More Squeeze For Middle Britain

By Liam Byrne MP

It became clear yesterday that George Osborne has decided it’s middle Britain that’ll get the squeeze to pay for the Tories’ economic plans.

We heard nothing about how Britain can earn its way to pay down the deficit. In fact Osborne just confirmed plans that’ll put 100,000 people extra on the dole – and put the benefits bill up by nearly 1 billion. With fewer people rowing, that makes the job harder for the rest of us – and sure enough, we also got the plan to cut child benefit.

Yesterday’s announcement from George Osborne that he would axe Child Benefit for middle income families is just another in a long list of broken promises from the coalition within just months of coming to power.

It’ll leave most middle income families saying ‘Why am I and my children being hit? We didn’t cause the crisis’. They’re right. Where’s the plan to ask more from banks? – they’ve just been given a multi-billion tax cut by Mr Osborne. Shouldn’t they be asked to pay a little more, instead of hitting middle income families?

On April 27th, my opposite number, Phillip Hammond said loud and clear on Newsnight:

“We have made a decision to rule out means testing child benefit because it is a universal benefit.”

Even Nick Clegg, made an unequivocal commitment in his only interview during the election campaign with Jeremy Paxman – watched by more voters than any other:

“We are not putting child benefit into question. I never have.”

But unfortunately, for this government promises come quite cheap. And this is just another of many decisions which the coalition have misled voters on, including their decision to scrap the Future Jobs Fund for young people, not to mention the Lib Dems’ biggest broken promise on a VAT rise.

Now, the Tories are peddling the myth that they have no choice but to make these inevitable cuts, but there is little evidence to back up this claim.

Labour had a plan to halve the deficit in four years – a plan that was the fastest and clearest of any country in the G7.

It included:
– £3.5 billion in savings to public sector pay
– £1 billion in savings to public sector pensions
– £5 billion in cuts to lower priority programmes
– £11 billion in savings by revolutionising Whitehall
– £18 billion in savings to capital spending

And if unemployment came down, £14 billion in savings across 5 years to the benefits bill as unemployment fell

It also included £19 billion in new tax rises – tax rises which the best off were to contribute the most of – 60% of the increase would have been paid by the top 5% of earners.

And don’t buy the lies about the Tories’ inheritance. In truth, the Office of Budget Responsibility proved that borrowing was:
– £8.4bn lower this year than predicted in March
– £22bn lower over the next five years than predicted in March

The greatest fear of many economists is that these cuts will fix Britain in the recovery slow lane. The cuts come at a point when the recovery is just getting underway. With Ireland falling back into recession only last week, we’ve seen what happens when a gamble like this goes wrong. In the weeks after George Osborne’s austerity budget, many key economic indicators turned in the wrong direction.

The PMI survey for the first month after the budget showed a record drop in confidence among service sector firms. The PMI data for August showed sharp slow downs in manufacturing, services and construction.

Another lagging indicator which reflects poorly on the prospects for a sustained recovery is the acceleration of the drop in house prices. Bank lending is still down. The government’s own business secretary said: “the recovery could be aborted if we don’t get on top of this”. And the Bank of England has revised down its growth forecast for the next year from 3.4% to 2.7%.

But George Osborne has ignored all of this and decided nonetheless to cut fast and cut deep – and into middle Britain.