Employment

Thursday 20th March 2014 Lords Chamber

Motion to Take Note

11:37

Moved by

[Lord Freud]

That this House takes note of the level of employment in the United Kingdom.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, it is appropriate that we should be debating the labour market today after yesterday’s figures showing record numbers of people in work and unemployment down again.

I believe that we will benefit from having a frank and open discussion. We have seen exceptional progress in recent months, but we know there is more to do and we must not be complacent. Indeed, the performance of the labour market in the recent recession can be seen as something of a puzzle. Previous recessions saw dramatic falls in employment. Yet despite this being, on some estimates, a deeper recession than in the 1930s, we did not see the number of people in work fall anything like as much as the experts predicted. GDP fell by more than 7% but the number of people in work fell by only one-third of that. I have yet to see a full and convincing explanation for why employment did not see the fall expected. There probably is no single reason. Active labour market policies and the flexibility of our modern labour market, as well as the bitter experience of those who went through past recessions, may all have played a part.

The resilience of the labour market in the recession has been matched by robust improvement now that we are getting the economy back on track. There are 1.3 million more people in work since the election, and more than 30 million people are working—more than ever before. In fact, if you exclude full-time students, the employment rate is now back to the peak that we saw before the last recession, and we have had further good news, with the female employment rate now at an all-time high.

I am often struck by what appears to be a widening gap between the impression that people have about the labour market and the reality of these figures. Many predicted that the fall in public sector jobs would not be matched by an increase in the private sector. They were right, but not in the way they expected. The rise in private sector jobs has not just matched the fall in the public sector but has far exceeded it—up nearly 1.7 million, with total employment up by 1.3 million as a result. Recently, there were reports that most of the growth in private sector jobs since 2010 has been in London. When I asked my officials whether that was true, I received a surprising response. Using already published and easily accessible data from the Office for National Statistics, the true position is almost the complete opposite. Nearly 80% of the rise in private sector employment has been outside London.

We are regularly challenged on the rise in long-term unemployment, particularly among young people. Long-term unemployment is a scourge, and through the Work Programme and the Youth Contract we have put in place just about the most comprehensive response that has ever been seen. Yet what those who criticise our record fail to mention is that the previous Government hid long-term unemployment by artificially removing people from the claimant count. They shifted people about to become long-term unemployed on to training allowances or into short-term job schemes, taking them off benefit in the process. We have put a stop to those methods, so now the figures are a true count of the number of long-term claimants. What really worries me is that the Opposition’s proposed jobs guarantee would result in the exact same problem, with long-term unemployment misrepresented as people are shifted off the claimant count.

People are rightly concerned about the effect the recession has had on young people. However, if we are to tackle youth unemployment, we need to have an understanding of where the real problem lies. When people talk about a “lost generation” of 1 million young unemployed, they are including those in full-time education, who make up nearly a third of the total. In fact, one young person in every 10 has left full-time education and is unemployed, and this proportion is the same for all under-25s and for those from an ethnic minority. This means that youth unemployment remains significantly lower than after past recessions: 9% of young people have left full-time study and are looking for work compared with 12% in 1993 and 14% in 1984. When it comes to NEETs—young people not in any form of education or work—we are not where we want to be, with a higher NEET rate than in many other EU countries. This is mostly due to lower participation in education in the UK. Although the NEET figures are now improving, this is something that the Government will continue to address. The other side of the picture shows that, among 20 to 24 year-olds who have left education, our employment rate outperforms the US and the EU average, and that, of the large EU economies, we are second only to Germany.

I should like to move on to some of policy responses we are making to the main labour market challenges that this country has been facing. It is unheard of for inactivity to fall in a recession, yet that is what has happened. Excluding students, inactivity is currently the lowest on record. The number of people claiming inactivity benefits has fallen by nearly 350,000 since 2010. People are better off in work and we did not want to repeat past mistakes by allowing people to drift into inactivity. Maintaining an active labour market policy ensures that people do not become detached from the world of work and are well placed to benefit as the economy picks up. We are changing the culture. People who can work are expected to work and, with our support, employment is rising. But challenges remain. Although falling, there is still a working age inactivity rate of more than 22%.

We have been successful in getting lone parents into work and have a record lone-parent employment rate. Before November 2008, lone parents could claim income support until their youngest child reached 16 years of age. This child age threshold has been progressively reduced and now stands at age five, and we are introducing additional measures best to support parents to prepare for work when their child is old enough. As noble Lords will be aware, the Prime Minister and Deputy Prime Minister announced further measures to help hard-working families. These included bringing forward a childcare package that will provide tax-free childcare for almost 2 million families. This will help parents go out to work and provide more security for their families.

Our reforms to the benefit system are a key part of the Government’s long-term economic plan to build a stronger economy and secure a better future. Much of our effort has been focused on improving the support available for people who are on sickness benefit but able to work to enter or rejoin the labour market. We are not just writing off people on long-term sickness benefits, as happened in the past. We believe it is only fair that we look at whether people can do some kind of work with the right support—support offered by Jobcentre Plus, specialist provision or through the Work Programme. We need to ensure that the longer-term unemployed do not drift away from the labour market. That is what happened in past recessions, with worrying consequences. It is because we are not going to allow that to happen again that we are investing in the Work Programme. That is expected to provide personalised support to more than 2 million claimants over the life of the contract.

The Work Programme is the largest employment support programme that Britain has ever seen, with far more financial risks sitting with the provider. Payment is by results, with higher payments for getting those with the biggest barriers to employment into sustained work. The Work Programme is better designed than previous employment programmes and is supporting more people into sustained work. Industry figures show that the Work Programme has already helped nearly 500,000 people into work and, of these, more than 250,000 have escaped long-term unemployment and got into lasting jobs. While all contracts are on track to hit their contractual JSA targets, there is significant variation in performance. The worst performing providers are being tightly managed to ensure that they up their game. One contract has been terminated. For the first time, a government employment programme is harnessing the disciplines of the marketplace so that only those providers who succeed are retained to help claimants into work.

Of course, young people still face many challenges, particularly in making that important transition from school to work. Youth unemployment is falling but we need to continue working to bring it down in the aftermath of the recession. We need to ensure that young people have the experience and skills that they need to succeed in the labour market. The Government are raising the participation age so that all young people are now required to continue in education and training beyond the age of 16. We are also implementing wide-ranging policies to improve standards in schools, reform post-16 academic and vocational education and ensure that apprenticeships continue to meet the needs of a modern labour market. We have a wide range of programmes, including those funded by the European Social Fund, and the Youth Contract, to support young people who are NEET to return to full-time education, training or employment.

In a recent report commissioned by Tesco, 60% to 70% of young people said that they had concerns about lack of experience. Many said that they wanted more help from business and struggled with CV writing. That is why it is so important that, through Jobcentre Plus, young unemployed people are given the opportunity to be referred to a careers interview with the National Careers Service. They can also work with local employers who offer work experience and pre-employment training to give them the chance to build up their CVs and job skills.

Apprenticeships play a vital role for many young people, helping them at the outset of their working lives to progress their careers, and the Government offer a £1,500 grant to smaller businesses to take on their first apprentices. Yesterday, the Chancellor announced an extension of this scheme. The Government will now be making more than 100,000 additional incentive payments for employers to take on young apprentices aged 16 to 24, providing a major boost to their job prospects. Traineeships are a new programme to help young people aged 16 to 23 to develop the skills and vital experience that they need to secure apprenticeships and other sustainable jobs.

This Government continue to support economic growth across the regions and help to create the conditions for businesses to feel more confident in hiring more people. Private sector employment has been rising across the UK, and we need to ensure that this continues. To satisfy the recruitment needs of employers, Jobcentre Plus and Work Programme providers use their local labour market knowledge and expertise to improve claimants’ skills and readiness for work. Local enterprise partnerships, in England, provide the vision, knowledge and strategic leadership needed to drive private sector growth and job creation in their areas. Through our strong local offer, Jobcentre Plus district managers work with local enterprise partnerships to ensure that their strategic economic plans make the important link between growth, unemployment and social exclusion. In Humber, Jobcentre Plus and the local enterprise partnership have mapped local and national employment support services and identified where they need locally to plug the gaps.

