John McDonnell speech ahead of Budget

John McDonnell MP, Labour’s Shadow Chancellor, delivering a major speech today ahead of the Budget, said:

Thank you for coming along.

This is the last prebudget speech that I will do as Shadow Chancellor before I return to the backbenches hopefully to play the role of an elder statesman.

It does give me maybe a bit more of a wider and longer perspective, released from some of the usual knockabout of day to day politics. 

So this morning I wish to set the scene for the budget on Wednesday.

This should be one of the most significant budgets in our peacetime history.

Why?

Well because we are facing three of the most serious emergencies that coming together our country has ever faced.

Immediately, we face the crisis of coronavirus as it impacts upon our country, with potentially immensely dangerous and, already for some, with tragic consequences.

After ten years of harsh and unnecessary austerity, we also face a social emergency, with extremes of poverty and inequality and crises in every one of our core public services.

And, of course, we are confronted by the overall existential threat of climate change and the growing, deeply troubling realisation that we are rapidly running out of time to avert a climate crisis 

Let me be clear on the question of coronavirus; this is not the time for any party politics or partisan behaviour.

I want to thank and pay tribute to the work, the professionalism and the dedication of the country’s Chief Medical Officer and the Chief Scientific Adviser.

I also want to express my thanks and, as always, my admiration to our NHS staff, who once again, as always, are rising to the challenge of providing us with the care and treatment we need, despite being under existing, huge pressures. 

As an Opposition, we will support the Government in implementing plans needed to keep our people safe and out of harm’s way.

Anything we say or do will be to support constructively the policies and programmes we believe are needed to tackle this health emergency. 

In that spirit, let me say that there are lessons to be learnt already.

The first is speed of action.

Of course, the Prime Minister should have called COBRA sooner.

Days and hours matter when you are dealing with a crisis of this significance and urgency.

The Chancellor also should have made clear immediately, ten days ago, in a major public statement and to Parliament that the Government stood ready to do everything necessary to support our economy and to participate in global action to maintain market confidence.

In these circumstances, you need to be fast in demonstrating that there is a clear plan of action nationally and internationally.

Attempting to let out assuring noises in dribs and drabs is not enough and has proved to be not enough. 

The Government’s delaying of any statement of an economic plan to the budget date doesn’t seem to appreciate the urgency of action needed to promote confidence and reassurance amongst investors, businesses, consumers, workers and their families. 

That’s why, in the absence of any announcements from the Government, last Monday I published my advice to the Government on the basics of a 5 point action point plan for the Chancellor. 

The action plan simply brings together the basic steps any government would take in dealing with the potential economic impacts of an emergency of this scale.

Naturally, it starts with a call for the coordination by the Treasury with the Bank of England, the OBR and the business bodies and TUC of an overall and regular ongoing assessment of the potential impacts of the spread of the virus.

We need to monitor constantly the consequences for production, consumption, and GDP and the resilience of the financial system.

We have heard some assessments by individual bodies, such as the Bank of England, but no assuring, authoritative, coordinated assessment dialogue amongst our national institutions.

Just as the Chief Medical Officer has been able to reassure people with his openness in reporting, so the Chancellor should also be on the economic progress of this situation.

The Treasury should also take responsibility for coordinating departmental impact assessments and resource planning in order to prepare a funding plan for increased resourcing for agencies and departments, using a variety of scenarios reflecting different possible levels of the severity of the outbreak.

What concerned me and still does, is the tardiness by the Chancellor in seeking to reassure the public and markets more comprehensively that the Government stands ready to intervene in the economy.

It is best to be straight with people now and acknowledge the limited effectiveness of monetary policy and make it absolutely clear that the Government will back fiscal measures to overcome short-term demand and supply issues, including liquidity challenges and to provide the detail of those measures. 

Of course, attention needs to be given to the impact on vulnerable groups likely to be particularly affected by any outbreak, including families of individuals who have contracted the virus, and households where self-isolation and sick leave are required.

