Are you better off now than in 2010? My pre-Budget article in the Evening Standard

“Are you better off than you were four years ago?” That was the question Ronald Reagan famously asked the American people in his first Presidential election campaign.

The answer back in 1980 was no — and his Democrat opponent Jimmy Carter was thrown out of the White House after just one term of office.

Thirty-five years on, it’s clear that Reagan’s famous question will be centre-stage in next year’s general election. Every previous British prime minister in my lifetime has always been able to answer it in the affirmative. But David Cameron is currently set to buck that trend in true Jimmy Carter style.

So with just a week until the Budget, the stakes are high for Chancellor George Osborne. This is his last chance to make decisions that will directly affect people before polling day.

The temptation for George Osborne will be to boast that everything is going well after all. And after three years of flatlining, we all need some good news. But even though growth has finally returned, the fact is that most working people are not feeling any recovery at all.

Average earnings are now down a staggering £1,600 a year, after inflation, since this Government came to office. To pass the Reagan test, George Osborne has to see this huge number turn from a negative to a positive before polling day next year.

And time is running out. What we need is a recovery for working people on middle and lower incomes — not just the very few at the top who are seeing their pay and bonuses rise again.

So what should the Chancellor do about it?

Tackling the cost-of-living crisis and policies to earn our way to higher living standards for all must be top of the list. That’s why Labour has pledged to freeze energy bills until 2017 while we reform the energy market for the long-term, to prevent customers being ripped off in future.

To back the small businesses which are the lifeblood of our economy, we will cut business rates and reform our banks for the long-term.

To support families and make work pay we will expand free childcare for working parents of three- and four-year-olds to 25 hours a week.

We will get every young person on the dole for more than 12 months into a paid starter job — which they will have to take up or lose benefits — funded by a repeat of the tax on bank bonuses.

To help 24 million working people on middle and lower incomes — and put right a mistake made by the last Labour government — we also want to introduce a lower 10p starting rate of tax.

And with our economy still smaller than before the global financial crisis, we also need to do more to boost exports and business investment. But David Cameron is instead creating damaging uncertainty for British businesses by caving in to his backbenchers, who will never be satisfied until Britain withdraws from the EU.

There can be no room for complacency. I believe the new Governor of the Bank of England is right to be worried that the recovery is not yet secure or balanced. That is why it is vital that the Chancellor acts to support growth and investment by getting more homes built for the millions who aspire to get on the housing ladder.

I back the Help to Buy scheme, though the limit should be brought down, because the taxpayer should not be guaranteeing mortgages on homes worth as much as £600,000. But soaring house prices and a shortage of homes mean the very first-time buyers the scheme should be helping are finding it ever harder to afford a home of their own.

We have a lopsided housing market because rising demand is simply not being matched by rising supply. And the danger is that the Bank of England Governor may be forced to act to rein in the housing market in some parts of the country and we’ll see rising interest rates for all.

A premature rise in interest rates would hit family finances hard and undermine prospects for an investment-led recovery. That is why George Osborne must listen to the CBI and the IMF and act in the Budget to boost investment in housing supply.

Whatever happens in the Budget, the task for the next government is going to be tough. Far from balancing the books as he promised, George Osborne’s latest forecasts show a deficit of almost £80 billion next year. That’s because deficit reduction stalled when the economy flatlined for three years.

So the next Labour government will have to finish the job. We will balance the books and get the national debt falling as soon as possible in the next Parliament. But we will get the deficit down in a fairer way. At a time when difficult decisions will still have to be made and living standards are under pressure, it cannot be right to continue with the £3 billion tax cut this Government has given to the top one per cent of earners.

We will keep the benefits cap, but ensure it properly reflects local housing costs, and we will scrap the winter fuel allowance for the richest five per cent of pensioners.

And because I believe it could help to restore trust in politics and improve the level of political debate at the next election, I have asked the independent Office for Budget Responsibility to independently audit the costings of every spending and tax measure in Labour’s manifesto.

We know at next year’s general election the country will be asking David Cameron and George Osborne the Ronald Reagan question. The answer looks set to be that people are worse off with the Conservatives.

So it will be Labour’s task to show we have the costed policies Britain needs to get the deficit down in a fair way, tackle the cost-of-living crisis and build a recovery that works for all and not just a few at the top.

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Posted March 11th, 2014 by Ed