Developing City Deals has provided a blueprint for working together and co-designing local initiatives. Cities are being given greater freedom to invest in growth and enterprise and being given greater powers, including the power to boost skills and jobs. In Leeds, DWP supports the city region to achieve its aim of being a NEET-free city. Its plan is to enable small businesses to provide apprenticeships when they would not normally have the capacity to do so. The aim is to deliver 680 apprenticeships over three years.

My 2007 independent report on the future of welfare, Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work, came on the back of a long-term aspiration to secure an employment rate of 80%. On the basis that the ONS now defines it—looking at those aged between 16 and 64 rather than between 16 and 59 for women—today this would be equivalent to an employment rate of around 78%. Clearly, a lot has happened since then, not least the deepest recession in nearly a century. Our first aim must be to regain the ground lost in the recession, which would mean a rate of 73% against the current level of 72.3%. It is interesting to speculate that, because most students are outside the labour market, rising participation in education makes it harder to achieve higher levels of employment. But, of course, it is no bad thing to see more young people in education. So, adjusted for that higher participation in education, that 80% employment rate probably translates today into a level some three percentage points higher than the 72.3% that we are currently looking at.

[Lord Giddens (Lab)]

My Lords—

[Lord Bates (Con)]

My Lords, I understand that, by convention, the mover of the Motion is given the opportunity to be uninterrupted and then can respond to questions in the wind-up.

[Lord Freud]

My Lords, that is three percentage points higher than the figure of 72.3% that was reported yesterday. That gives a feeling of the factors that we have been looking at over the past seven or eight years. As I said, that extremely challenging outcome implies that any employment strategy would need to target all of the inactive groups. Noble Lords will be pleased to see that, since 2007, the number of people on inactivity benefits has fallen by around half a million. The economy is now recovering and creating new jobs, making this a once-in-a-generation opportunity to help those who have been trapped on welfare to return to work. It is in that light that I would ask noble Lords to view the Government’s welfare reform ambitions. I beg to move.

11:56

[Baroness Donaghy (Lab)]

My Lords, I thank the Minister for initiating this debate, and in doing so, I note that he is much admired for the way in which he steered the Welfare Reform Bill and the Pensions Bill—two of the most difficult Bills in Parliament—through this House. In fact, I think that he is more appreciated by this side of the House than he is by his own party. I say this because my contribution is not very supportive of the Minister’s claims and I wanted to place on record my admiration for him before I rubbished his thesis.

I understand why there is a great deal of celebration from the coalition Government about the level of employment. However, the increase in inequality, the way we treat our young people, the way we treat public sector workers, the increasing economic fragility of people’s lives and the experience of most women in terms of income and childcare mean that there is absolutely nothing to celebrate. The economy is nearly 2% smaller than it was at the end of 2007. Looking at the very short term, it is true that the number of unemployed actively seeking work has shrunk by 250,000. I accept that. However, there are still 770,000 more people unemployed than at the end of 2007—a total of 2.4 million. That represents little change from May 2010. Unemployment has averaged nearly 8% since 1980. So we have to ask how—or even whether—the economy can bring that level down to the 2% we had for 25 years after the Second World War. We had growth averaging 3% a year for more than 60 years. Achieving that over a period of time under current government policies is beginning to look unlikely.

Then we have low productivity. Firms have survived by shelving investment and paying their workers less. This might work in the very short term but it will not lead to growth. George Osborne knows that low productivity has slowed growth and will continue to do so. The Financial Times has used the Office for Budget Responsibility’s own model to show that the £85 billion deficit target in 2013-14 will actually be £111 billion.

The Government’s headline increase in apprenticeships is positive on the face of it, and of course it makes the unemployment figure look better. However, the reality is very different. The minimum wage rate for an apprentice is £2.68 per hour. Although it is a positive step to acquire skills and work experience, when the wages are under £100 a week before travel costs and bills, it starts to look less attractive—and if those apprenticeships do not lead to a job, it breeds cynicism and despair. Most of the new jobs in the service sector are filled by young, unskilled workers on short-term, part-time and zero hours contracts, which is a guarantee that low productivity will persist. The impact on young people is extremely worrying.

The latest survey from the Prince’s Trust confirms what some of us know already. Young people are having a tough time finding security and fulfilment—unless they come from a privileged background. Some 9% of respondents to the survey said that they had “nothing to live for”, and one-third of young unemployed people have considered suicide. Clearly, there are other factors such as an increase in homelessness, poor careers advice and the break-up of families, but we cannot be proud that in this country a large proportion of apprenticeships are just an excuse for cheap labour, or are of poor quality and short duration. The Government’s own research shows that one in five apprentices receives no on-the-job or off-the-job training, and 25% are paid less than their legal entitlement. The Work Foundation has found that, despite the range of skills that are deemed necessary for a career in social care, only around one-third of health and social care apprentices receive both on-the-job and off-the-job training, and one-fifth report receiving neither. It is no coincidence that most new claimants of housing benefit are working rather than unemployed.

A Manpower survey shows that job prospects are better than they have been for six years, in particular in the building industry, the utilities and large companies. If that leads to more jobs for skilled workers, it may help productivity, but if it represents more low-paid, temporary and unskilled work, it will disguise the real problem. The Government have made much of the fact that private sector jobs have increased by 1.5 million and that that has made up for the loss of jobs in the public sector. Even if we discount the tragic loss of skills and commitment to public service that that represents—a hollowing out of the Civil Service and local government, and unsustainable pressure on health service staff—the figures hide blatant exploitation of workers and the prevalence of low pay, particularly among women workers. Some 11 million people have had no increase in real earnings since 2003.

The Government have also made much of the increase in self-employment. Research by the Office for National Statistics shows that women have made up more than half of the 10% growth in self-employment since the recession began. If this represented an increase in business start-ups and thrusting entrepreneurs, we would all be cheering, but the reality for most is very sobering. According to HMRC, in 2011-12 the average income for a self-employed man was £17,000. Even taking account of the ability to offset a large proportion of costs and expenses if you are self-employed, that is still a surprising figure. The average for women, however, was £9,800—40% less than men. In almost every region apart from London, the south-east and Scotland, self-employed women earned less than £10,000 a year. This suggests a great deal of substitution from low-paid employment to low-earning self-employment.

A recent report by the Women’s Budget Group notes that much of the increase in women becoming self-employed is effectively because of precarious work and zero-hours contracts rather than because of the creation of new businesses. Scarlet Harris, a spokesperson for the group, said:

“Clerical, cleaning and caring work, which is predominantly carried out by women, has experienced some of the fastest growth in self-employment in recent years. These women, who already suffer poverty rates of pay, are now having to contend with the poor working conditions and complete lack of job security that self-employment brings. These shocking gender pay gap figures should end any delusions people have about the UK’s four million self-employed workers”.

A BBC investigation last month found that advisers are encouraging individuals on welfare-to-work schemes to become self-employed in order to move them from unemployment benefits to working tax credits. Has the Minister investigated this matter? If so, how does he plan to deal with it?

Not only is the gender pay gap widening for the self-employed, but ONS figures show that the gender pay gap as a whole in the UK widened in 2012 for the first time in five years, from 9.5% to 10%. The Chancellor of the Exchequer said that the recent Budget is for,

“the makers, the doers, and the savers”.—[Official Report, Commons, 19/3/14; col. 794.]

He should have added—“and young people and women can push off”.

Finally, I do not believe that we can win a race to the bottom. We need high-quality jobs, investment in manufacturing and good-quality training and careers advice. The World Economic Forum in Davos concluded that the biggest threat to prosperity in the next decade was the increasing gap between rich and poor. This Government are following a path that will ultimately fail, at enormous cost to people’s security and aspiration. It really is a case of, “Never mind the quality, feel the width”.

12:06

[Lord Shipley (LD)]

My Lords, I, too, thank the Minister for enabling us to have this debate because it gives us an opportunity to look at the levels and nature of employment in the UK, not least from the perspective of region and age. The context overall is one in which austerity, inevitably, is still with us, in that borrowing this year will be more than £100 billion. Government debt is still rising so there are limits on what the Government can afford to fund.

