among children and pensioners. We are the 6th largest economy but in 2017 over 14 million people – 22% of our population – are living in poverty. If this Government does not change course, particularly on its welfare cuts, the number of children living in poverty will soar to a record 5.2 million over the next five years. Whilst the Government flounders, Labour must stand ready to deliver the real reform the economy needs.