“End the immediate crisis in local government” – McDonnell’s full speech ahead of spring statement

This is the full text of John McDonnell’s speech today ahead of the Spring Statement on Tuesday.

Thank you all for coming this morning.

Next week, Chancellor Philip Hammond will stand up in Parliament and deliver what he and his aides are working very hard to convince us will be a non-event.

The Spring Statement, we are told, will be little more than an update on the nation’s finances.

Let’s see what the government might claim. The Chancellor may trumpet small upward revisions to the forecasts for GDP and tax revenues as evidence that the economy is somehow in strong health.

He might decide that a marginal revision to the dire November forecasts for productivity prove, to use his own meaningless analogy, that our economy is “match fit”. Or somehow that we have “turned a corner”. But there is an air of unreality about all this.

This is a government still committed to the austerity spending cuts the Tories first announced in June 2010.

They seem absolutely blind to the economic evidence and the pain and misery they have caused.

Former Chancellor George Osborne was crowing – actually boasting – about what his austerity plan has achieved, last week.

The occasion was a return to budget surplus on day-to-day spending, three years later than intended.

A three year delay in reaching a target that George Osborne himself had previously abandoned!

So I suspect, if market and other expectations are correct, that Philip Hammond may attempt a small brag of his own when presenting next week’s borrowing figures.

Any boasting will be misplaced. The picture in the official statistics remains as bad as ever under this government: Britain had the lowest rate of growth last year of any major developed economy, and the government’s own figures show that real wages are still falling.

But these abstract national figures don’t show us the real impact of austerity and economic failure on our communities. You can see it every day, here in London and across the country.

It’s the stories of the misery and ruined lives that add up to a national tragedy.

It’s the schools so short of cash that they have to write begging letters to parents for pens and pencils.

The 60% of vulnerable women who sought refuge last year, often in the most tragic circumstances, turned away because of the lack of spaces.

Or it’s the desperate increase in children taken into care because councils can’t provide the early intervention they used to.

It’s when, on Parliament’s doorstep, a homeless man is found dead, just days after he had been applying for work.

This is the sixth largest economy on the planet. London has more billionaires living here than any other city in Europe.

And yet every night on the streets of this city there is another rough sleeper.

So today Labour are outlining our demand on this government to wake up to the scale of suffering austerity is inflicting on our communities and the underlying damage being done to our economy.

But of course there is nothing inevitable about this. Austerity was always a political choice, not an economic necessity.

Nearly eight years ago a Tory led cabinet of which Theresa May and Philip Hammond were senior members, made the political choice to give tax breaks to the wealthy and large corporations while depriving our economy of the investment it needed.

Over £70bn of tax cuts have been scheduled for the richest and the largest corporations – even as social care faces a £1bn deficit and children’s services a £2bn shortfall by 2020.

To inflict this pain and this misery whilst shovelling cash to those who needed it least was the ugly choice made by George Osborne, and now continued by his successor, Philip Hammond.

We were promised by the Tories that, at the very least, the pain would be over quickly.

And yet it never seems to end. The government’s deficit, which austerity was supposed to remove, was supposed to be eradicated in 2015. Then it was 2016. Then 2017. Then 2020.

At the Autumn Statement last year, Chancellor Philip Hammond suggested it might, finally, be wrapped up by 2025. But the official forecasters think it more likely we will get to 2031 before the deficit is cleared.

There is no serious debate and no serious argument to be had about austerity: debt has increased, productivity has flat lined, wages have fallen, and last year GDP growth was the lowest of any major developed economy.

It has failed decisively and comprehensively. There is no upside to this. No serious, credible economist can now be found in support of the government’s plans.

The outcome of nearly eight years of cuts has not been to eliminate the deficit but to shift it onto those who can least afford it. On to the balance sheets of NHS hospitals who ended last year in millions of pounds of debt and with more than 100,000 patients waiting more than half an hour in ambulances before they could be accepted in A&E.

