The Conservatives have stifled recovery, and now they are hitting hard-pressed wage earners with a cost-of-living crisis and cuts to benefits and tax credits
We ended 2012 with the chancellor setting out the painful reality of his economic failure. We start 2013 with families getting the bill. The chancellor has overseen an economy that his own forecasters say shrank last year, and has had to downgrade growth for every year of this parliament. Two years ago George Osborne told us he would balance the books by 2015, but after two years of sharp tax rises and deep cuts to services, he says he needs another five years.
Indeed, despite the pain, we are no closer to a balanced budget as the economy stutters and stalls. The fact is, as Ed Miliband and Ed Balls have warned, you need growth to get the deficit down. In the global race, Britain has fallen behind, expanding by just 0.7% in the last two years while Germany grew by 3.5% and the US by 4%. This failure amounts to £212bn more borrowing, because cutting too far and too fast choked off the recovery, pushing up welfare bills and business failures.
Now this failure is hitting home, with the triple whammy of the cost-of-living crisis, cuts to benefits and tax credits. For the poorest in society, an increasing number of people relied on food banks over the festive period. The Trussell Trust, which runs food banks across the country, estimated that demand at Christmas had doubled in a year. In Leeds I saw this scandal unfolding when I visited the food bank in my constituency, distributing food parcels not just to the jobless, but to those in work too. It cannot be right that in a civilised society and alongside such wealth, so many cannot afford to feed their families.
Far from attempting to confront the unfolding cost-of-living crisis, Osborne is asking hard-working families to pay for his economic mistakes. The Institute for Fiscal Studies says that an average one-income family with children will lose £534 as a result of the autumn statement. At the same time, some rail passengers are seeing their fares rise above inflation. Despite promises that increases would be capped, an anytime return between London and Norwich will go up from £98.60 to £107.70, a rise of 9.2%.
In April, the “granny tax” will see 4.4 million pensioners lose out, including those with small personal pensions worth just £67 a week. In the same month, millionaires will receive a tax cut worth on average £107,000. Even US Republicans have agreed to increase taxes on people earning more than $400,000, yet Tories are giving money back to the wealthiest.
And while the government likes to pretend it’s on the side of “strivers”, tomorrow the chaotic and unfair child benefit cuts become a reality. Single-earner families on £50,000 will see their child benefit cut, while some dual-earner families on as much as £100,000 keep every penny. This is not a policy of a government that understands and appreciates aspiration. To make matters worse, the latest official forecasts for growth in 2013 have been cut, and unemployment is now expected to be higher in every year of this parliament.
Tomorrow is also the day that MPs return to parliament. Over Christmas we have seen the prelude to this debate as Osborne has played crude games with welfare, pretending to target those with “their blinds down” as others go out to work. But the Resolution Foundation has shown that more than six in 10 households hit by the cuts are in work. The government is hitting families on modest incomes, desperately trying to do the right thing but surviving on low wages.
George Osborne and David Cameron do not have a positive vision for where they see our country headed. They should be thinking about the big challenges facing Britain in the years ahead. But no action has been taken on the reform we need to our banking system, national infrastructure or vocational training. They rejected Labour’s proposal last week for a compulsory jobs guarantee for the long-term unemployed. They cannot bring the change we need because they don’t see anything wrong with the way this country is run in the interests of a few at the moment.
In these difficult times, the country longs for a collective spirit – as we saw during the Olympics. The British people know we face great challenges and sense this is a time for big ideas. Ed Miliband has set out a different direction for Britain. Instead of the race to the bottom planned by the Conservatives, Labour would rebuild Britain as one nation, a country where prosperity is fairly shared, everyone plays their part and no one is left behind. This year you will see one-nation Labour standing up for the young person looking for a job, the pensioner struggling with the heating bills, and the parent juggling work and family life.
Sound public finances are essential for our country’s prosperity. Difficult decisions are required, but with the deficit rising as the economy struggles, more needs to be done to reduce unemployment, support small businesses and get the economy growing – all essential for deficit reduction. We need a fairer Britain, where those who are suffering most are supported, not reduced to relying on food banks, where modest and middle income families are not squeezed further and where a strong and growing economy boosts jobs and incomes for ordinary people.
Rachel Reeves is Labour MP for Leeds West and shadow chief secretary to the Treasury. Heather Stewart is away