I listened very carefully to what the noble Baroness, Lady Donaghy, said. I will simply say in response to the list of criticisms of the Government—which was a self-selected list because it missed out a whole range of things that indicate a trend towards a higher rate of quality employment—one would think that the financial crisis had nothing to do with the Labour Government up until 2010. This Government have had to deal with a huge financial crisis in a very serious recession and the level of employment we have today is quite remarkable given the record of the previous Government and what this Government have had to do.

I say that otherwise one would be led to think that this was a story of entirely bad news and it is not. The green shoots of growth and recovery are there. Figures published yesterday by the Office for National Statistics show that the number of people in employment has risen to 30.19 million and that the level of unemployment has fallen again by 63,000 to 2.33 million in the three months to January this year. Compared with a year ago, the numbers in employment have grown by more than 450,000. That is a very encouraging figure. A higher percentage of the adult population in the UK is now in work than in the United States of America. Unemployment is down to 7.2%, falling well below its peak, and below the current levels in most European countries. The unemployment rate in the European Union is 50% higher than here at 10.8%. It is true that more women are employed now in the UK than ever and that 95% of all jobs created last year were full time. The trend data also show that youth unemployment is now falling and has already fallen to a level lower than when this Government came into office four years ago. That is a very important achievement, and we should say so. However, that is not to say that there is a lot of further work that needs to be done, because it is undeniably the case that youth unemployment remains far too high.

I join the Minister in saying that it is very important that we note the impact of the Budget. I realise there is a debate on this next week, but it is highly relevant to this debate, because yesterday’s Budget is a Budget for employment. It has been described in the media as very much a Budget for savings and pensions, and in one respect that is true, but actually it is a Budget for employment. There are several reasons why I think that is the case. First, it will help to drive exports even more, giving British businesses access to the most competitive export finance support in Europe, because the UK’s direct lending programme has been doubled in the Budget to £3 billion. Secondly, it is cutting energy prices for business, particularly for the most energy-intensive manufacturers, around 80% of which are based in the north of England, Scotland and Wales. There will be increased incentives for companies to return manufacturing from abroad to Britain. Thirdly, there is increased financial support, through the tax regime, for capital investment and for research and development. Fourthly, there is more support for apprenticeships, which I will look at in greater detail in a moment.

I noted the comments by the noble Baroness, Lady Donaghy, about childcare, but we should remember that it was announced earlier this week that as many as 1.9 million working families could benefit from a tax-free childcare allowance worth up to £2,000 per child, up to the age of 12. Taken together, all these measures will help business growth, increase the number of jobs and increase the number of people in work and able to work. The Office for Budget Responsibility has said that employment will rise to well over 31 million by 2018, which seems a reasonable prediction based on what we know today.

I will now focus on unemployment and what will happen there. Unemployment stands, as I said earlier, at 7.2%. I was very concerned early last summer when the Governor of the Bank of England said that the Monetary Policy Committee would look at the case for increasing interest rates when unemployment reached 7%. My concern was that 7% is an average UK figure and that parts of the country would be higher while others would be lower. Some parts of the UK have unemployment rates of over 10% and they need continued low interest rates to encourage investment. I was therefore very relieved when the Governor of the Bank of England revised his view and said that the unemployment rate should drop further before the Bank considers an interest rate rise. A substantial body of opinion thinks there is sufficient slack in the economy to permit this without impacting on the rate of inflation. It will certainly help to encourage growth in those parts of the UK with higher unemployment and will also help to secure more jobs for young people.

It is that issue that I want to take a more detailed look at. In official statistics, young people can be shown as employed full time, employed part time, employed and in full-time education, employed and in part-time education, unemployed, economically inactive, or not in employment, education or training. The detailed statistics can be complex to follow because the categorisations can vary depending on what you are looking at. What is not complex to follow—I agree entirely with the noble Baroness, Lady Donaghy, on this—is that too many young people are unemployed or underemployed. The trend, as I said earlier, is in the right direction and the Government should be praised for that, but I am grateful to the Local Government Association—I should declare that I am a vice-president of the LGA—for pointing out that 1.25 million young people are not working but would like to. Some of course are in full-time or part-time education, 760,000 are in work but would like more hours, and 425,000 are not working to their potential—for example they may be graduates in what are thought to be non-graduate jobs.

The Government are spending around £15 billion a year on young people and I welcome their ambition, which the Minister has explained to the House, to devolve skills and training to local enterprise partnerships and to local authorities and their partners. It is important because we need integrated employment services based on local labour markets. Only local networks can deliver that, as was highlighted by a number of City Deals, in which—as Members of the House might be aware—I have had an involvement.

Crucially, however, we have to remember the role of schools here. Schools have a statutory duty to provide a careers service, yet a few months ago Ofsted reported that three-quarters of secondary schools were not executing their statutory duties satisfactorily. This was followed by IPPR North’s report, published in January, which concluded that secondary school careers services were not equal to the task of helping students navigate the increasingly difficult transition from school to work. That report, entitled Driving a Generation: Improving the Interaction between Schools and Businesses, made a number of very helpful recommendations which I commend to the Minister because it proposed a means whereby schools and businesses could relate much better to each other. My point is that if the huge and worrying mismatch in skills is to be solved, the solution must be started in the place where young people learn in compulsory education, where they need to better understand the qualifications and skills required to enter an apprenticeship, particularly in science, maths and IT.

There is high demand from young people for apprenticeships, but there are still not enough employers coming forward to offer them. The average apprenticeship post receives 12 applications each, but in some sectors the level of demand is twice as high. I therefore welcome the extension in yesterday’s Budget of apprenticeship grants for employers, which will fund more than 100,000 additional incentive payments for employers who take on young apprentices. I also welcome the funding to support employer investment in apprenticeships at degree and master’s level. This will bring more employer engagement into the HE sector and expand apprenticeships at higher levels, where there are currently too few available qualifications.

I have two very brief points in conclusion. First, will the Minister and his colleagues look at the role of UKTI? In many respects it does a very good job. Its role in driving exports upwards is good, but it has a role in inward investment and no regional or sectoral targets to meet. It simply has UK-wide targets. It would help enormously if it actually had to produce an audit of where it has directed inward investment. My second point is about regional and local procurement. I have a constant concern that national procurement contracts are being driven by price and go to national companies headquartered in the south of England. I would like to think that we would always ensure, in all procurement by central and local government, that local people are employed, that local people are trained and that smaller local companies and social enterprises can tender for government contracts. I hope the Minister might be prepared to agree to undertake a constant audit of the outcomes of government national procurement policy and its impact on employment.

12:18

[Lord Holmes of Richmond (Con)]

My Lords, I thank the Minister for initiating this incredibly significant debate and for all the work that he has done across the work and pensions landscape, which has been ground-breaking and innovative. It is worth reiterating yesterday’s employment figures: there are more people in employment now than at any previous time; more people employed in the private sector than at any previous time; and more women in employment than ever before. Yesterday’s Budget was a Budget for jobs: employment is up; growth is up; the deficit is down by a third and by next year it will be down by a half. Could there be any greater evidence for that than the announcement this morning from Hitachi that it will base its global—yes, global—rail business in the UK?

It is one thing for employers to provide jobs; we also need to ensure that the skills and training are there so that our people, particularly our young people, are ready to take up those employment opportunities. To that end, I commend the work of my noble friend Lord Baker of Dorking with the university technical colleges and the work they are doing. All educational establishments should focus on not just a careers service but what is now known as employability. I suggest to the Minister that he should consider a potentially statutory obligation on schools, colleges and universities to the young people leaving them which would last until those young people enter the next stage of their journey, be it higher education, training or employment. In future, it should not be possible to have someone who is not in education, employment or training and who has nobody potentially looking out for, supporting and assisting them to take that next step—whatever the right step might be for them.

