The government's economic plan is failing. Instead of more of the same failing policies we need a bold and radical Budget this week to kickstart our economy and help millions on low and middle incomes struggling with the rising cost of living.

Briefing for Labour Group Leaders

Pre-Budget script

The government's economic plan is failing. Instead of more of the same failing policies we need a bold and radical Budget this week to kickstart our economy and help millions on low and middle incomes struggling with the rising cost of living.

Our economy is flatlining, prices are rising faster than wages, the deficit is going up and even our triple-A credit rating has been lost. On every economic test this Government set itself, it has failed. It’s no wonder the Cabinet are losing confidence in the Prime Minister and his downgraded Chancellor by openly calling for a change of direction.

We need action now to kickstart our economy, create jobs and support businesses:

·         bring forward long-term infrastructure investment in schools, roads and transport and build thousands of affordable homes — getting builders back to work, creating the homes we need now and strengthening our economy for the future;

·         temporarily reverse the government’s VAT rise to boost spending power in the economy;

·         give small firms a national insurance tax break if they take on extra workers;

·         get people back to work to help get the benefits bill down by guaranteeing a job for every young person out of work for a year or more and every adult unemployed for over two years – a job that they will have to take up or lose their benefits – funded by a fair tax on bank bonuses and changes to pensions tax relief for the very richest;

·         and get lending going to small and medium-sized companies, who desperately want to invest and expand, by establishing a British Investment Bank.

A strong and sustained recovery can only be made by the many, not just a few at the top. So we need to ease the squeeze on people on middle and low incomes who are seeing their living standards fall year after year:

·         next month's tax cut for millionaires should be cancelled. It cannot be right that millions are being forced to pay more for this government’s economic failure - and through cuts to tax credits, child benefit, maternity pay and the bedroom tax - while millionaires get an average £100,000 tax cut;

·         we need fair tax cuts for millions of people on middle and low incomes, for example by bringing back a new lower 10p starting rate of tax (paid for by a mansion tax on homes worth over £2 million) and putting right a mistake Labour made in the past;

·         and if the government finally wants to help families with the growing cost of childcare, they should start by reversing their cuts to childcare tax credits which cost a family with two children up to £1,500 a year and extending Labour’s free nursery places from 15 to 20 hours a week.

The government is borrowing to pay for economic failure:

·         David Cameron says any action to kick-start the economy will lead to more borrowing. But the government is already borrowing more to pay for the costs of their economic failure.

·         Without growth we cannot get the deficit down. If confidence is crushed, businesses go bust, long-term unemployment soars, the Government gets less from tax revenues and the benefits bill goes up.

·         That is why the deficit is rising this year and the Government is set to borrow a staggering £212 billion more than planned to pay for the mounting costs of its economic failure.

·         This doesn’t make any sense. A steadier and more balanced plan – sensible spending cuts and tax rises, together with measures that support our economy, create jobs, invest in infrastructure, and reform our economy for the long term – would be fairer, more successful in getting the deficit down and make Britain better off for the future.

Background: Three years of economic failure

After nearly three years in the job, George Osborne’s record is one of failure – failure on growth, failure on living standards and failure on his own tests on the deficit and debt.

Failure on growth

·        Since George Osborne’s spending review in 2010, the UK economy has grown by just 0.7% compared to the 5.3% forecast at the time.

·        Only two other G20 countries have grown more slowly than the UK in that time.

·        Last year the UK went through a double-dip recession and the economy shrank by 0.3% in the last quarter.

GDP growth (%)	2011	2012	2013	2014	2015	2016
June 2010 Budget OBR forecast	2.3	2.8	2.9	2.7	2.7	n/a
Latest OBR forecast	0.9	-0.1	1.2	2.0	2.3	2.7

Failure on living standards

·        With the economy flatlining and inflation high, real wages have fallen since this government came to office meaning people are worse off.  

Real wages (%)	2011	2012	2013	2014	2015	2016
June 2010 Budget OBR forecast	-0.5	0.4	1.8	2.4	2.4	n/a
Latest OBR forecast	-2.3	-0.1	-0.3	0.6	1.7	2.0

Failure on the deficit and debt

·        Lack of growth has meant more borrowing to pay for the costs of economic failure – with borrowing forecast to be over £200bn more than planned at the time of the spending review.

·        The government will not “balance the books” by 2015 as David Cameron promised.

·        National debt as a % of GDP is not now forecast to start falling until 2016/17 – breaking one of the government’s fiscal rules.

·        Latest ONS figures show that public sector net borrowing (PSNB), excluding the Royal Mail and Asset Purchase Facility transfers, is over £5 billion higher so far this year than the same period last year.

PSNB (£bn)	11/12	12/13	13/14	14/15	15/16	16/17
Nov 2010 OBR forecast	117	91	60	35	18	n/a
Latest OBR forecast	121.4	119.9	111.6	98.6	81.2	49.0

Debt (% of GDP)	11/12	12/13	13/14	14/15	15/16	16/17
Nov 2010 OBR forecast	66.3	69.1	69.7	68.8	67.2	n/a
Latest OBR forecast	66.4	74.7	76.8	79.0	79.9	79.2