We need prosperity that is fairly shared

You might have thought George Osborne would have learned a lesson from his 2012 omnishambles budget. Not a bit of it.

He surpassed himself with a megashambles. No budget has unravelled as quickly and as comprehensively as this one did. Within a couple of days its main revenue-raising policy, the cut in personal independence payments, was abandoned, leaving a £4.4bn black hole.

The chancellor failed on compassion and competence.

The budget exposed the fundamental unfairness of his approach. That was true even before Iain Duncan Smith fired his broadside. The resigning secretary of state for work and pensions said the chancellor saw benefits as a pot of money to cut because claimants ‘don’t vote for us.’

He resigned because he felt that the Conservative party had, since the last election, begun a ‘limited, narrow attack’ on workingage benefits.

The Tories are in danger, he said, of ‘drifting in a direction that divides society rather than unites it’.

Duncan Smith echoed what Jeremy Corbyn had said in his budget reply – that this budget had ‘unfairness at its very core.’

The Resolution Foundation pointed out that 80 per cent of the gains from this budget’s changes to income tax will be to the top half of the income distribution, and nearly half to just the top 20 per cent of households.

It estimates that during this parliament households in the lower half of the income distribution will lose an average of £375 a year. Those in the top half will gain £235.

One of the most shocking aspects of the chancellor’s record is how women have borne the brunt of his policies. Since he has been in office 81 per cent of the tax increases and benefit cuts have fallen on women.

Now the Women’s Budget Group has shown that female lone parents and female single pensioners will see their living standards drop by an average of 20 per cent every year by 2020.

A week in March left the chancellor with his reputation in shreds. He is a diminished figure, whose flawed values, poor judgement and sheer incompetence have been exposed.

He is damaged goods – damaged, of course, by the ‘friendly fire’ from Duncan Smith.

But the real damage to Osborne has been self-inflicted, by the exposure of his failure on the economic fundamentals: infrastructure, skills, productivity, growth and exports.

Tory member of parliament Mark Field’s verdict on the Osborne record is just as devastating. He told readers of Conservative Home that, for all the chancellor’s talk about investment and export-led growth with less reliance on debt, the reality is that ‘a large chunk of the growth our economy has seen arguably comes courtesy of debt-fuelled consumption and a renewed housing and property boom.’

This is a Conservative MP telling us the chancellor has failed to rebalance the economy.

Osborne has repeatedly missed his target for reducing the deficit. Why? The reason is simple: he is economically illiterate. He has not understood the need to invest for the future. Only through investment will we see productivity rise, wages rise, tax receipts rise and a growing economy.

Wherever you look in the Osborne cuts you see false economies – a cut today leading to a cost tomorrow.

Take housing. In his first budget, the chancellor slashed housing investment by 60 per cent. Now the housing benefit bill is soaring, up £4.4bn since 2010 and now over £24bn. Home-ownership is down, with over 201,000 fewer households owning their home than when he came to office.

Or take flood protection. Spending was cut by £100m early in the last parliament. Among further cuts was a flood defence scheme that could have saved Leeds this winter. The total costs of last winter’s flood damage have been estimated by KPMG at over £5bn, £1bn of that falling on uninsured families and businesses. Now the chancellor has announced an increase for flood defence by over £700m by 2020-21.

These false economies are all incredibly wasteful. Short-term political gains, without regard for value for money or for the future, are the hallmarks of the chancellor.

There are deep structural weaknesses in our economy, and we are concerned this is in fact a recovery built on sand.

What was missing from the budget was a sustainable vision of the future; a vision of a Britain with a strategic partnership between government and business based on the cutting edge of technological innovations that are transforming economies around the world, and investment in world-class infrastructure and skills.

A vision of a Britain that is productive and prosperous, where the country is stronger and united because that prosperity is fairly shared.


Seema Malhotra MP is shadow chief secretary to the Treasury