Working on the Olympic and Paralympic Games, we saw the opportunity to create hundreds of thousands of jobs, but also how there were gaps—particularly in the host boroughs—in finding people to fill those jobs and to drive employment in the local area as much as we all wanted. That will continue. When you look at iCITY, a brilliant redevelopment of the media centre in the Olympic park, there will be high-skill, high-tech jobs. We need to ensure that people have the right skills to be able to go into those jobs and to continue to work in their local areas. Similarly in terms of construction, there is the E20 village—the old athletes’ village—and the new plans at Ebbsfleet. In Scotland, there is the new town at Tornagrain. These will provide thousands of constructions jobs, engineering jobs and jobs across the economy. We need to ensure that people are ready, willing and able to take up those jobs. Similarly, across the massive infrastructure programme that we are rolling out under the careful eye of my noble friend Lord Deighton, there is again potential to drive economic growth and employment opportunities right up and down the country, but we need to have people ready, willing and able to take up those jobs.

UKTI has already been mentioned. Great work has been done but successive generations have relied far too much on the EEC, the EC and now the EU. Yes, Europe is a great market but it is not the only one. We have got nowhere near maximising our opportunities with the BRIC economies. When I was with the GREAT campaign down in Rio in 2011, I found that Italy exported many multiples more than the UK did to Brazil. Italy has no historical or language connection to Brazil but it has built up an effective, practical and meaningful trading relationship that has driven jobs, and not just in Brazil, for Italian businesses. We need to look at that, not just in terms of the BRIC economies but also the new MINT economies—Mexico, Indonesia, Nigeria and, not least, Turkey. Turkey is pretty much on our doorstep. To get a sense of the demographic there, take any western European advanced mature democracy and then turn that demographic on its head. That is the opportunity in Turkey. The majority of the population is under 25. Its economic growth is in double digits. Those people are purchasing and we need to ensure that they have the opportunity to purchase British stuff and so drive employment for our businesses right up and down the UK.

I turn to Scotland. Ultimately—in September—an incredibly significant decision will be made by the Scottish people, the most significant decision for the union in hundreds of years. It will not be simply a decision about their destiny, and it will not be considered only on the basis of Faslane. It will not be about oil, per se, and it will not be about the financial service industry in Edinburgh in isolation. It will be about jobs. It will be about employment. When Scottish voters put their cross in the box in September, I urge them not to think just about Scottish jobs; I urge them to think about English jobs and UK jobs, because that is what is at stake, and we will all benefit if we keep the union together.

In short, the Budget was about employment. It was about possibility. It was about potential. We are not out of the woods but we are on the right road. There is a long journey ahead of us. We need to drill into those employment figures, as has already been mentioned, and ensure that every area and region of the country is benefiting from this employment boom. We need to ensure that young people and disabled people are similarly benefiting and being enabled into employment. In short, we need to ensure, for all our sakes, that every person who is able to work is enabled to do so and that we provide real security for those who are not. It is in all our interests to drive this forward. What we should all be striving for is a high-employment, low-inflation, high-productivity, low-interest-rate, prosperous United Kingdom economy that is focused on and fit for the future.

12:26

[Lord Giddens]

My Lords, I, too, congratulate the noble Lord, Lord Freud, on having initiated this debate, and I congratulate him in a non-partisan way on his work on welfare and on other areas, such as mesothelioma, which has touched me and my family personally. I greatly appreciate his efforts in that discussion. He will be pleased to know that I do not propose to emulate my noble friend in trying to rubbish him, but I want to develop an analysis which is quite different from that which has been offered by noble Lords so far.

I shall argue that when considering the level of employment in the UK it would be a great mistake to concentrate only on the incipient economic recovery and the return of demand. As the Minister said, net new jobs are being created, and there is certainly a debate to be had, as my noble friend said, about what kind of jobs they will be, who will hold them, how many are part-time and so forth. However, I shall concentrate on much deeper structural trends which provide a much more sober picture than some of the portrayals being offered so far because some of these trends are utterly dramatic. They are absolutely profound in their medium-term implications. Even in the short term, recovery in the job market could be completely subverted by them, and these changes are accelerating in the here and now.

The changes I have in mind are driven by two convergent sources of technological transformation: computer technology and robotics. It has aptly been said that we are entering a second machine age, one that it is totally different from anything we have seen before. One of the most important features of this technological innovation is that in some areas these innovations—and it is amazing when you look at the details—are exponential, not linear, and they are resonant with implications for the future.

The two fields—computer technology and robotics—are tied together by digitalisation. As digital areas, they are truly global, not national in any sense. Only some 15 years ago, it was confidently said by experts in the field that there was a range of tasks that computers could never do, essentially because computers cannot be creative. These tasks included driving a car and translating a natural language. With the advent of supercomputers, all this has changed. Most noble Lords will know that the Google driverless car has gone for something like 400,000 miles without accidents. The only two accidents it had were when two human drivers crashed into the back of it. Supercomputers can now do translations of natural language sources, including, for example, translations of poetry, as well as human translators. That is quite an extraordinary transformation.

The same thing is happening in the area of robotics. About 15 years ago I went to the Sony media lab in Japan and talked to the head of Sony at that time. He said, “From now on, we are concentrating on robotics; this is going to be our main emphasis”. I saw some of the robots they had there. They could barely walk. They could not climb stairs. They could not do the most mundane tasks. This was 15 years ago. How things have changed. I will give you a couple of examples which sound trivial but are actually a bit awesome to me. A robot recently took on the world table tennis champion at table tennis. The robot was winning for most of the match. The human suddenly came from behind at the end, and in fact triumphed, but it will not be long before the conjunction of the computer and the robot will beat all human table tennis players. If you see someone playing table tennis at the top level, it is a completely amazing phenomenon. To think that a machine could be on the verge of beating the world champion is quite awesome.

There is also a robot stand-up comic. It is able to innovate, to tell stories, to tell jokes which the robot itself invents and, as it were, to play the audience just like a human stand-up comic. For example, the robot stand-up comic said, “I went out with an Apple gadget. It didn’t work out—she was always i-this and i-that”. The robot stand-up comic also has a way of deflating the situation when it does not get a laugh: it will say, “Oh well, I’ll have to do better next time”, or, “Hmm, that was not good enough”. It sounds trivial, but there is something awesome going on here.

The implications for work and jobs are huge. Many of my economist friends and colleagues are working intensely on them. Supercomputers will be able to take over a large number of professional and technical jobs. Jobs which only a few years ago it would have been inconceivable for machines to do are now lined up for destruction. They include jobs in the law, the medical profession, accountancy, finance and other areas. These are not low-level jobs, but at least medium-level jobs. We are talking not about the distant future, but of the next 10 years. Some of these changes have already happened. For example, machine translation is already replacing human translators in some of these areas; that is quite widespread.

One detailed analysis carried out by economists in the United States concludes that 40% of technical and professional jobs are vulnerable to takeover by intelligent machines. This is a level of job displacement not seen since the transformation of agriculture by industry. Agriculture used to employ 40% to 50% of the population, and it is now down to 2% or 3%. It is potentially a level of job displacement of that order. That is why it is hard to get one’s head around it. It is easy to dismiss and say that it is just hype about a distant future. It is not that at all, I assure noble Lords. These things are already happening. It is most advanced in the American economy, but it is happening in many other economies, too. So what we see when we go into a supermarket and we are more or less obliged to checkout by machine, or we go into a bookstore and find the same thing—or we go into other shops where there is a checkout machine—is at the lowest level of what will increasingly happen, and is happening, at a higher level. That is serious stuff for future employment.

Could the Minister reflect on or give me a response to three questions? On my first question, an easy or ignorant response would be to say, “Oh well, new jobs have always been created in the past when you have technological change”. We absolutely cannot say this with any certainty here, because we have never been in a position where machines have outstripped us intellectually and physically in this way. What work is going on inside the Government on that issue? This is quite different from the rosy picture and the debate about the immediacy of jobs; it is a surging trend that could be massively important for how we look at the future of employment.

Secondly, if it proves true that there is not enough work to go around in 10 to 15 years, we might have to be much more imaginative about the role of work in life than we are today. Many of my economist colleagues are thinking about this; an example in your Lordships’ House is the noble Lord, Lord Skidelsky, in his recent book. They suggest that we should return to themes that existed primarily in the 1960s of basic income and negative income tax. Is any thinking going on inside the Government about those issues, should those trends become exponential, as to me they will?

