Conservatives are proudly patting themselves on the back at the return of growth. But families know it will take years to recover from Osborne's time in office, says Rachel Reeves.
Today in Parliament, Conservative MPs have been patting themselves on the back at news that the economy is finally returning to growth. Their mood reveals a shocking disconnect with the reality facing families.
Of course it's welcome that the recovery, which was choked off back in 2010, is finally resuming. But the complacency and self-congratulation we have seen in the House of Commons today, in a debate on living standards, has been staggering. It goes to show just how out of touch they are with the lives of ordinary families struggling to pay the bills and make ends meet.
Working people are on average almost £1,500-a-year worse off since David Cameron became Prime Minister. Since the end of 2010, the UK has seen the biggest fall in people’s incomes of any country in the G7. Indeed, Cameron is entering the record books when it comes to overseeing falling wages for ordinary workers. Prices have risen faster than wages for 37 out of 38 months of David Cameron’s time in Downing Street.
The odd month out was April this year, when bankers reaped the rewards of deferring their bonuses until George Osborne’s cut to the top rate of tax was implemented. This decision means that 13,000 people with an income of over a million pounds will receive a tax cut worth on average £107,000. At the same time, an average worker will have lost £6,600 by the end of this Parliament.
George Osborne’s gamble on faster tax rises and spending cuts choked off growth in 2010 and has resulted in the slowest recovery on record. Two quarters of growth does not begin to repair the damage of three years of a flat-lining economy, and we will pay the price of Osborne’s folly for years to come. Youth unemployment at almost a million, businesses have lost investment opportunities and deficit reduction has stalled.
On every measure the government set itself – securing the recovery, boosting living standards, balancing the books or keeping Britain’s credit rating – they have failed. Simply to catch up the lost ground since 2010 we would need to see growth of 1.4% a quarter between now and election day in 2015.
We also need a recovery that is strong and sustainable, and an economy that is balanced where the benefits are fairly shared. That’s why we have called on the government to act on the IMF’s recommendation to act now to secure the recovery by bringing forward £10bn of infrastructure investment. This would allow us to build 400,000 affordable homes, create more than half a million jobs and make our economy stronger for the long term. Because simply boosting housing demand with a taxpayer guarantee while doing little to increase the supply of housing is not going deliver a balanced recovery.
We also need a long-term plan to deliver the right kind of growth – sustainable and broadly based – an issue I addressed in my speech to the Resolution Foundation this morning. That’s why we have asked Alan Buckle of KPMG to review what government can do to get more workers paid a living wage. It’s why Sir John Armitt will tomorrow publish a report commissioned by Ed Balls on how we can better plan the infrastructure investment we need. It’s why we have pressed the government for action on skills and apprenticeships, and to improve finance for small and medium sized enterprises.
Finally we need government to make fairer choices on deficit reduction and ease the squeeze on family living standards. That means reversing George Osborne’s tax cut for millionaires and using the money to help families that are struggling instead. And it’s why have called for a lower 10p starting rate of tax, paid for by a tax on homes worth more than £2 million, and a tax on bank bonuses to pay for a compulsory jobs guarantee.
Without a plan to get the country back on track and make sure people are better off, the government should be wary of complacency. At one point in today’s debate on living standards, there was only one Tory MP on the backbenchers, and no Lib Dems. That isn’t the behaviour of two parties that are on the side of hard-working families.