“Chancellor, you are sowing the seeds of disappointment” – McDonnell’s Budget response

Below is the full text of the speech delivered by Shadow Chancellor John McDonnell in the House of Commons today, in response to the Budget announced on Wednesday.

As we face the coronavirus crisis it’s vital that we demonstrate to the people of our country that we are meeting this crisis head-on and that we will defeat it. And we will. As I have already said, this is no time for partisan political knockabout or for that matter political publicity stunts. We have lives to save so we must all work together. We will work with the government and parties across this House to protect our people and to contribute to the world-wide effort to overcome the outbreak of this virus. So we welcome the government’s package of measures announced yesterday.

We must ensure, though, that alongside the medical and scientific strategy to contain, mitigate and halt the spread of the virus, the economic strategy is equally comprehensive. We agree with the government that the NHS must receive whatever resources it needs. Let me at this stage pay tribute to and thank our NHS staff, who as always are rising to this challenge with their usual professionalism and dedication. We acknowledge that they are doing so at a time when they are already under extreme pressures.

The other key service that we need to support in this emergency is of course social care. It is unclear from government statements so far what additional support is being provided to social care. Social care is in crisis already in this country. One and a half million people – before this virus outbreak – were not receiving the care they need. There are over 120,000 staff vacancies and many of the private providers have been on the financial edge for some time. The majority of people who do receive social care are older, disabled or vulnerable people. These are the people most at risk from the coronavirus infection.

We have an £8bn funding gap in social care budgets, as the result of ten years of austerity. Providers and local authorities are already stretched to near breaking point. We need to know how much additional support is being provided specifically to social care and what contingency plans are in place if individual providers are unable to cope.

A large section of our care workforce is now also under threat from the government’s recently announced immigration policy. The GMB union calculates that the government’s immigration policy will cost the care sector 500,000 staff. Without foreign care workers our care system would collapse. The message is clear to the Home Secretary: do not put our social care system at risk. Pragmatism must override ideology. Social care in this country also still often falls on the shoulders of family members. Usually to the older women in families.

It is many of these women whose pension age was increased without proper consultation or notification, who were effectively robbed of many years of their pension and who this government, despite all of Johnson’s pre-election promises, has refused to compensate. When I met WASPI women last week, it’s no wonder they were angry still. If there is to be any good to come from the developing tragedy of the coronavirus outbreak it must be the lessons we learn from it.

It is now overwhelmingly clear that no government can inflict a decade of cuts and austerity on our public services – like the NHS and social care services – without impacting upon their resilience in a time of crisis. Ten years of cuts and failure to invest in services have meant we are extremely ill prepared for dealing with this type of large-scale health risk to our community. We know the NHS is already under intense pressure after years of underfunding and understaffing.

17,000 beds have been cut. Bed occupancy levels were at 94% last week. Critical care bed occupancy was 80%. These are the beds we rely on in episodes like the coronavirus. The NHS is short of 100,000 staff – including over 40,000 nurses and thousands of doctors. But we also have to recognise that the NHS needs putting on a longer-term stable footing with secure financial backing for the long term. Just as we have over the coronavirus outbreak, we must listen to the clinicians and experts when it comes to what is needed. It shouldn’t take a crisis to secure for the NHS the resources it needs.

Turning to the support to individuals and businesses: we welcome many of the measures the Chancellor set out yesterday. The Budget stated that statutory sick pay (SSP) will be paid from the first day of sickness absence and that people would be compensated for self-isolation. But the government guidance appears to exclude workers on zero-hours contracts, part-time workers, and people earning below the lower earnings limit of £118 per week, saying they are ineligible for SSP and can make a claim for Universal Credit.

Let’s be clear: will these people be covered? Sick pay is currently set at the extremely low rate of £94.25. That’s about £18 a day, while average pre-tax earnings are £511 per week, in nominal terms. Without lifting statutory sick pay, all but the most financially secure will err on the side of caution and self-isolate. All but the most financially secure will be asked to take a significant pay cut in order to self-isolate. That leaves people, inevitably, choosing between health and hardship. For those being directed by government to universal credit, can I ask: What, if anything, has been done to reduce the five-week delay in receiving Universal Credit and ensure there are staffing resources within DWP to cope?