Thirdly, and finally, these trends are going along with a phenomenon that my noble friend Lady Donaghy mentioned—the large-scale displacement of wealth and large-scale inequality. It is driven in some part by these technological changes, as has been demonstrated in the United States, where there has been an absolute decrease in the amount of wealth taken by the majority of wealth-holders; almost all of it has gone to the top. A similar pattern is seen with income: the closer that you get to the very top, the greater the proportion taken. That is a really disturbing trend, and it is pretty similar here. We need some seriously new policies to produce a more equitable society in this world of high technological change. I conclude by asking the Minister: where are these policies?

12:37

[Lord Bilimoria (CB)]

My Lords, when the United States was formed in 1776, it took 19 people on a farm to produce enough food for 20 people, so most people had to spend their time and effort in growing food. Today, it is down to 1% or 2% to produce the food. So let us consider the vast amount of supposed unemployment produced by that. There was not really any unemployment produced; what happened was that people who had formerly been tied up working in agriculture were freed up by technological developments and improvements to do something else, which enabled us to have a better standard of living and a more extensive range of products. That is freedom—arguing against the race to the bottom. The noble Lord, Lord Giddens, talked about robots, but I have gone back to 1776. Nothing has changed in that sense.

I thank the noble Lord, Lord Freud, for initiating this debate. I have just a few points to make. First, the rise in the overall employment rate is real and is at record levels and, correspondingly, there has been a fall in unemployment. With the economic dominance of the south-east, there is a need to rebalance the economy by supporting manufacturing, particularly in the regions. Continued tax reform is also needed. The Office of Tax Simplification is an oxymoron; our tax system is getting more and more complicated.

UK unemployment has fallen by 63,000 to 2.33 million. The unemployment rate now stands at 7.2% of the population. As the noble Lord, Lord Holmes of Richmond, said in his excellent speech, employment has risen to a record of more than 30 million. The bad news is that the NEETs are still close to the 1 million mark; although the figure is falling, it is still above 900,000. The number of people claiming jobseeker’s allowance has fallen to 1.175 million. Over the year that number has dropped by 363,200, which is terrific. That is all really good news.

The new Governor of the Bank of England, Mark Carney—I say new, but he has been in post for almost a year—made a fundamental mistake in saying that he was going to give us forward guidance and that when unemployment fell to 7% the Bank would think of raising interest rates. That figure has been reached more quickly than thought, and he has had to back-track on the forward guidance almost straightaway. Interest rates are still at a record low of 0.5%. Just think: what got us into this financial crisis was what was then perceived as being the longest period of low interest rates for a long time—and they were then at 5%. Interest rates are 10 times lower than that, but still we cannot increase them, although the unemployment figures are near, or at, what the Governor of the Bank of England wanted them to be. They have been kept unchanged at 0.5%.

The real issue is public expenditure. Public expenditure used to be around the 40% mark. It was 42% of GDP in the early 1970s. Then under the previous Government it went up to almost 50% of GDP. By the late 1980s it was below 40%. We need to get that public expenditure down to 40%, because our tax-collecting ability historically has been around 38% to 39%. If we can get our public expenditure down to 40% we will have a balanced economy and will eliminate the deficit.

UK manufacturing is not dead, by any means. We are excelling in manufacturing. Our aerospace industry is the second largest in the world. Our automotive industry, of which I speak regularly, is flying. When Tata Motors bought Jaguar Land Rover in 2008, I spent a whole day at the Land Rover factory. Wow—it was impressive. I am due another visit, because my last one is already outdated. The company is now making more in profits than it paid for a business that nobody was interested in buying in 2008: that is how well it is doing. It is also exporting and creating employment.

We have heard the great news that Bentley is moving its 12-cylinder engine manufacturing from Volkswagen in Germany to Crewe in the UK. How wonderful is that? Rolls-Royce is manufacturing at Goodwood. Therefore, we have the best of the best quality—the best cars in the world—being manufactured here in Britain.

Our chemical industry is huge; our defence industry is huge; our electronics industry is huge; and so is our food and drink industry. I speak from my own experience. I mentioned yesterday that we were manufacturing a great deal in Europe. In fact, the majority of our production was in Europe some years ago and we decided to reshore to the UK because here we can produce world-class beer. We now produce in Burton upon Trent; we are winning award after award and exporting around the world. I am proud of that.

We have a plastics industry and a steel industry; we also have a textile industry, which we thought was dead but which is not dead at all. There are still almost 80,000 businesses employing 340,000 people and generating £11.5 billion of turnover.

What about the regions and the whole focus on London? We have a country where one big city is the capital and the financial capital and is much bigger than the second biggest city, Birmingham—let alone Manchester or anywhere else. If we look at a large country such as the United States, New York is big but you have Los Angeles, Chicago and lots of other big cities. If we look at another large country, India, there is Mumbai but also Chennai, Bangalore, Hyderabad, Calcutta and Delhi, which are huge cities in their own right. We have this one big city. I am very proud of London; it is the greatest of the world’s great cities. But how can we encourage business and employment in the regions? The answer is simple: we must encourage manufacturing. We cannot manufacture in London; we have to manufacture in the regions. That can create the jobs.

The Financial Times analysis tells a story in which the percentage of people on jobseeker’s allowance benefits dropped by more than 30% last year in places as varied as Oldham in the north, Stafford in the Midlands and the Suffolk coastal region. This is great news. If we can carry on in that vein, we will have growth and employment outside London.

Again, worries about lopsided economic growth are not new. The noble Lord, Lord Giddens, talked about developments 50 years ago, at a time when the economy was also recovering after a period of stagnation. The then Labour leader, Harold Wilson, complained in Parliament of a two-nations economy and said that,

“the Chancellor has to try to restrain the overheating which he sees in the South at a time when large areas in the North are still in the chill grip of his predecessor’s freeze”.—[Official Report, Commons, 14/4/1964; col. 285.]

Those were the comments of Harold Wilson on Reginald Maudling’s 1964 Budget speech.

We should look at the great signs of success. We have already heard that Hitachi is to move its rail business headquarters from Japan to the UK, and that Bentley is to move from Germany to the UK. Companies from Japan and Germany, the pinnacles of high-tech manufacturing, are moving to the UK. This is fantastic. Hitachi says its move will expand the number of rail jobs to 4,000, which is excellent. I have already mentioned Jaguar Land Rover and Bentley. The Chancellor has promised to cut the costs of manufacturing to boost growth, and he has done it. He predicts that energy costs will go down by £7 billion. Again, that is excellent.

Immigration is one area where I fundamentally disagree with the Government. Their immigration policy has sent out the wrong signals around the world to foreign students and academics. That affects not just universities such as Oxford and Cambridge, where 30% of the academics are foreign. For example, more than 30% of the academics at Birmingham University are foreign. As I say, bad signals have been sent out, and the number of Indian foreign students is now plummeting, but we should look at the contribution Indians make to our economy. On Friday, I went to the celebrations for the principal of West Nottinghamshire College, who has been made a dame. She is the first Indian-born dame in 83 years. She came to this country as a young bride unable to speak English but today heads the most successful further education college in the UK, and probably one of the most successful in the world. That is the power of immigration.

The statistics show that Indians make a huge contribution to our economy. In 2013, Indian men topped the ethnicity employment table in the UK and Indian women came second. Indian men had the second lowest rate of unemployment—and so it goes on. One in seven companies is founded by a migrant entrepreneur. Migrants make a huge contribution to our economy and create jobs. Migrant entrepreneurs have been a benefit to this country.

In looking at overall business performance, we must not neglect SMEs. The Minister talked about all the Government’s initiatives. I was on the National Employment Panel for eight years and on the New Deal task force before that. SMEs account for 59% of private sector employment and 48% of private sector turnover. Within SMEs, small businesses account for 79% of employment and 69% of turnover. We need to encourage these small businesses to grow, because the argument about big companies not paying corporation tax misses the point. Yes, we would like them to pay more corporation tax, but that tax makes up only 8% of our tax take. Most of our tax take comes from the tax that is generated by employment—more than 50% comes from PAYE and NI-paying employees and NI-paying employers. The more jobs we create, the more tax we will generate; therefore we should encourage SMEs to grow.

