Rachel Reeves: These unfair cuts put Britain's future prosperity at risk

Budget at a glance

Hear informed debate in a special edition of our BusinessTalk podcast, with experts from Deloitte in Leeds

I am in no doubt that the deficit must be reduced. But it is misleading and wrong to claim that the cuts ordinary people – who are least responsible for the crisis – are now being forced to shoulder is the only way to achieve this.

In fact, the surest way to bring down the deficit is to ensure strong and sustainable growth that results in a new, rebalanced economy. From what we have seen in the new forecasts from the Office for Budget Responsibility, these policies will reduce growth by 0.1 per cent this year and 0.3 per cent in 2011. It will increase unemployment by about 100,000 next year and the following three years.

This is clear and damning proof that our economic future is being put at risk.

Yesterday, we heard much about spending cuts and tax rises, but no vision about the sort of economy that this Government wants to emerge from the financial crisis.

What we should be striving for is an economy that is diverse – both sectorally and regionally – with more and better jobs and businesses in places like Yorkshire.

Instead, the coalition Government are cutting the very things that would ensure not only growth in the short-term, but economic security in the future too. They are portraying their cuts as "eliminating waste" when, in fact, they are risking our future economic prosperity.

They are scrapping the regional development agencies, including Yorkshire Forward, which has brought jobs, businesses and investments to the region. They are eliminating the Future Jobs Fund, which has got 200,000 people back to work through the recession and they are axing the loan to Sheffield Forgemasters, costing our region high skill jobs and growth. And as if this wasn't enough, they are cutting funding to universities, meaning 10,000 less university places, and cutting hospitals and school building programmes across the country, including the health centre in Holt Park, Leeds. This is hardly the way to build a rebalanced economy with strong and sustainable growth.

Not only does the Budget threaten growth, but it is also unfair. It is ordinary people, least responsible for this crisis, that have been hit hardest. The Government is increasing VAT from 17.5 to 20 per cent. This will hit families in my constituency of Leeds West hard, where average earnings are 16,000. The people of Leeds West bear no responsibility for this recession, but this increase in VAT, alongside the reduction in free school meals, the scrapping of the health in pregnancy grant, the reduction in tax credits and the freezing of child benefit, means that they bear a vastly disproportionate burden of

the pain.

The VAT increase will take 13bn out of the pockets of normal working people and small businesses. But how is this fair when the bankers are only being taxed an extra 2bn?

The Chancellor should heed the warning of President Obama who said in his letter ahead of the G20 meeting this weekend that we should "learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession".

I do not dispute that we need a realistic plan for reducing the deficit. But, without a credible plan for growth, we risk a double-dip recession or a British economy that splutters along in the slow lane of the global economy. This Government is trying to convince the public that the only way that Britain will bring down its deficit is if they pursue hasty spending cuts.

This is simply not true. The Chancellor has talked over and over about how we are "all in this together". But this seems to be regardless of whether you are responsible for the recession and can well afford to shoulder the burden – or whether you have no responsibility at all and are already struggling to make ends meet.

We are being told that this way is the only way. But there is another way, and in fact, the surest way to reduce the budget deficit is to ensure strong, sustainable growth and a rebalanced economy. Yes taxes need to go up and spending needs to be reduced, but not at the expense of the economic future of Yorkshire and this country – not at the expense

of a strong, diverse and sustainable economy. And not in a way that will plunge more families and children – who played no role in causing this recession – into poverty, unemployment and despair.