Labour Left calls for a Real Labour Budget

Concerns about the seepage and demotivation of traditional supporters in the coming general election has prompted the Labour Left to call for a package of measures in tomorrow’s budget aimed at mobilising traditional Labour voters.

John McDonnell MP, Chair of the Labour Representation Committee, stated:

“Labour is facing an election with the prospect of lowest turnout in the political history of the country. Traditional Labour supporters comprise the largest section of the ‘stay at home’ vote, disillusioned and demotivated.

From pensioners to students to the low paid and to public service workers, large sections of Labour's traditional heartland base have been alienated from the electoral process.

What is needed to mobilise these latent Labour supporters before the election is a Real Labour Budget.”

The LRC submitted a Real Labour alternative Budget including:

Expenditure

• Raise pensions raise to guarantee credit level (£105 for single pensioner, £160 for couple) and restore earnings link £7.3bn; (NOTE 2)
• One-off cash injection into the Financial Assistance Scheme (FAS) to protect the income of workers who lost their pensions due to insolvency prior to 2005: £2.5bn (NOTE 3)
• Abolish tuition fees and restore maintenance grant: £1.3bn (NOTE 4)

Total £11.1bn

In addition, a minimum wage of £6.60 as proposed by the TUC would complete an anti-poverty package reaching the great majority of Britain’s lowest paid.

Revenues

• Restore defence spending to 2002 levels: £3.5bn (NOTE 1)
• Windfall tax on bank and oil profits: £2.5bn (NOTE 3)
• New tax band at 50 per cent for incomes above £100,000: £5.2 bn. (NOTE 4)

Total £11.2bn

A further £4.4bn could be obtained by withdrawing from Iraq and Afghanistan, releasing the chancellor’s special reserve set aside for war costs.

Peace not Poverty

By 2007/2008 Britain will be spending £7.2 bn more on defence than in 2002 in real terms. Had this money been spent on pensions, the government could have given Britain’s of pensioners a decent living standard – for the rest of their lives and without means-tested benefits – leaving intact both the retirement age and avoiding the curtailment of pension rights for early retirees.

The costed budget below shows that an incoming labour government could use this peace dividend as the flagship of a package bringing a major reduction in poverty for pensioners, young people, and low wage-earners.

-ends-

Notes

Note 1: Defence

Extract from the July 2004 spending review

“The Chancellor announced today the longest period of sustained real terms growth in planned defence spending since the early 1980s.

The settlement for the armed forces builds on the annual 1.2 per cent real terms increase announced in Spending Review 2002, with a further annual average increase of 1.4 per cent over this Spending Review period, equivalent to a further £3.7 billion a year by 2007-08 compared to this year.”

The 2002 spending review already announced increases of £3.5bn in real terms by 2005 compared to 2002.

HM Treasury Press notice: 2004 Spending Review

Extract from Chancellor’s statement on the 2004 spending review

“The Secretary for Defence will set out the detailed allocations of the full budget for our Armed Forces which will rise from £29.7 billion this year to £33.4 billion by 2007-08 - £3.7 billion a year higher than now. An annual average real terms increase of 1.4 per cent for defence. In addition, I will continue to meet the additional costs of military operations in full from the Reserve - and to meet the costs of Iraq and Afghanistan we have provided, to date, an additional £4.4 billion.”

Read the Chancellor's statement in full

Guardian report

Reporting on the 2004 spending review on July 12 2004 the Guardian wrote that:

“Mr Brown boasted that the strength of the economy had allowed him to find the extra billions ‘to fight international terrorism’ despite having also funded huge extra spending in health and education...”

“...just ahead of the Iraq war Mr Brown announced an emergency reserve fund of £3bn to pay for the conflict, with a further promise to ‘spend what it takes’ - virtually his only comment on the war. An additional £800m was soon added to that sum, taking the total ‘spend’ on the war on terror in Afghanistan and Iraq to £6.3bn.”

Note 2: Pensions

Cost of raising Pensions to guarantee credit level and restoring earnings link £7.3bn;

Source: answer to parliamentary question, September 2004

Note 3: Windfall tax

Source: Transport and General Workers' Union

The TGWU proposal is that as a one-off tax this be applied to secure a one-off benefit, a £2.5 billion cash injection into the Financial Assistance Scheme to provide compensation for workers' who lost their pensions before 2005 through insolvency.

Note 4: Tuition fees

Total cost in 2002 £ is £1,110mn – in 2005 terms approx £1,300mn

HOC Library. Estimated cost of reintroducing grant scheme is £735m (2002/03) in real terms. Estimated cost of abolishing student contributions to tuition fees is £375m (2002/03).

House of Commons Hansard written answers for 23rd Jan 2001 (pt 15)

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