I have suggested to the noble Lord, Lord Young, that we should have a competition in this country to sponsor staff from 100 companies to attend the Cranfield School of Management business growth programme or the University of Cambridge Postgraduate Diploma in Entrepreneurship. It costs £10,000 to attend these programmes. The businesses that send people to attend those programmes will grow faster than other businesses because we will be training our entrepreneurs to perform better and grow their businesses.

We need to go further on national insurance breaks. Ralf Speth, the chief executive of Jaguar Land Rover, said that the secret of his company’s success was innovation. UK Trade and Investment was mentioned by the noble Lord, Lord Shipley. Exports are crucial. The further we go down the route that I am suggesting of training our entrepreneurs, encouraging manufacturing in the regions and generating jobs, the more exports will follow. I have mentioned my own experience as an example of that.

To conclude, what is the purpose of business? I think that, yes, you want to create a product that people love, but you also want to create employment for the well-being of the people whom you employ. In every survey that asks people what is most important to them, they say family. What else is important to them? They say health. What else is important to them? They say their working life. If people do not work, they are not going to be happy. A happy country is a country with, ideally, full employment. We will never get to full employment, but at least let us try.

12:50

[Lord Monks (Lab)]

My Lords, I add my thanks to the Minister for initiating this debate. He has every reason to be cheerful given the rise in employment that has taken place. It would be churlish not to welcome the fact that the British economy is in a better place than it has been over the past six years, and the rising employment rate is the best feature of that.

As the Chancellor recognised, there is a long way to go before we can say that we have a balanced and sustainable economy. I note that he was not quite as upbeat and positive as the noble Lord, Lord Bilimoria, about the prospects for the British economy. While I welcome the national fall in unemployment, it is not being felt in all areas of the country or all areas of the economy. In the north-west, my region of origin, the number of unemployed has risen by 22,000. That is the largest rise of all the regions in the country. As the Minister said, the figure that raises the greatest concern is the rate of long-term youth unemployment. For example, in south Warrington in the north-west, between May 2010 and January of this year, the number of unemployed young people increased sixfold. In Rossendale over the same period, seven times as many young people have been unable to find work. Further north, in Lancaster and Fleetwood, the number of unemployed young people has increased tenfold over that period.

The harsh facts are that fiscal austerity has slowed and weakened the recovery rather than led to it. Exactly the same thing has happened in the eurozone. Both of these are in contrast to the United States, which has bounced back more rapidly and powerfully than this side of the Atlantic.

Monetary looseness and quantitative easing has been a factor in the UK. It has helped the recovery, but it has also helped it to be rather unbalanced and, for that reason, fragile. One could say that the economy is still on life support while we have quantitative easing. We have been under the delusion, as the noble Lord, Lord Skidelsky, described it, that the policies which made the recession worse would be the same policies that made recovery possible. In fact, public investment is still down 35% from pre-crash levels. Resources still stand idle and must be mobilised in all parts of the country, not just in the relatively prosperous south-eastern corner.

That brings me to concern about the British economic model. Just over six months ago, it was said in the Economist that:

“The bones of Britain’s economy are rotten. Shoppers are consuming not because they earn more but because they can borrow more … Firms with cash … are hoarding rather than investing. New firms … find it hard to borrow: the banks will lend only against property. Britain still buys far more abroad than it sells, despite a weak currency”.

Things have moved on since then. They would not write the same thing today. However, I ask noble Lords to appreciate the fact that some of that is still very true.

The Chancellor recognises these structural weaknesses. He mentioned them in his speech on Tuesday. However, his prescriptions still fall well short of what is necessary to cure our problems. It would be so depressing to think that we are condemned to a future in which we might get a debt-fuelled property boom, particularly led again by the south-east, followed by another financial crisis, followed by another period of austerity. What can we do to avoid that? There are things being done in the banking system but it is important that this rebalancing of the British economy becomes a national priority.

Can we be bolder in this area? The noble Lord, Lord Heseltine, has certainly had a go and is very active in this field. With his report, No Stone Unturned, he pointed to lessons from our neighbouring countries on the eastern shores of the North Sea, including Germany, the Netherlands and the Nordic countries—lessons about decentralisation, skills and active public intervention to spur growth. These lessons need to be learnt here, along with other features of the more successful economies of our North Sea neighbours. These include: the equality of Scandinavia; the collaborative, long-term culture of Germany, with its voice for workers; the widespread, effective collective bargaining systems in all the countries that I mentioned on the other side of that sea; and the general excellence of their infrastructure, public services and welfare states. They did not follow the cult of deregulated labour markets being the route forward to prosperity, and they did not adopt the easy hire-and-fire policies that were largely pursued in the English-speaking world. Even in Germany, the Hartz reforms introduced by Gerhard Schroeder were, by our standards, rather modest and marginal.

Collective bargaining is a term that you do not often hear in this House and sounds quite quaint and historical to many here, although it is prevalent in most of our top companies, including those on the list that the noble Lord, Lord Bilimoria, mentioned as exemplars. It is still strong at a sectoral level in the countries I mentioned and has a major influence in pressing against inequality. After all, if you are the boss and you have influential unions, it becomes far harder for you and your colleagues to sustain a culture in which you tend to help yourself and give yourself the benefit of every doubt when it comes to sharing out the company’s income. If you have effective information and consultation arrangements, involving company councils and even workers on the board, then you strengthen the forces that seek a long-term perspective on company performance—not those who see companies as a bundle of assets to be traded in the City, where the hunger for deals and transaction commissions seems undiminished. That certainly runs counter to our need for a better-balanced, more sustainable economy. The approach of those North Sea economies has much assisted greater equality and better productivity as well as longer-term perspectives about the future of their economies.

I accept that there are many good things about labour market flexibility. When applied functionally it enables workers to respond flexibly, and we have seen some of that in companies through this recession, which has helped to keep employment levels up. Flexibility in skills is obviously important, too, and enables individuals and companies to flourish. In passing, I hope that the Government continue to support Unionlearn, the programme that has done a lot to promote a learning culture among the workforce in this country. It would be a false economy to cut it back. That is not the responsibility of the Minister’s department but is on the Government’s agenda.

Flexible working hours are clearly important for the future to employers and employees alike, but while labour market flexibility has good features it also has some much less good features, particularly where it benefits unscrupulous employers by letting them fire people without adequate consultation. It is a process that has been encouraged in recent months and years by the Government’s moves. It is therefore important to consider labour market flexibility in its different segments, and regulation sometimes produces better practice.

Perhaps the worst thing about labour market flexibility as it has been applied in the UK is the lamentable performance on productivity. Output per hour in Germany is 31% higher and in France it is 32% higher. These are pretty disastrous figures. If we are to keep up with other countries, never mind soar to become the economic leader that the Chancellor talked about on Tuesday, then productivity must become a national campaign. It must become something that we improve and we must all work together to achieve that.

The Chancellor was right to warn against complacency because things are getting better, but I believe that he is wrong not to reach for more ambitious plans—perhaps, for a start, applying some of the lessons that we can learn from the other side of the North Sea.

13:00

[Baroness Eaton (Con)]

My Lords, I add my thanks and congratulations to the Minister on initiating this debate but also on his very inspired work in his field.

I am certain that there is not a single Member of this House who does not recognise the value of employment to the well-being of individuals and their families. Times of unemployment are tragic for people and for the places where they live. Therefore, it is heartening to note that, as we have heard, the number of people in employment is at a record high; over the past year the total has risen and we now have 30.19 million people in work. I know that that has already been referred to but it is such a good figure that I need to say it again.

Even so, many of our major cities, especially those in the north of England, have on occasion suffered disproportionately as major industries have almost disappeared. Therefore, today’s news—again, already referred to—about Hitachi moving its operation to the north-east is very welcome. It is also an indication of the confidence that business has in the UK and its Government.

The closure of one factory can cause several hundred jobs to be lost, even overnight. One authority in the north of England, the metropolitan district of Bradford, where I am a councillor, was once one of the richest cities in Britain and the centre of the world’s wool trade. Over a number of years, the wool trade declined and so did much of the heavy engineering industry. This had a major impact on the employment opportunities for the people of the Bradford district.

In Bradford, for the 12-month period to September 2013, 217,500 residents aged 16 to 24 were in employment. Since September 2011, an additional 18,400 people have found employment. Employment growth in Bradford since 2011 has almost doubled the 4.7% increase seen in the Leeds city region as a whole and is more than four times the 2% increase across the UK.