On to our schools which are now facing the first real-terms per pupil funding cuts since the 1990s.

And shamelessly onto the average households who now with increasing debt owe almost £13,000 in unsecured loans.

Perhaps recognising the lack of argument on his side, the Chancellor has chosen to talk down his own Spring Statement as far as possible.

With even commentators at the Financial Times and some of his own backbenchers recommending he move now to repair the damage of austerity, he is refusing to act.

The Chancellor cannot simply stand there, once more, and pretend that the decisions he takes and enforces are nothing to do with him.

He is the Chancellor. It is his responsibility. He has the opportunity to act and provide the funding that our local authorities urgently need.

If he has the room to spend, even against his own misplaced targets, then he must act.

Let me be clear, I agree with the principle of a single fiscal event, under normal economic circumstances. But the reality is that The Autumn Budget was a non-event.

The measures announced were so inadequate and the situation in our communities so severe, that meaningful action is required next week.

There’s a traditional labour movement slogan, that an injury to one is an injury to all. We apply that principle to our current situation.

Labour’s demand: end the immediate crisis in local government.

It’s absolutely not good enough to pretend that nothing either can or should be done when spending cuts are depriving local authorities of their ability to provide basic support for some of the most vulnerable in our society.

It is local councils that have been used as human shields to absorb nearly eight years of Tory spending cuts.

Northamptonshire was pushed into effective bankruptcy a few weeks ago, unable to pay for its local services.

Three more Conservative Councils were reported last night to be in crisis. But experts are warning that is just the tip of the iceberg.

The head of the Local Government Information Unit has described local authorities as “at breaking point”.

The National Audit Office report released yesterday confirms many councils are running out of reserves to draw upon.

New figures now also show that local government has lost 785,000 staff since 2010.

Almost £10m of support has been taking from women’s refuges. Almost a fifth of specialist women’s refuges have been forced to close under the Tories and over 400 women, often with children, were refused a space at a refuge last year.

Over 500 libraries, 300 children’s centres and almost 500 playgrounds either have been or are being closed by this government.

Record numbers of children are being pushed into care because early intervention funding has been cut. Children’s services as a whole are facing a £2bn deficit.

The head of Action for Children says that, without immediate, additional funding, children’s services are facing a “crisis” that could become a “catastrophe”.

Education budget cuts mean that secondary schools are at risk of losing the equivalent of six teachers over the next five years due to those cuts.

Over a million vulnerable elderly people are left without the care and support they need as care services face a £1bn deficit.

There are innumerable personal tragedies behind the raw figures, but this isn’t some natural disaster. It’s the result of direct political choices made by Conservative-led governments to impose austerity, against all sound economic advice.

It should be intolerable for all of us to live in a society like this, where the most vulnerable are the worst affected.

So it is against a backdrop of local services being stretched to breaking point that Labour are demanding money is found in next week’s Spring Statement to address the immediate crisis in local government.

We are calling on the Chancellor, as a bare minimum, to plug the funding deficit in children’s services, social care and domestic violence services.

Inaction under these circumstances would not only be irresponsible but morally reprehensible.

Wider structural economic problems: an economy that’s not working. But the immediate crisis in local government is just the most visible expression of a deeper, underlying malaise.

The truth is that our economy, under this government, is not working for people. The international figures make this very clear. The developed world as a whole has not recovered properly from the crash of 2008, but Britain is a clear outlier for poor performance.

Amongst major advanced economies since the crash, in fact, Britain is the only economy where the economy has grown (even if only a little), but wages have actually fallen.

The experience is unique in modern British history. For sixty years, from the Second World War to the financial crisis, rising GDP meant broadly rising living standards. When GDP rose, unemployment came down and wages went up.

That link has now been seemingly broken. It should be no surprise that people express such cynicism in official forecasts and official pronouncements. Why would it matter if GDP goes up or down, if you, personally, are still worse off?

What this means is the old rules of the economy have simply broken down.

