The budget will exacerbate inequality

John McDonnell who wants to challenge Gordon Brown for the Labour leadership gives his reaction to t

Ten years in power affords any Government the opportunity of laying the foundations of the society it aspires to create. Ten Brown budgets have produced a society which is more unequal today than when New Labour was elected in 1997. Just look at the facts. In 1997 the richest 1% owned 25% of marketable wealth. By this year that had risen to 34%. Meanwhile the poorest 50% had gone from holding 6% of the nation’s wealth in 1997 to just 1% today.

Today’s budget will exacerbate the problem of inequality.

The Chancellor’s announcement to cut Corporation Taxes will fuel even more obscene City bonuses and will be paid for by the cuts announced in the wages and jobs of public sector workers over the next two years. As part of this attack on public sector wages, the Government has quietly started the process of introducing local pay rates for public sector workers based upon an assessment of the local labour market. Public sector workers undertaking the same work will be paid less in vast areas across the country if local pay rates are low.

Vying with the Tories on tax cuts as an electioneering stunt may appear as a morale boost in the short term but in the longer term will undermine any strategy to create a society capable and willing to fund the public services our community needs and tackle the inequality and poverty which so disfigures our society. In practice this budget is at best neutral in terms of wealth redistribution but I fear that cutting the basic rate of tax to 20p by abolishing the 10p rate will hit the poorest earners as many are unable to find their way through the complexities and inadequacies of the tax credit system.

The failure to restore the link between pensions and earnings, to increase the basic state pension and to increase child benefit sufficiently means that Britain will still have two million of its children and three million of its pensioners living in poverty. How can we find it acceptable that 25,000 of our pensioners died last winter from cold related conditions after 10 years of a Labour government?

Where the Chancellor has announced continued increases in public spending on health and education the scale of the public expenditure growth is significantly less than needed to maintain the pace of investment to meet growing demand and expectations. In comparison with other European countries which have had long periods of Social Democratic government public expenditure in the UK is still amongst the lowest: 45.4% in the UK in comparison with 57.1% in Sweden, and 53.85% in Denmark.

In addition on Monday Gordon Brown and Tony Blair published the New Labour’s policy documents committing the Government to more and extensive privatisation. Many fear therefore that any additional public investment will be laundered into private profits.

Where there has been a growing consensus on the key issue of climate change the Chancellor has taken a few small steps towards encouraging change in our polluting behaviour but these appear to many as mere tinkering at the edges. Much more radical change is needed in promoting a large scale programme of developing alternative energy sources and changing our polluting economy and lifestyles. How can we claim to be serious about tackling climate change when the Government is sanctioning the greatest expansion of airports in our history?

The budget is designed to raise the Chancellor’s electoral standing. In the short term there may be an immediate lift but within days as the detail is unpicked it is likely that there will be a reaction to what will be seen as electioneering spin. I worry that this will undermine our longer term project of convincing our community that creating decent public services and a fairer society requires a progressive redistribution of wealth.

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