Bradford’s working population is growing by 2,000 people per year. By 2021, there will be an additional 18,000 work-age people living in the district. Maintaining current levels of employment rates will require 10,000 new jobs. The Leeds city region econometric model forecasts employment growth at around 16,000 by 2020—an increase of 7.5%, which is higher than the increase of 6.5% forecast for the UK. The majority of new jobs will be higher-skilled, with around 6,000 requiring graduate level skills, while only 2,000 will be NVQ level 1 or below. The sectors likely to experience the biggest growth are health, transport, education, retail and professional and business services.

Bradford Council has implemented the rates rebate scheme as part of a package of measures funded by the Government’s successful regional growth fund. This scheme has been critical in persuading a number of prospective commercial tenants to commit to a large retail development project, which has in turn enabled the critical level of pre-letting required to trigger development obligations.

Bradford’s city centre growth zone, launched in 2012, is jointly funded by the regional growth fund and the council, the aim being to encourage private sector investment. Construction of the new retail centre, I am pleased to say, is now under way. The construction phase will create 1,500 jobs, with 2,500 permanent jobs in the completed contract, which is projected to attract 20 million shoppers per annum. The timeframe for the growth zone offer is crucial. The construction phase commenced later than anticipated when the programme was devised, and this creates a major issue. The delivery schedule and the regional growth fund funding period are no longer aligned, resulting in many priority activities falling outside the contracted delivery period.

The city centre growth zone is working in the case of Bradford. It is bringing real change to the face of the city centre—change that is lasting. The momentum for investment has been really positive. It is essential that such excellent government schemes always allow flexibility on timescales to enable local circumstances to be accommodated.

A project called Get Bradford Working has provided funding for unemployed people and has funded longer-term placements in business to provide people with skills and experience. Some 273 unemployed people have been helped into jobs created through the Employment Opportunities fund, and a further 245 unemployed people have been supported into work through the Routes into Work fund. In spite of changes in heavy industry, there are opportunities to train for manufacturing jobs in the district, which still has a larger than average percentage of manufacturing. There is a shortage of engineers—especially those with high-level skills—and there are examples of people working well past retirement age as there are not the people with the relevant skills to replace them.

Nationally, youth unemployment has been rising since the early 2000s, growing by more than a third during the 2008-09 recession, and it has remained too high ever since. It is, however, encouraging news that the latest figures show that youth unemployment has fallen by 29,000 this quarter and is 81,000 lower than a year ago. Some 8.7% of all young people who have left full-time education are unemployed. While this is unacceptably high, we should note that it compares with 12% in 1993 and 14% in 1984.

As we have heard, the Department for Work and Pensions works with young people on jobseeker’s allowance through jobcentres, and the number of young people on JSA has fallen for the 21st month running. The 18 to 24 claimant count peaked in December 2011 at over 480,000, but today it is 295,000.

Apprenticeships can be part of the solution to youth unemployment and aid the development of appropriate skills in manufacturing. There are many opportunities. The Chancellor is to be congratulated on yesterday’s Budget, recognising the value of apprenticeships and extending the apprentice grant for employers scheme, providing £85 million in both 2014-15 and 2015-16 for 100,000 grants to employers, as well as £20 million for postgraduate apprenticeships, as referred to by the noble Lord, Lord Shipley.

As I have said, apprenticeships create many opportunities for young people, but in too many cases young people have not been encouraged in school or by their parents to think of them as a credible alternative to higher education. We need to move young people away from the idea that anything other than a higher education degree is an inferior route to employment.

In many schools, as the noble Lord, Lord Shipley, ably pointed out, careers advice is woefully inadequate, with too little focus on the variety of routes into work and education. Many careers departments in schools do not have a good understanding of the employment trends or the skills required in their locality. Academy schools with business sponsorship do much to improve this situation. Too often, those leaving education are not seen as being ready to cope with the world of work. There can be issues around attitude, timekeeping and communication. Therefore, to some potential employers, school leavers can be much less attractive than those who have experience.

There is no magic bullet that resolves the issues of unemployment overnight. Her Majesty’s Government are to be commended on their economic strategies, which give confidence to investors, on their many schemes, such as enterprise zones and the regional growth fund, and on the support that they gave to businesses in many ways in yesterday’s Budget, which will have a major and positive impact on employment opportunities.

13:10

[Lord Haskel (Lab)]

My Lords, every Wednesday, John Kay writes an article in the Financial Times. Last week he wrote about economics and mathematics, and he came to the conclusion that numbers do not really reflect the world as it really is. Numbers have to be tempered with the realities of human life, as I think the noble Baroness, Lady Eaton, implied. While I welcome this opportunity to debate employment and I welcome the rising numbers in work, I am not sure that there is much to be gained in just debating the level of employment. The noble Lords, Lord Holmes and Lord Bilimoria, told us that the number in work is at a record level; I gently remind them that so is the population. I agree with John Kay. The numbers without the humanity can be meaningless.

I will give another example. In the normal course of events, every month some 30,000 people in Britain change jobs for a whole range of reasons; many of them are for personal reasons totally unrelated to government policies, yet they are all included in government figures. The level of employment has to be considered not just in terms of numbers but also in human terms, in its effect on people and on the fairness of our society. So I will look at the level of employment in this way.

There was a time when the Government were going to create employment by means of an industrial strategy, a strategy that would balance the economy and balance the country; it says so in the coalition agreement. This would mean high-tech growth, skilled jobs, advanced technology and a lower north-south divide. However, as yesterday’s Budget indicates, this has manifestly failed. As my noble friend Lord Monks explained, we have growth, but it is based on increased consumption and on a property boom. It is based more on trading in finance, which is a zero-sum game that benefits the few, and less on trading in goods and services, which benefits us all. Yes, the employment level has gone up, but in a way that reflects this rather disappointing industrial strategy.

The recent report from the Resolution Foundation makes it clear that some 5 million of our workers meet the definition of low pay set by the OECD. We have a higher proportion of low-paid jobs than most OECD countries. Of course, the low pay in many of these jobs is topped up by the Government through the tax system, so giving people a chance to make ends meet but also keeping up the employment figures. Instead of subsidising low pay, why do the Government not do more to encourage people to run their businesses better—by raising productivity so that they can pay a living wage? Yes, the Government are trying to raise skill levels and encourage people to gain qualifications, but if we are seeking to have a successful economy, a degree or a qualification is not necessarily a proxy for or even a means of getting a job. As my noble friend Lord Giddens explained, in that kind of world the economy pays you for what you can do with what you know, not just for knowing it. I would add that, in that kind of economy, success is increasingly a group endeavour that depends a lot on soft skills such as leadership, collaboration, adaptability and the ability to learn and relearn. Indeed, it is the absence of these skills as much as technical skills that concerns many employers today. Perhaps the biggest threat to our level of employment is the possibility of leaving the European Union. This would marginalise us economically because every day we hear from international corporations that our leaving would reduce their activity in Britain and jobs would go elsewhere. Thank goodness we now know that a Labour Government would remove this threat to our level of employment.

Then there is the matter of productivity, raised by my noble friends Lady Donaghy and Lord Monks. Did the Minister see the release on 20 February from the Office for National Statistics which gives the final productivity estimates? In case noble Lords missed it, I will give the highlights. Last year the output per hour in the UK was 21 percentage points below the average for the rest of the major G7 industrialised economies. UK output per hour and output per worker fell compared with the previous year. Our output per hour was 3 percentage points below the level of the pre-recession year of 2007. What this demonstrates is that this Government have maintained the high level of employment thanks to the high number of low-paid, low-skilled jobs that are needed in a low-productivity economy. That is a strong indicator that we are in a race to the bottom. Is this how we are going to pay our way in a globalised economy? Many of the people needed to do all these low-skilled, low-paid, entry-level jobs are the very immigrants that the Government are seeking to control. Is this how we are going to build up our exports to deal with our balance of payments and borrowing, which the Chancellor spoke about yesterday?