The vague statements from the Chancellor so far, lack the detail to give confidence to many very financially vulnerable people, often in precarious work, that the will be supported and protected.

Immediately we need the details of the protections planned for workers, including paid sick leave guarantees for all workers of whatever status from day one and sick pay for self-isolation.

The gig economy, zero-hours contracts, and earning thresholds means around 2 million workers are ineligible for statutory sick pay.

It’s unacceptable that some of the lowest-paid workers who need to self-isolate will be forced to make a choice between their health and financial hardship.

The Government’s emergency legislation and actions must guarantee that the right to sick pay from day one will include those people who are not currently eligible for statutory sick pay, and that no one on social security will be sanctioned if they miss appointments.

The Prime Minister appears to be particularly out of touch on this issue.

He stated last week that anyone who does not qualify for statutory sick pay can claim universal credit.

Apart from the five-week wait for payment, you can’t make a claim for universal credit online because you have to meet a work coach and that means you have to go to a jobcentre at the start of the claim.

Also, to get an advance in universal credit, which is a loan, you have to go to the jobcentre to have your ID-verified.

So people will not be able to get money at the start of their claim. 

The key issue is that no one should have to choose between health and hardship. 

This is a matter of public health concern for everybody.

The Prime Minister clearly does not understand how the system works.

So someone in Government urgently needs to take an active lead on this and consult with the trade unions on the measures that are necessary as this emergency develops.

International coordination was critical during the financial crisis of 2007/8.

Although it has been reported that there has been some communication between finance ministers, it’s certainly not clear that it is of the scale or depth of coordination of 2007/8.

As a result, whatever statements have been made have not had the effect of steadying markets or reassuring people more generally that there is an internationally agreed strategy to address this emergency.

Whatever criticisms people may have of Gordon Brown’s policy strategy in the banking crisis, nobody can question the international leadership he showed and the focus and determination he brought to dealing with those events globally.

I regret that we have not seen that leadership, commitment, indeed political, diplomatic and indeed managerial ability from either the Prime Minister or the Chancellor.

I just say gently, someone needs to get a grip.

As in the past, the UK could and should play a critical role in mobilising the international bodies we have, in particular the UN, to agree a global response to deal not just with the current wave of this pandemic but the possible subsequent waves.

The coronavirus infection has exposed the social emergency that we face in our public services after ten years of austerity.

Ten years of cuts and failure to invest in our public services has meant that we are extremely ill-prepared for dealing with this type of large scale health risk to our community.

Our dedicated and professional NHS workers will always do their utmost to rise to whatever health challenge is thrown at them.

But they are hampered by ten years of Conservative-led governments refusing to provide the resources needed to deal with a growing and ageing population. 

The NHS is already under intense pressure after years underfunding and understaffing.

17,000 beds have been cut.

Bed occupancy levels were at 94% last week. Critical care bed occupancy was 80%.

These are the beds we rely upon in episodes like the coronavirus.  

The NHS is also short of 100,000 staff – including over 40,000 nurses and thousands of doctors.

Of course, an emergency cash injection for the NHS is needed in the Budget to help to deal with coronavirus. 

The Chancellor has said that the NHS will get what it needs.

The expression a blank cheque has been used.

But we also have to recognise that the NHS needs putting on a long term stable footing with secure financial backing from the Government in this budget.

Just as we have over the coronavirus outbreak, we must listen to the clinicians and experts when it comes to what is needed for the long term.

Worryingly, Directors of Public Health still don’t know their public health allocation for the next financial year starting next month which means they could be cutting nurse workloads, at a time when those very nurses may be needed to deal with Covid-19 cases.

My only hope is that the announcement of the public health allocations has been held back by Dominic Cummings for a publicity splash on budget day.

Whatever is announced on public health spending, it needs to recognise that public health budgets have been cut by £1 billion in recent years and if we are to have sustained control of the coronavirus and cope with the growing health needs of our population, we need an investment of that quantum at least. 

