John
McDonnell MP, Labour’s Shadow Chancellor, speaking at the South Bank Centre ahead
of next week’s Budget, said:
***CHECK
AGAINST DELIVERY***
Next
week, the Chancellor will stand up in Parliament to deliver his first – and
last – spring Budget.
He
will no doubt want to paint a rosy picture of progress since the Autumn
Statement, just a few months ago.
But
if progress has been so significant, and all is going so well – why is the
government continuing to pursue spending cuts?
From
the NHS to social care, from prisons to education, our public services are in
crisis.
Brexit
will present challenges to this whole country.
Labour
is prepared to meet them.
Yet
instead of rising to the challenge I fear the approach from this government on
the economy is to continue the failures of the past.
Look
behind the headline figures and the real story is apparent.
The
essential facts on our economy remain as follows.
Low
investment over many decades has led to a low productivity, low wage economy.
Insecure
and poorly-paid work dominates new job creation.
That,
in turn, means that the tax base needed to secure our public services is less
stable.
Deliberate
decisions by this government to privilege tax giveaways to the super-rich and
giant corporations have further undermined the tax base.
The
model is not sustainable.
The
failure at a national level is palpable.
The
Conservatives will soon have added three quarters of a trillion pounds to the
national debt since they arrived in office.
At
the same time, they will have imposed the first spending cuts on schools for
forty years.
An
NHS in a state of profound crisis.
Those
who work in and manage our public services have done their best under the
austerity onslaught.
Local
authorities in particular have had to cope with the most extraordinarily sharp
funding cuts.
They
will not sustain a further round of spending cuts.
So
when the Treasury casually announces that it is looking for a further 6% of
funding cuts to some government departments, as they did this week, it is an
act of gross irresponsibility.
And
the comments today from the head of the Care Quality Commission that the NHS
“stands on a burning platform” have driven home the scale of the crisis.
Cuts
to social care, amounting to £4.5bn since 2010, have brought the system to the
brink of collapse.
Over
1m vulnerable elderly people, including many who are very frail, now lack
access to the care they need.
This
is one of the richest countries in the world, and yet Tory austerity has
brought our public services to the brink.
Social
care has a £1.9bn deficit in funding for this year.
This
needs to be filled immediately to stabilise the system.
Based
on estimates by the Chartered Institute of Public Finance and Accountancy, the
NHS and social care face a funding gap of between £8.5 and £15bn by 2020.
Published
figures indicate that tax receipts are currently higher than anticipated.
Given
that we’re facing an immediate crisis in the NHS and social care, I’m calling
on the Chancellor to use that money to address this NHS and social care
emergency.
Any
measure less than this is likely to be inadequate.
It
is not just those who rely on our public services who have suffered under this
government.
The
slump in living standards overseen by this Tory government is the worst this
country has experienced since the Industrial Revolution.
The
Chancellor may try and boast about rising GDP.
But
that hasn’t turned into real improvements in people’s lives.
The
reality of our economy is that average real hourly pay remains over 10% below
its level before the crash.
And
that cuts to public services have now placed them, as the independent Institute
for Government has said, close to outright collapse.
The
record on living standards is the worst of any leading economy.
Only
Greece has seen a bigger fall in real pay.
Britain
has the distinction of being the only large developed economy in which wages
fell even as economic growth returned after the crash.
And
now rising inflation as the government mishandles Brexit is devaluing people’s
wages further.
Yet
the government has reneged on its promised National Living Wage level, and is
continuing to pursue cuts in in-work benefits.
Analysis
out this morning by the Institute of Fiscal Studies shows that low-income
working families with children will suffer most.
The
average household will be £5,000 worse off by the end of this Parliament than
they might have expected.
If
the economy is growing, the benefits must be shared fairly.
The
Chancellor must reverse the £70bn giveaway to the super-rich and giant
corporations between now and 2021.
And
the cruel £3.7bn cut to Personal Independence Payment for disabled people must
be halted.
Labour
will bring in a £10 an hour Real Living Wage to make sure work always pays
fairly.
Our
public services, from education to local councils to prison services and social
care are in deepening crisis and the burden is falling disproportionately on
women.
It
is women who are bearing the brunt of low pay, cuts to in-work benefits, and
the public sector pay cap.
Put
together, this government has created a toxic mix.
Independent
estimates by the Women’s Budget Group suggest that 86% of cuts in public spending
since 2010 have fallen on women.
The
Chancellor must take action in the Budget next week to fund our public services
and end this discrimination.
In
the place of austerity, Labour want a Budget that
works for women, that invests in jobs for women, funds the services that women
depend on and advances women’s equality and economic independence.
It
is the National Health Service and our social care services that tell us the
most about this government’s failures.