The chancellor announced yesterday a £500m fund for councils to administer. Could the minister clarify how much this means for each local authority? And will the hard-stretched local authorities receive support for delivering this? Councils are also being asked to administer £2.2bn of funding to support businesses to help meet ongoing business costs. What resourcing will councils be given, as they are asked to take on more responsibilities after ten years of being hollowed out?

The government urgently needs to provide the certainty that the public deserves. Our worry is that because this package isn’t comprehensive, it ultimately won’t make us safer and may put our people at risk. Although it has been reported that there has been some communication between finance ministers, it’s certainly not clear that it is of the scale or depth of coordination of 2007/8.

As a result, whatever statements have been made have not had the effect of steadying markets or reassuring people more generally that there is an internationally agreed strategy to address the economic consequences of this emergency. Whatever criticism people may have of Gordon Brown’s policy strategy in the banking crisis, nobody can question the international leadership he showed and the focus and determination he brought to dealing with those events globally.

I regret that we have not seen that leadership, commitment, political, diplomatic and indeed managerial ability from either the Prime Minister or the Chancellor. As in the past, the UK could and should play a critical role in mobilising the international bodies we have, in particular the UN, to agree a global response to deal not just with the current wave of this pandemic but possible subsequent waves.

In addition to the emergency we face with coronavirus we mustn’t lose sight of the two other crises we face. One is the crisis in our public services, and in the levels of poverty and inequality in our society. The other is of course the existential threat of climate change.

Yesterday’s Budget failed to address the social emergency. A social emergency that sees 4.5m of our children living in poverty. 70 per cent of those children are living in households where an adult is in work. There was nothing in the Budget to relieve the hardships inflicted on our community by universal credit, the bedroom tax, and – especially for disabled people – the work capability assessment.

In fact the government’s own table accompanying the Budget shows that the bottom 10% fare the worst as a result of tax decisions made in this Budget and the last spending round, with the bulk of the benefits flowing to higher paid households. Some people are saying this could have been a Labour Budget. Those people haven’t looked hard enough at who wins and who loses from this Budget. Not one family will be lifted out of in-work poverty because of what was announced yesterday.

We heard again the government’s aspiration to get a national living wage to two-thirds of median earnings. But it’s not a real living wage. And it’s an aspiration for five years’ time. And only if “economic conditions allow”.

Worryingly, there is nothing of any substance in the Budget to tackle the long-term crises in each of our public services. Let’s take the justice system. In prisons, there has been a sharp rise in deaths, violence, self-harm, and suicides, all linked to cuts, according to the Institute for government. The House of Commons justice committee has pointed to a £1.2bn gap in justice funding. So the small sums in this Budget like £175m for prison maintenance – just won’t cut it. Not one prison officer will be safer on the landings because of this Budget.

And on domestic violence: according to Women’s Aid, ten domestic abuse victims are turned away from women’s refuges every day because of a lack of space. This Budget needed to commit £173m to ensure no survivor is turned away. It hasn’t done that. Without this funding, measures in the Domestic Violence Bill simply cannot be delivered. Not one women’s refuge can feel assured it will get the funding it needs.

When, as the NEU has said, class sizes are rising, subjects are being dropped, and inadequate pay is making the education staffing crisis worse. There will be few teachers from whom pressure will be lifted.

On housing, derisory sums earmarked for rough sleeping when we know at least £1bn is needed to reverse the cuts in homelessness services. The Chancellor said he would end homelessness. We heard that from the Prime Minister when he was mayor of London – that rough sleeping would be ended in London by the 2012 Olympics. Rough sleeping doubled during the Prime Minister’s second term as mayor.

Not one library will be reopened as a result of this Budget. Not one youth centre. Not one Sure Start Centre. The IFS told us that £54bn of day to day spending was needed, outside of health and social care, to return per head to 2010 levels. This Budget doesn’t meet that target. Why hasn’t the government gone further? People need to understand what conservatism is in this country. The Conservative Party will say or do anything it can to gain and retain power, except shift power and wealth to working people.

