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The Budget

I am grateful for that intervention because it allows me to repeat my point and for the public to understand the truth even more. I notice that the right hon. Lady has not challenged any of my arguments or any of my figures about debt, borrowing, the deficit, spending and so on. As a result of our policies, growth was increasing last year from the miserable situation during the recession caused by the banking crisis. We get a Conservative-Liberal Government and immediately we get a reversal of growth; it goes down. The OBR revised its forecasts into much lower growth. It is one of the lowest growth rates against any comparable economy in the world, as a result of these misguided policies that are so punitive towards Wales. Instead of underpinning the recovery as they could have done last year, the Government through this Budget, the CSR and their first Budget, are undermining the economy. Slamming on the brakes by slashing spending is no way to go for growth. What they should be cutting is their haste to bring down borrowing. By rushing to reduce the deficit they have now produced two botched Budgets. There is an interesting historical parallel. The American Government made exactly the same mistake in the 1930s. Having launched the new deal, which was a brave and successful attempt to get the American economy out of that desperate depression, President Roosevelt, who was under pressure to balance the budget, eased off on the new deal prematurely in 1936, only to see his economy stall and unemployment soar again. The lesson that the Government have failed to learn is to adjust the rate of deficit reduction to the pace of economic recovery. That is the point that needs to be understood. The Prime Minister used to talk about sharing the proceeds of growth between public spending and tax cuts. The Government should be investing for growth again, and should have done so for Wales in the Budget. Growth is the key to bringing the budget back into better shape. However, instead of advancing steadily through the gears as the economy picks up speed, the Chancellor is trying to force the pace of deficit reduction, which risks stalling the motor of growth and disabling the economy. His whole enterprise could condemn the Welsh economy to bumping along for years ahead, instead of forging forward, creating many more jobs, fulfilling the British promise, and giving hope to the new generation. The clocks have just gone forward, but the economy is going backwards. The recovery should be picking up speed. Instead, it is losing momentum, as the report by Office for Budget Responsibility confirmed. As we heard in the Chancellor’s statement last week, growth this year is forecast by the OBR to be only two thirds of what it would have been if based on Labour’s previous Budget. It is predicted to be only 1.7%, against Labour’s 2.6%. Other forecasters put the figure even lower; the National Institute of Economic and Social Research and the OECD both forecast only 1.5% growth in 2011. What a contrast that is with Germany, for example, where growth this year is forecast to be 2.6%. Growth is slowing, even before the big spending cuts have begun to bite. The Government’s policy is not working, but it is certainly hurting Wales. The Budget only prolongs the pain. Growth is slowing down, unemployment and inflation are going up, and families on low and middle incomes are suffering in the tax and spending squeeze. Only yesterday, the Office for National Statistics pointed out that real incomes fell last year by 0.8% for the first time in 30 years. That approximates to more than £1,000 per person in Wales. This year, it will be worse. The ONS projects that they will fall by 2% in real terms, as a result of the Government’s policies. The Chancellor is sticking to his debt and deficit targets, but he is already falling short of his growth, jobs, and prosperity targets.