It
is essential that the government uses this Budget to give the NHS and social
care the funding they urgently need.
The
present Conservative government has been condemned for its fast-and-loose
approach to NHS spending.
The
Chief Executive of NHS England has dismissed government claims that current
funding is adequate – let alone more than was asked for.
The
Public Accounts Committee has rebuked this government for raiding the NHS
capital budget to meet NHS spending.
The
Health Select Committee has dismissed the government’s claims on increased
funding.
The
reality is that this government has consistently failed to provide the funding
that the NHS needs, and that it will continue to need into the future.
Yet
the rhetoric from the Prime Minister downwards has suggested anything but.
There
is an air of unreality about her claims that more and more patients are being
seen by more and more doctors.
The
experience on the ground of patients, doctors, and nurses is of a treasured
institution already drifting into the greatest crisis in its history.
The
reality is that the Tories are imposing a real-terms cut per head in healthcare
spending.
Current
plans from the government do not come anywhere close to addressing the scale of
the crisis.
It
is essential that they now bring forward plans to close the funding gap if we
do not want to lose our NHS.
Labour
will never break from the fundamental principle that our National Health
Service should be free at the point of use.
And
we will reverse Tory privatisation, by renationalising the NHS.
It
will require bolder steps to secure NHS funding where demand pressures are
rising, confidence in government is low, but retaining the NHS’ historic
mission of healthcare, free at the point of delivery is a national priority.
Public
trust and confidence must be restored.
Not
only in the government of the day.
But
in governments for the rest of this century and beyond.
Recent
discussions around the long-term future of the NHS have helped clarify some
important issues.
I
want to lay out some of the framework on how Labour will be looking to develop
its thinking in the future.
The
financing of the NHS has become excessively politicised to the point where even
supposedly official figures are subject to dispute.
There
needs to be an independent adjudication of both needs, and actual provision, to
restore public trust and confidence.
The
Office for Budget Responsibility has already taken steps to assess the levels
of funding needed for the NHS in the longer term.
I
have written to Robert Chote to ask about the ability of the OBR to continue to
provide these assessments, as part of its overall brief to monitor the
government’s fiscal position.
To
change the OBR’s responsibilities and bring in permanent oversight on
healthcare funding would require primary legislation from government.
Fair
and objective assessments of long-term need are required, along with close
monitoring of actual spend being made.
That’s
a bigger task than Ministers can provide.
We
need a political neutral body, modelled on the Office for Budget
Responsibility, that can remove the question of long-term funding from the
political squabbling.
Only
in this way can public confidence in the figures be restored – and essential
spending correctly made.
Second,
we have to place funding for the NHS on a longer-term basis.
As
Lord Macpherson and others have suggested, placing the NHS on a stable
five-year financing basis means that certainty of funding can be assured.
But
we need to do more than tie funding down for the length of a Parliament and
look to ten-year budgets.
The
pressures that we know of today will continue to build up over decades.
We
need NHS budgets that can assure funding on those timescales.
Third,
we must show those expected to pay for the NHS that their tax money is
well-spent.
The
simple truth is that after the financial crash and years of failed austerity,
governments are not trusted.
Creative
accounting and stealth taxes have helped chew away public trust in the system.
The
fact that the wealthy can seemingly dodge their taxes at will has further
undermined public confidence in the tax system.
And
politicians, thinking only about the electoral cycle, have too many incentives
to game the system.
People
need to know that the contribution they make will be spent properly.
Hypothecation,
allocating taxes raised to specific purposes, can make absolutely clear where
tax money is being spent.
It
can help restore the trust and confidence in taxation and government spending
that has otherwise started to break down.
But
hypothecation for the NHS has to be more than a commitment from a politician or
a political party to spend a given amount, however firm that promise.
It
needs a clear commitment, over the long term, that specific taxes will be used
for specific purposes, and that this spending will be properly monitored.
The
government’s rhetoric on the economy has changed profoundly over the last year.
They’re
catching up with some of positions we’ve staked out.
The
Chancellor claims he now accepts the need for government to invest, rather than
to slash investment.
He
just won’t deliver properly on it.
And
the Prime Minister has offered fine words about the “good that government can
do”.
And
yet her government actively pursues NHS spending cuts that have contributed to
30,000 excess deaths in a year.
These
are not my figures, but those of the Royal Society of Medicine.
The
disconnect between what Ministers say, and what they do, has reached dramatic
proportions.
The
reason for the disconnect is clear.
The
Tory Party know that after years of austerity and sliding living standards, the
sentiment against political elites out there in the country is palpable.
That
mood was a critical factor in driving the vote to Leave the European Union last
year.
This
government have sensed the mood and adapted to circumstances.
They’ve
borrowed the rhetoric of protest and now pose as champions of the workers.
