The budget response Labour should deliver tomorrow

Left Foot Forward contributing editor Richard Carr delivers his budget response from the Labour party leader

 

I thank the chancellor for his speech. Although we will remain a stern critic of the unnecessary and the unjust, I want to begin by making clear that Labour will work with the government where the national interest can be upheld.

Some of what he has announced today I welcome. Other policies we would quibble with the method and detail, but not the overall aim. But some I would strongly urge him to think again on. If he truly wishes to be a One Nation chancellor there are better ways and means than some of what we have heard.

But let us start positively. The location of power is changing in this country and that is a good thing. For the two-thirds of English people living outside London and the South East, for too long power has been concentrated away from them. I therefore welcome the devolutionary measures the chancellor has announced today with regard to Cornwall and its health and social care budget. Building on the previous precedent of the Greater Manchester deal, devolution by default must become the watchword of this administration. We will hold it to account if it does not deliver on this.

At the end of last year Lord Heseltine remarked that devolution was ‘unstoppable.’ So it should be. The benefits are obvious, a potential £144bn of additional economic activity across England by 2020, and better public service delivery. Indeed, Labour councils have already pioneered in this regard.

To address productivity gaps which are becoming extremely worrying, skills funding has to be the next big step change in the devolutionary agenda. As and when this can tap into local business acumen, so much the better. I would have liked to have seen more – particularly with regard to LEPs – here. Small and large firms alike should be plugged into considerations of long term economic planning far more than they are at present. We need to bolster the British Business Bank to get credit moving to such institutions too.

Moving to welfare, we support the principle of the benefits cap, though will demand the chancellor keeps an eye on the most appropriate level for its implementation. Crucially however the British people did not vote for all stick and no carrot. He must be careful to balance his tough line on benefits with concrete incentives for people to work, giving them the skills to find decent jobs, and providing space for employers to take on low paid workers.

In particular, low pay remains a scourge. I am pleased to see any rise in the National Minimum Wage, but we need to be more ambitious. Two former Conservative Downing Street advisers have raised the notion of increased payment of the Living Wage over the last week, and I welcome their contribution to the debate. We in the Labour Party have talked about tax breaks to encourage the Living Wage and our councils have led the way in paying it. We should praise the work of firms from HSBC to Oxfam who do likewise, and I note that KPMG have joined the calls for wider payment of the wage too.

Mr Speaker, a consensus is building on this and it is one I urge the chancellor to listen to. For all the excellent work it has done to date, the remit of the Low Pay Commission needs to be reformed. As a former history student, the chancellor will no doubt recall Harold Macmillan’s proposal during the 1930s to lay out a roadmap for the introduction of a National Minimum Wage within five years. In the end it wasn’t until New Labour and the 1990s that it came to pass.

British workers must not wait as long again for meaningful change. I say to the chancellor today that if he wants to see the Living Wage become mandatory by the end of this parliament then Labour will work with him to achieve it. Low pay is too important an issue for political squabbling. My door is open.

Mr Speaker, today I hope I am setting out a constructive and consensual tone. But I must add that the chancellor’s inheritance tax reforms do strike me as wrongheaded in the extreme. Even at its present level, in 2013/14 less than five per cent of deaths saw any payment of inheritance tax – some 28,000 estates in a nation of 25 million homes. The £1bn cost of the measure to the Treasury more than reverses, for example, the chancellor’s sensible decision in 2012 to apply a higher tax band to properties sold for over £2m.

It overrides most of the savings of withdrawing housing benefit from the 400,000 under-25 year olds who receive it. Mr Speaker, we are fully prepared to look at measures to lower the benefits bill, but the government must also evaluate its priorities. As the Economist put it last week, ‘it is astonishing that while he makes tough decisions to cut benefits of the poor, [the chancellor] will let the wealthy pass on more to their children.’ Who benefits from the recovery will remain a key question. A rising tide must lift all boats, not just provide an extra coat of paint to the yachts.

My own view is that work should be rewarded, not passive inaction. The endeavours of no doubt productive parents should not define the future of their children, yet this is exactly what this inheritance tax measure enshrines. Here then we have a profound disagreement. The Conservatives want to reward the children of the richest whilst making only modest advances for the low paid. This is not a positive stance.

It is also the wrong direction of travel. Taxing wealth not income will become ever more important as our population ages. On top of moving quicker on the living wage, I say to the chancellor that had he brought forward sensible measures with regard to wealth taxation, I could have supported a reduction in the highest (additional) rate of income tax from 45p to 42p.

But alas this was not forthcoming. I also state that I would have supported a lowering of the inheritance tax threshold, but only to use the additional receipt to raise both the personal allowance further, and the level at which the 40p rate of income tax kicks in for upper-middle earners. That might be a ‘death tax’ for some, but personally I prefer to reward the endeavours of the ordinary living. Labour remains the party for low and middle earners.

Mr Speaker, the chancellor has a fresh mandate and I congratulate him for it. The economy thankfully appears to be growing again, albeit with significant variation. But I urge he does not rest on his laurels. As and when he wishes to make constructive, dare I still say ‘One Nation’ contributions to the future direction of our economy, he will find a friendly ear in me.

In return, Labour will remain a loyal opposition in continuing to question the government where it goes down the wrong path.

Richard Carr is a lecturer at the Labour History Research Unit, Anglia Ruskin University, and a contributing editor to Left Foot Forward. He wrote the bookOne Nation Britain last year.

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