We know that staff in the NHS will do the absolute best job they possibly can in the difficult circumstances they are facing, during its busiest period. 

Our NHS has previously navigated similar outbreaks of flu, monkey pox and Ebola and everyone in the NHS has our full support. 

If there is to be any good that comes out of the tragedy of the coronavirus outbreak my hope is that it is that it serves as the wakeup call needed to secure the long term resources our NHS needs.  

Just as the coronavirus outbreak has exposed the vulnerability of the NHS due to a decade of Conservative austerity, the impact of Conservative austerity on our social care services is potentially even starker and more dangerous.

Social care in our country is already in crisis. 

87 people die each day before they receive the care they need.  

There are over 122,000 staff vacancies in social care.

The majority of people who do receive social care support are older, disabled or vulnerable people.

These are the people most at risk from the coronavirus infection.

Since 2010 a £4.3 billion funding gap in social care budgets has been brought about by Conservative austerity.

As a result, providers and local authorities are already stretched to near breaking point.

Any further pressure – as a result of widespread infection and/or major outbreaks in care homes – has the potential of fracturing our fragile social care system.

A large section of our care workforce is now also under threat from the Government’s recently announced immigration policy.

The GMB union’s research calculates that the Government’s immigration policy will cost the care sector 500,000 staff.  

Without foreign care workers, our care system would collapse. 

The message is clear to the Home Secretary- do not put our social care system at risk.

Pragmatism must override ideology. 

Social care in this country also still often falls on the shoulders of family members.

Usually, it still falls to the older women in families.

It is many of these women whose pension age was increased without proper consultation or notification, who were effectively robbed of many years of their pension and who this Government, despite all of Boris Johnson’s pre-election promises, has refused to compensate.

When I met the WASPI women last week, it’s no wonder that they were angry still.

It is clear that we need more in this week’s budget than another round of prevaricating consultation on social care.

We need concrete plans backed up with both immediately available and long term solid finances.

We hear that there has been some discussion in Government about the potential of social disorder associated with the coronavirus outbreak.

No matter how distant, this prospect should force the Government to take an objective look at our justice system.

It is also in crisis.

The Justice Select Committee calculated a £1.2 billion-pound funding gap.

In prisons, the Institute for Government has reported a “sharp rise in deaths, violence, self-harm, poor behaviour and drug use – as well as a drop-off in efforts to rehabilitate prisoners”, all of which could “be linked to the cuts in government spending on prisons, and a fall in the number of prison officers.” 

Prisoner-on-prisoner assaults and self-harm have more than doubled from since 2010.

Police numbers have been cut by 23000.

The mismanagement of our economy over the last decade has made us especially vulnerable to shocks to the system like the coronavirus outbreak.

The UK economy has experienced the slowest recovery from a downturn in over a century.

Productivity growth has averaged a dismal 0.3%, putting firms in a precarious position when supply chains are disrupted.

Business investment is flatlining.

And we now have almost four million people in insecure work with nearly a million on zero-hours contracts, meaning millions of workers do not have guaranteed sick pay or other protections. 

According to the New Economics Foundation, ten years of austerity cuts to our public services have drained £100 billion from our economy.

It has caused a social emergency combining both crises in our public services with high levels of poverty and insecurity.

Universal Credit continues to be rolled out with 2 million families losing more than £1000 a year. 

750,000 households losing an average £3,600 a year from the two-child limit. 

4 million of our children now live in poverty.

Over two thirds of them in a household where someone is at work.

The recent Marmot report showed that life expectancy has failed to increase for the first time in a hundred years and for the poorest 10% of women life expectancy has declined.  

To tackle this social emergency, we need a fair taxation system that reverses many of the Tories’ tax cuts to the rich and corporations and tackles the current industrial scale of tax avoidance and evasion. 

