The global banking and economic crash six years ago left us with a massive spending deficit, that had - and still has- to be dealt with. It wasn't driven by borrowing too much for pay for police officers and nurses, either - a fact George Osborne once understood so well so that he was committed to supporting Labour's spending plans right up until 2008. Nonetheless, it remains true that a deficit caused by the aftermath of the banking crash has to be cleared- it costs billions of pounds to service in interest payments. The Coalition came in with a cast -iron promise to clear the deficit by 2015, rejecting our plans to go more slowly and carefully with a still weak economy. They failed. They have borrowed £219 BILLION more than they said they would back in 2010. And they failed whilst also making harsh cuts to public spending, wage top ups for the working poor and more. Now they re-make the promise to clear the deficit by 2020, but with more than half of their planned spending cuts still to come. These plans will reduce public spending, as a share of our national wealth, to a level not seen since the 1930s.
Why did they fail, despite deep spending cuts and- to be fair- the creation of many new jobs? The answer lies in the (modern equivalent of) millions of pay-packets. People simply aren't earning enough. The economy we now have is not improving living standards for most people, and it isn't leading to tax revenue coming in. The average person in full time work is £2000 a year worse off than in 2010. Too many new jobs are low paid and insecure. Only today I was helping a mum of 3 employed by a company providing social care in Westminster, whose zero-hours contract means she doesn't know from one week to the next how many hours she will be working for. And even in Westminster a quarter of all jobs are paid below the Living Wage, with London suffering particularly badly from the increase in low pay. If people don't earn enough, they don't pay tax- and millions rely on tax credits and Housing Benefit top up their inadequate incomes. So over the life of this Parliament spending on social security is over £20bn higher than was planned in 2010. On top of everything, growth is now expected to slow down next year.
We have to turn this around. We need the public finances back on a healthy footing, and this will have to include cuts in public spending, such as removing the Winter Fuel Allowance from the top 5% of pensioners, and a 1% cap on Child Benefit for 2 years. We need the economy to grow- if it grew just 0.5% faster than the-now down-graded projection for next year, borrowing would be £32b lower over the next Parliament. It also means we need to raise more revenue.
The Conservatives have made changes to Stamp Duty, raising bills on properties worth over £938,000. Yet this will actually cost money overall- the Government estimates the bill at £800m. It also adds £63,750 to the existing Stamp Duty on a £3m house, according to Knight Frank- which puts Labour's £3000 annual charge for a £2-£3m property in some perspective. However, it does mean they have accepted the need to ask people in high value properties to contribute more. Even the local Conservatives are now also proposing a total re-banding of Council Tax and a new top ‘mansion' band, recognising, as we do, that it is ludicrous for the owner of the multi-million house to be paying the same annual charge as applies to a home worth a fraction of that. The difference between us is not one of principle, but of detail- as they say of their scheme: "(the) big diff between this and mansion tax - money would be ring-fenced locally for councils to build more affordable housing".
More will still need to be done. Above all, the economy needs to be working for most people- which is clearly is not at the moment. That is why we want to see a higher minimum wage, tax breaks for employers paying the living wage, greater security at work by tackling the abuse of zero-hour contracts, lower business rates for small firms, more house-building and expanded free childcare for working parents- all fully funded. And we will make sure our precious NHS gets the resources it needs. And that is where the choice will lie for the country next spring.