Welsh Grand Committee: The Flaws and Failings of Gordon Brown's Budget

Speech by Lembit Opik delivered to Welsh Grand Committee on Wed 19th Apr 2006

Tony Blair famously said last year that his one regret in his time as Prime Minister was not going far enough with his policies.

What did he want to add to the list of triumphs of his Labour administration? ID cards for pets? Should we have attacked Iran as well? Ah, but the answer comes with the Chancellor's budget.

This is a timid budget from a cautious chancellor. Its main failings are not what it contains, but what it lacks.

On personal debt, on unfair taxation, on our unsustainable pensions system, the budget is as silent as a quiet as a Trappist monk. On the environment, it whispers when it should roar.

This is ironic, because the Chancellor's recent speeches have generally been more impressive in volume than in vision.

When Labour were elected in 1997, many people in Wales saw the prospect of genuine reform. I did. And I WANTED to be impressed. But I just feel a bit let down now. Instead of grand reforms we've seen efficient but unimaginative management.

In fairness, the Chancellor does deserve credit for his ongoing investment in schools, and for the continued economic stability he has overseen - though obviously the money has to trickle into Wales through the utterly outdated Barnett formula.

But increasingly, the economy, is balanced uneasily on a growing mountain of personal debt. Personal debt in this country has now reached more than a trillion pounds. That means the British public currently pays £1 million every ten minutes in interest. This budget ignores that fact.

The chancellor could do something about this: like protect consumers from hidden debt charges on credit and store cards; establish a code for mortgage payment protection insurance; and include the cost of housing properly in the inflation figures, so we see the true pressures on households.

Ignoring the problem will not solve the problem. But the Government seems content to pretend it's not there.

Nowhere is the Chancellor's conservatism more apparent than on taxation.

After 9 years of Labour the poorest 20% of people in Britain still pay a higher proportion of their money in tax than the richest 20%. After 18 years out of power you'd have thought Labour would be bursting to tackle the severe economic and social inequality that grips this country.

Yet the the wealthiest 10% of the population own 56% of Britain's marketable wealth- higher than in 1997. The poorest half of British society actually own less of Britain's marketable wealth than they did after 18 years of the Tories - including Margaret Thatcher. People like her are better off now than they were under her! Thatcher should be voting Labour!

In large part the tax system is to blame. Hundreds of thousands of people across Wales, including our poorest pensioners, are being hammered by the unfair council tax.

The only respite Mr. Brown has offered was a £200 rebate. But it seems this was a special one-off deal- available only in election year. Gimmicks don't make up for injustice, especially when the gimmicks disappear as well.

The legacy of Labour's failure to scrap the unfair council tax and replace it with fair local income tax based on ability to pay typifies the problem. This Chancellor embraces trickle-down economics, just as Thatcher did before him. So the rich got richer, and the poor have a smaller share of the economy than they did when the Current Chancellor moved to 11 Downing Street.

The Welsh public want a Government that cares about equality and fairness, not hedge funds and Public Private Partnerships which mortgage the future for a short term gain. If the Chancellor wants a fairer society he should take meaningful action on taxes. Otherwise he'll be remembered as the chancellor who fiddled while inequity burned the poor.

Also the overwhelming reliance on complicated credit systems just adds confusion. In Wales last year almost 35% of tax credit awards overpaid leaving over 100,000 Welsh families repaying over £1000 each.

Across Britain, DTI figures published recently showed that pensioners have paid £4.5 billion too much council tax since 1997. That's more than £500 each. Almost 50% of pensioners are missing out on the benefits they are due.

Pensions

One-in-five pensioners in Wales live in relative pension poverty, with almost 70,000 not claiming the credits they're entitled to.

Two weeks ago Lord Turner re-emphasised his position on pensions. He had to re-emphasise it because the Chancellor was telling everyone how wrong Lord Turner was, before anyone had even seen Lord Turner's conclusions.

It seemed then that the Chancellor was the only man left in Britain who agreed that infinite means-testing was the way-forward for British pensions. Now we're told the Chancellor agrees with 90-95% of Turner's conclusions.

The Welsh Liberal Democrats, and the Welsh public, are anxiously awaiting Mr. Brown's pensions u-turn to become a reality.

As for the Barnett Formula, this is a system so outdated and unfair that even its inventor, Lord Barnett, says it should be junked.

The Barnett squeeze is beginning to take effect, most notably in the deficits run up by the Welsh health service.

There is no excuse for the Government's persistent lie that the Barnett formula is still adequate. It's obvious we should have a needs based formula. Again, no action on this key issue.

We were lectured at length in the Budget speech about the importance of science jobs, and research and development to the British economy. But at the Institute of Grassland and Environmental Research in Mid-Wales, we've just seen dozens of jobs lost because DEFRA, a Government department, have withdrawn a vital contract.

The Home Office budget will be frozen in real terms over the next three or four years. But the Home Office are pushing through two of the most ill-though out and uncosted policies in recent times: the reformation of police forces which could cost as much as £600 million, and the implementation of ID cards, which could waste £3 billion - for no significant benefit to the British people whatsoever.

The Government has its priorities wrong.

Our unfair tax system and our inadequate pensions system are ageing, rusting relics, not fit for modern Wales. Our mounting personal debt problem needs tackling. And our environment needs more than token gestures.

But fear of reform is paralyzing this Government.

This is a negligent budget from a nervous chancellor, timid where he should be bold, and failing to give Wales the reforms it so badly needs. It's not only the Prime Minister who should be worried about not going far enough.

Lib Dems WOULD introduce local income tax. We WOULD replace the Barnett formula with a fair needs based system. We would address the pensions crisis by introducing a basic state pension that would ensure no-pensioner lived below the poverty line.