Instead, all that is hinted at so far is a lift in the National Insurance threshold, the bulk of which will go to the better off, various relatively minor tax relief reforms and the introduction of free ports, which have a notorious reputation as tax havens and displacing existing investment and jobs.

The Government is set to continue to ignore the hardship caused by universal credit, the two-child limit, bedroom tax and PIP. 

The budget has been much hyped for the start of the so-called levelling up, especially in infrastructure investment outside of London and the South East.

£100 billion over 5 years has been proposed.

To put that in context, had the Tories invested what was needed on infrastructure over the last ten years – at least 3% of GDP – £192 billion more would have been spent. 

What investment the Government has made has disproportionately favoured the capital. IPPR North has calculated that transport investment has increased by 2.5 more per person in London than in the North in the last decade. 

The Government’s much-vaunted additional infrastructure spending fails to go anywhere near filling the hole in investment the Conservatives created or what is needed. 

And even more disappointingly we learnt last Thursday that the publication of the Government’s much-vaunted National Infrastructure Strategy has been delayed again.

4 years ago, I launched Labour’s campaign to tackle regional inequality and then called for a rewrite of the Treasury Green Book, consideration of a Barnett type funding arrangement for the regions, the move of large sections of the Bank of England, Treasury and a National Investment Bank outside of London. 

We have seen a lot of kites being flown by the Chancellor this weekend attempting to plagiarise these ideas, but nobody is holding their breath in anticipation of them happening on the scale needed.

Far from levelling up, the IFS has made it clear that austerity is baked into the Government’s plans. 

Their assessment is that £54 billion of current spending is needed just to get back to departmental spending per head of 2009/2010 levels.

The Government holds out no hope of ending or let alone reversing its austerity.

For those that believed Johnson’s promises of change, they face the risk of five years of disappointment.

Of course, addressing coronavirus and the social emergency in our country are the immediate issues but hanging over all our heads is the ever-present existential threat of climate change. 

Despite warm words from the Government on prioritising the environment in this budget, there is little evidence that the seriousness and the imminence of the climate emergency has penetrated government thinking.

The IPPR’s environmental justice commission has published its report arguing that the Government needs to spend an additional £33 billion a year on measures to tackle climate change if it is to achieve its target of net-zero carbon emissions by 2050.

Various capital projects have been listed by the Government on decarbonisation of housing, public buildings, carbon capture, electric vehicles and flood defence but the sums are very slight and judged inadequate to address the system-wide shifts needed.  

Nothing that the Conservatives have said suggests that they have a sense of the urgency and ambition required to tackle the threat of climate change.

If the UK is to have any credibility as hosts of COP 26 we need to be seen to be leading in the implementation of a green new deal backed with sufficient funds to decarbonise our economy.

That also means addressing the role of the finance sector in financing fossils fuels and contributing to climate change.

In conclusion, I cannot overstate the significance of this budget.

Of course, the immediate and pressing challenge of this week’s budget is to ensure that the necessary resources are delivered to our NHS and to social care services to meet this health risk head-on, to contain it and defeat it.

Resources are needed to ensure members of our community are protected from both the medical harm but also the financial hardship that threatens them from this outbreak.

However, the natural focus on the coronavirus should not be a reason or an excuse for not addressing the equally serious and dangerous threats from the social emergency created by a decade of decline and the climate change crisis we also face.

The scale of government intervention on both these emergencies mooted so far fails to recognise the significance of the threats we face from the rundown of our public services and from the running out of time to halt the climate crisis.

I hope that the Government has woken up to the state of our public services and the poverty and insecurity in which so many of our people live.

I can only hope that fires in Australia, the burning of the Amazon forest and the flooding hitting even our own country has so chastened the Government to act this week.

If not, we are told there is likely to be a further fiscal event later this year.

We will need then all of us to join with others to mobilise a social movement on a scale that forces action.

It will be for a new Shadow Chancellor to support us in that campaign.

And I am sure that he or she will.

Thank you.