Just look at what they did yesterday: Choosing to keep Entrepreneurs’ Relief largely intact – a tax relief where 5,000 individuals make an average of £350,000 each. A u-turn on its tax on foreign buyers of UK property, reducing the surcharge from 3% to 2%. Reducing the amount of money earmarked for rough sleeping. So much, Mr speaker, for “the people’s priorities”. The social emergency has been created by a fundamental failure of economic policy.

We warned them that austerity would damage the economy. Ten years later the verdict is clear. Yesterday the ONS reported that, prior to the coronavirus outbreak, growth in the three months to January was 0.0%. Manufacturing output down by 1.2% over the same period, because of what the ONS described as “widespread weakness”. Productivity growth over the last ten years has been at a 0.3% average. Dismal pay growth, in the slowest economic recovery for a century, described by the chief economist of the Bank of England as a “pay disaster”.

Now, in this Budget, a 0.4% downgrade for GDP this year, before calculating the impact of the coronavirus. The weakest official growth outlook on record, according to the Resolution Foundation. Pay growth weakening in every year of the forecast. An outlook that will hit every household by £600 a year. And of course the Tories have failed to tackle in this Budget longstanding challenges at the heart of our tax system. Like how we treat capital alongside income fairly, how local councils can have stable funding, or how we rationalise the long list of tax reliefs that provide opportunities for tax avoidance and evasion.

The Tories have not scrambled together this Budget because good economic performance has made it possible. They have plagiarised Labour ideas – from rewriting the Green Book to bringing some of the railways back into public ownership.The Tories have always preferred gimmicky ideas and this week’s Budget shows that Tory tendency again – this time on infrastructure. A gimmicky grab-bag of projects announced, while the government puts off the national infrastructure strategy. And even those announcements are disappointing.

No commitment to deliver funding for the full northern powerhouse rail project. A £500m investment in electric vehicle charging infrastructure, four-fifths of which is a re-announcement from 2017. A pothole fund, repeating a policy announced twice under Theresa May, that will only be enough to repair a quarter of potholes. And an overall infrastructure pledge that only goes about halfway towards filling up the £192bn infrastructure hole that the Tories created by underinvesting between 2010 and 2020.

Again, the Tories have given us very little detail on who will build this infrastructure – and who gains from this investment. On broadband, their £5bn investment will be a subsidy to private providers like Virgin. And there is no sense in this Budget that the Tories have any understanding of the skills investment that is needed to ensure that infrastructure can be delivered.

Let’s not forget the third emergency we’re facing today. Future generations will never forgive this government for its failure to address climate change in this budget. Infrastructure investment, if properly planned, could have been an opportunity to shift the tracks on which this economy runs. The government has missed that opportunity.

The IPPR’s environmental justice commission has said £33bn a year in green investment was needed for the Government to achieve only its weak target of net-zero emissions by 2050. The Chancellor has fallen woefully short of that target. Instead the Chancellor has opted for £27bn for roads, which currently contribute 90% of the UK’s transport emissions. They’ve committed less than one fifth of that, on buses and cycling. Fuel duty still frozen, with no effective assistance to encourage the shift to less polluting cars and public transport. There is no new support for renewable energy sources like wind and solar In the year when we host COP26, this budget will be seen a betrayal of future generations.

The lessons we have to learn from this Budget are these: It shouldn’t take a medical crisis before a government wakes up to fund the NHS adequately. It shouldn’t take a collapse in the economy and the threat of recession to force the government to invest. It shouldn’t take our children striking to take climate change seriously. Ten years of immense suffering for nothing. For the pursuit of ideology, a political and economic experiment that’s failed, and will continue to fail.

This Budget should have been the most significant since the Second World War and a turning point. As time has allowed scrutiny of this Budget, it’s become clear it failed. It doesn’t come close to reverse the damage of the last ten years of austerity. I caution the Chancellor, you are sowing the seeds of disappointment and disillusionment which could stir up a form of politics none of us wish our country to experience.