London has more billionaires than any ever before – more than any other city in Europe. But homelessness is at a record high. And what use are a few more of the mega-rich living the high life in London for those parts of the country that have seen good, secure jobs disappear, never to be properly replaced?

Something has gone deeply wrong with how our economy operates. Broader economic demands: revisit our approach to the economy. So, yes we are calling on the Chancellor to act next week to address the immediate crisis, but more fundamentally to completely revisit our economic approach in order to build the foundations for a stronger future.

Thirty years of deregulation and governments committed to the hands-off, laissez-faire dogma have created a debt-ridden, low wage, low investment economy. The expansion of financial services has meant piling up wealth in one small corner of the country, and piling up debts in the rest.

Britain has the worst regional inequalities in Europe as a direct result. And these inequalities are worsened by government decisions – so that London is set to receive more than two and a half times as much transport investment per head than Northern England.

And too often our corporations and financial institutions are fixated on the short-term, immediate profits, at the expense of long-term patient investment.

I’ve asked City economist Graham Turner to report on the British financial system, and make recommendations for its reform.

The findings from their interim report are crystal clear: our major financial institutions are too fixated on the short-term, and on unproductive investments.

We are in the early years of a major technological transformation – the combination of robotics, artificial intelligence, and communications technology in the “fourth industrial revolution”.

Yet the data presented by Graham and his team show that our financial system is funnelling investment money from manufacturing and into property speculation.

This is the exact opposite of what is needed. And if we don’t deliver this investment, we will continue, as an economy and as a society, to fall by the wayside.

Already, productivity growth in Britain is lagging far behind comparable economies.

It now takes a typical British worker five days to produce what a typical German or French worker produces in five.

This productivity gap is the worst it has been for a generation. Such economic growth that has happened since 2010 has been the result of more hours being worked, not improvements in productivity. We are reaching the limits for this model for growth.

We need an alternative – based fundamentally on long-term, patient investment.

To deliver this investment, we need more than just a few tweaks to our economic model.

That is why at the heart of Labour’s economic programme is a commitment to radically transform how our economy works and to reshaping old institutions as well building new ones.

This requires an active, entrepreneurial state.

Under this government there is a failure to invest effectively in skills and training – so Labour’s National Education Service will deliver the funding needed for lifelong learning for all, free at the point of delivery.

There is a failure to invest in infrastructure – so our National Transformation Fund will deliver £250bn over a decade into bringing our infrastructure, from broadband to railways, up to scratch.

There is a failure to invest in research – so our industrial strategy will target focused investment in critical, national priorities like renewable energy and Artificial Intelligence.

And to lock those changes in place, we will be looking to bring major economic assets into public ownership – on a more democratic, collaborative basis than was ever done in the past.

We also look to overhaul how our businesses are run, and how they are owned – creating a new generation of high-technology co-operative and worker-owned firms.

Our new Strategic Investment Board linked to our National Investment Bank will act as a focus and centre of expertise for the economy, charged with delivering a major increase in productive investment, focused on the technologies of the fourth industrial revolution.

That’s the bold, transformative vision that Labour intends to build on – a high-technology, high-wage, high-investment economy.

An economy that is radically fairer, more democratic and environmentally sustainable. A prosperous economy but where that prosperity is shared and enjoyed by all. Those are foundations on which we must rebuild our economy.

But today we must end the immediate crisis in our public services. The government must use this Spring Statement to bring forward measures to end the crisis they have created in our local communities by providing local government with the funding it needs.

To find the funding let’s demand a bit of fairness in our tax system with the reversal of the cut in the Bank Levy and the reversal of the £70bn of planned cuts to Corporation Taxes, and taxes paid largely by the super-rich like Capital Gains Tax.

They can change direction: end the disastrous failure of austerity, and start once again to fund our public services.

I believe we are approaching a moment of real national crisis on this. Essential services simply cannot cope with the strain of spending cuts that have now stretched into their eighth year, with no end in sight.

 

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