Just back from the House of Commons, where I praised the Coalition Government for boosting the incomes of the poor despite the terrible economic circumstances. Prior to the statement there was speculation that the Chancellor would fail to give the unemployed and pensioners an increase that matched the current high rate of inflation. In fact out of work benefits will get a 5.2% increase and the state pension will go up by £5.30 a week. In response to a question from me the Chancellor also confirmed that the Coalition will continue to raise the income tax threshold in the next Budget, giving all basic rate tax payers a tax cut and lifting more of the low paid out of tax altogether.
It’s worth reminding ourselves that Britain fell into a deeper economic hole than any other major economy between 2007 and 2009. It all appeared really bad at the time…but in fact we now know it was even worse than Gordon Brown claimed. Accurate economic data lags behind events and the last Labour government published its own figures. The independent Office for National Statistics (ONS) has now confirmed that the economy shrank by 7% in the last 3 years under Labour. The Coalition has set up the independent Office for Budget Responsibility (OBR) to prepare economic forecasts. The figures George Osborne announced today were not his own, they were from OBR. The OBR have confirmed that growth will be lower than their previous forecasts but Britain is not heading f0r a recession.
The OBR have also stated that the low growth is not a result of the government’s deficit reduction, as Labour claim. Rather, it is a result of an external inflation shock (oil prices etc) and turbulence in the Euro zone. The OECD have made similar points. It is worth noting that in May 2010 Britain and Italy were able to borrow at the same interest rate. Now Italy’s borrowing costs have soared to over 6% whereas Britain’s triple AAA bond rating keeps costs at 2%, similar to Germany’s. This international confidence keeps down the cost of government borrowing and helps everyone with a mortgage or business loan to service.
The government has also acted to help young people who are struggling to find work. The £1billion Youth Contract, trailed by the Deputy Prime Minister last week, will give unemployed 18 – 24 year olds an opportunity to work in the private sector. We are also expanding child care places, helping parents to work and their infants to experience high quality early years education.
To boost economic growth there will be a splurge of capital spending. Bristol West will benefit from the £42 million rapid transit scheme from Temple Meads, through the city centre and onto Ashton. This will complement the electrification of the railway to Paddington.
The econmoic backdrop is stark. But our Coalition Government has acted to protect us from external pressures and to rebalance and strenghthen our economy.