Only
five months ago, the Prime Minister and her Chancellor were giving the
impression that austerity was coming to an end.
But
much of the austerity is yet to come.
In
the end, the Tory leadership are the elite.
So
they can make all the grand promises they wish.
But
they can’t deliver the transformation our economy now needs.
They
don’t have the political will to do it.
Labour
has already begun to lay out its alternative.
We
want a break with the past – not a continuation of its mistakes.
So
the fundamental task of any reforming government in the future will be to
rebuild and reconstruct our economy.
Our
Fiscal Credibility Rule and commitment to invest means the next Labour
government will break with the failures of the past.
We
will bring down the deficit whilst committing real government resources to
increase investment.
By
the end of the next Labour government, the national debt, relative to trend
GDP, will be lower than what we will inherit.
We’ll
reverse years of underinvestment across the whole country.
Not
just in the few existing centres for growth and prosperity.
But
delivering the funding needed so that our smaller towns and communities can
share in the prosperity.
The
great divide between London and the rest has to be overcome.
We’ll
introduce legislation to correct the bias in investment funding for the
regions.
We’ll
commit the funding needed for specific infrastructure investments, like the
£10bn Crossrail for the North or new tidal lagoons.
Labour
is committed to delivering one million new houses, and building a new
generation of council housing.
And
we need a government prepared to give back control to our localities.
So
alongside the National Investment Bank, the next Labour government will create
a network of regional development banks that will supply the funding needed on
the ground for local businesses to flourish.
We
can allow workers and those wishing to set up and run their own businesses the
opportunity to take control back away from the boardrooms where short-term
decision-making has dominated.
The
railways will be renationalised by Labour.
But
we’ll also introduce a “Right to Own” for workers, giving them first refusal on
taking control of companies undergoing a change of ownership.
And
we’ll use the regional development banks to support a new generation of
co-operative businesses, at least doubling the size of our co-operative sector.
Small
and new businesses will be properly supported with reforms to business rates,
financing from the regional development banks, and support for business hubs in
every major town and city, allowing new businesses to work together and
collaborate.
We’ll
support investment by manufacturing firms by removing plant and machinery from
business rates.
And
we’ll reform corporate governance laws to block raiders trashing profitable
companies and bankrupting pension funds.
We
want our large corporations to work for the public good – not against it.
So
we’ll also introduce a fair pay ratio to stop top bosses paying themselves
excessively.
But
to reverse the slide in living standards, we’ll need to do more.
Labour’s
Real Living Wage will be a £10/hour minimum, meaning work will always pay
properly.
The
public sector pay cap will be lifted.
We’ll
repeal the Trade Union Act.
And
we’ve fought to defend the rights of EU migrants here, who contribute so much
to our public services and our economy.
The
Lords have passed Labour’s amendment and we urge the government to immediately
bring forward a guarantee to protect the rights of all EU nationals resident
here.
We’ll
be working with our European colleagues to protect the rights of EU citizens
here and UK citizens in the EU.
And
of course we’ll halt the austerity cuts to in-work benefits and payments to
people with disabilities.
We
need a clear plan for government to intervene on a major scale, supporting
essential industries, fostering new sectors and above all creating decent,
secure jobs across the whole country.
We’ll
use the power of government procurement, backed up by the National Investment
Bank, to deliver a massive expansion of industries like renewables where the
global potential is enormous and our natural resources so significant.
The
next Labour government will break the cartel of the Big 6 energy suppliers,
creating the conditions for local, decentralised, low-carbon energy by
supporting local authorities and co-operatives.
We’ll
target 3% of GDP spent on scientific research, from all sources, to deliver on
the huge potential of our scientific research base.
From
a laggard in research spending, we’ll move to being a leader.
We
can’t run first rate public services on a second or third rate economy.
But
we can’t pay for first rate public services unless the tax system works fairly
and effectively.
There’ll
be no place to hide for tax avoiders under Labour.
Our
Tax Transparency and Enforcement Programme will clamp down on the worst
avoiders.
And
building on the successful Nordic model, we’ll introduce legislation to make
public the tax returns of those earning over £1m.
Transparency
and fairness is at the heart of building a decent, open society.
This
will help restore public trust in the tax system – and help clamp down on any
avoidance.
This
programme of structural reform should all be taken as fundamental.
This
is, in outline so far, the economic programme of the next Labour government.
It
represents nothing less than the transformation of this country.
We
don’t have to settle for the steady management of decline under the Tories.
And
we don’t have to accept the failings of an elite that have lead us into a
decade of falling living standards, insecurity, and failing public services.
There
is an enormous potential here, in every part of the country.
We
can build a radically fairer, more democratic, and more prosperous society.
We
can, together, turn this whole country round.