The Minister’s fine words about our level of employment does very little to deal with these issues, which are central to our economy. John Kay is right: take the numbers out of the human context and you get a completely different picture. Not only does this kind of employment do little for our economy, it also damages our society. There is more employment, but the unemployed are, more and more, overwhelmingly the younger generation. This is a problem all over Europe and there are EU social funds available to tackle it. Central to this funding is a job guarantee scheme, and the Government were wrong to scrap it. The Minister is wrong. The rising level of employment still leaves many young people needing to be rescued from long-term unemployment before the rot sets in.

Other noble Lords have spoken about the huge growth in zero-hours contracts and part-time work. Yes, this may raise the level of employment, but it also raises the number of people who live with insecurity, people about whom my noble friend Lady Donaghy spoke. My noble friend Lady Hollis, in her letter to the Guardian, pointed out that if you work 30 hours a week on a minimum wage split between, let us say, two 15-hour jobs, you cannot add the hours together to bring you into national insurance, so you end up with no state pension. It is playing on this kind of insecurity that enables employers to make unreasonable demands such as working people harder and paying them less, sometimes insisting on false self-employment, as other noble Lords have spoken about. I put it to the Minister that there is plenty of evidence that this is happening. The economy is growing, corporate finances are in good shape, executive salaries and bonuses are soaring, but ordinary wages are being squeezed. The number of people who are living precariously is on the rise.

We are told that average wages are going up. But the Minister may remember when he was being taught arithmetic at school, that a big increase at the top is enough to lift the average. Meanwhile, the median wage is static, leading to the rising inequality that concerns so many of us. Even with rising levels of so-called employment, is this the kind of leadership that inspires growth and innovation? Is this the kind of leadership that delivers a fair society? Successful leadership means that people have to believe that you believe in what they believe. If they think that all you care about is the numbers, you are in deep trouble. This kind of insecurity and inequality means social and economic trouble.

The level of employment must be in the context of an economy that works for all of us—not just the few who are doing well, but the many who have to make do with low wages and dehumanised working conditions. This level of employment does not create the society that I seek. This is not my vision.

13:21

[Lord Soley (Lab)]

My Lords, I thank the Minister for putting this debate before the House and I share his pleasure at the good news within the employment figures. However, my noble friend Lord Haskel—who, as usual, gives us the benefit of his experience of working in industry and being an employer in the past—is right to point to the dangers of low productivity and low wages. My noble friend Lady Donaghy also made some very forceful points. The Minister might have found her attack slightly critical but if he looks at the figures she produced, I think he will see that they bear further examination.

I say in passing to the noble Lord, Lord Shipley, that yes, the previous Labour Government have to accept responsibility for not regulating the banks and the finance industry much better than they did. However, I would be more respectful of that argument if every other political party, not just in Britain but throughout the western world, had argued for greater accountability of the banks and finance industry. If you strip out the effect of the banking finance collapse you will find that this country's economy has not been in a bad position for a very long time. We need to acknowledge that and get some of the rubbish out of this debate.

I want to focus my comments today on the difficulty that all parties share in addressing the problem of those, particularly young people, but not just young people, who have difficulty in finding a job or maintaining a regular work pattern. My comments follow the direction set not just by my noble friend Lord Haskel but also by the noble Lords, Lord Bilimoria and Lord Giddens, because the science and technology aspect is vital. Changes in science and technology have been a factor in driving the economy forward since the Industrial Revolution but such change is an even bigger factor now.

I do not usually bore the House with my own experiences in life but I should say that my own experiences are one of the reasons why I have always looked sceptically at the unemployment and training issues. I left school at the age of 15 in 1954 and with an appallingly low educational achievement. The first thing that the school’s job officer, as they were then, said to me was, “You look like a nice young man. Why don’t you work in an office?”. So I went to work in the solicitor’s office that he sent me to. The first thing I did was to make the tea and the second was to run messages. That went on for a year.

The great advantage of the 1950s, at that stage, was that there were still plenty of jobs, so after a while I got fed up with my first job and left. You could earn much more on building sites and in factories, and that is what I did. I am not sure that some of those building sites would be open these days after a visit from a health and safety officer. I was quite relieved to discover that one building I worked on in Essex was still standing some years later, although I have to confess that it has been knocked down since. I just hope that that had nothing to do with the young man who was mixing the cement. The reality was that there were plenty of jobs and you could switch around. However, some of the people I knew at that stage did suffer quite long-term unemployment. They were not getting into the job market. Often, it was because of a lack of educational skills.

Just over 100 years ago, in the middle and late 19th century, people became aware of the fact that the abilities to read, to write and to do basic arithmetic were not only good for them but, above all, good for the economy. Those skills enabled them to use the emerging new technologies, and to develop them very effectively. In no way do I want to undermine any attempt to ensure that people leave school with good educational abilities in reading, writing and arithmetic. However, it is a digital economy now, so we need to make sure that everyone who is struggling to get and maintain a job has those skills.

My main question for the Minister is: can we look rather more creatively at how we involve people—not just young people, but particularly young people—in digital training? I do not think that any young person who has had a history of uncertain employment—let us use that phrase rather than “unemployment”—should be allowed to go through the employment agencies without addressing the questions, “What skills do you have and what skills can we give you?”. The same applies to many of the other government departments and the organisations that work with government on this. The same questions should be asked. Do they have the basic skills? “Basic skills” does not mean just being able to use a computer. It does not mean just being able to search the internet. It means an ability to operate in a much more complex area, including the increasingly important one of coding.

I can give a simple recent example. Some youngsters I know who had literally just left school and did not have jobs painted T-shirts and shoes which they had bought and on which they then applied special designs. They sold them at school fetes and charities for anything up to £100. It was pretty impressive. They were certainly able to use computers and they knew how to use the internet but they did not have the digital skills to design a website where they could sell these items. We need to remember that many of the new industries can be run from home; it is much easier to do it now, but not easy unless you have those digital skills. With some basic training, could not those young people have done it? They had computers at home, so they had the technology sitting there, but they could not design websites and therefore promote sales in that way. That is one of the ways forward. I had a conversation the other day with the noble Baroness, Lady Lane-Fox, in which she drew my attention to an organisation called Go ON UK—which I know has been in contact with the Government. It is saying that that is precisely what we need to do. When young people—or older people, because we should not describe this issue only by age—go to a jobcentre or other government agency and their technical skills, such as coding, are assessed, training should be offered immediately to those who do not have the necessary skills.

I would go so far as to say, given the Minister’s involvement in the benefits area, that there ought to be a way that we can offer financial help or recompense—I would almost dare to call it a bribe—for such training. A lot of this is about a lack of confidence, which is particularly true of older people. If you do not have the confidence to use the internet well or to use IT to create, run or work for an existing business, the right training can give you the confidence. As I said, financial support might be needed to encourage that. We need to look much more creatively at this because, for all the reasons that the noble Lord, Lord Giddens, gave, we are looking at an economy which is much more driven by science and technology than ever before. Perhaps I may expand on my example of the late 19th century, when people began to recognise that reading, writing and arithmetic was good, and speculate that if we fast forward a hundred years from now, people will look back and say that we were only just becoming aware in the early 21st century of the importance of digital skills.

There is an opportunity here for Governments and for political parties of all persuasions to look at the way in which new technologies are used to enable people to earn an income wherever they are in life. I want my own party to look into this and it is very encouraging that it is doing so. We have got very much better at this with people with severe disabilities. There is now much greater help in this area. No person should get through an employment agency or some of the other agencies without us gaining some idea of the digital skills which that person has, what more could be offered to them and how they could be encouraged to take up those skills.

13:31

[Lord Sheikh (Con)]

My Lords, I pay tribute to my noble friend Lord Freud for introducing this subject and for his excellent speech. I speak as a businessman and as somebody who has employed many people through several business ventures. At the outset I take the opportunity to commend the Chancellor of the Exchequer on his Budget Statement. I hope to speak more on this subject during the impending debate next week but it is useful to note in this debate the measures that will boost employment.

I welcome measures announced in the Budget to support businesses, which include cutting the cost of energy bills for manufacturing and doubling the annual investment allowance to £500,000. The Chancellor also stated that we will have the most competitive export finance in Europe, by doubling government lending available to exporters to £3 billion and cutting the typical interest rate by a third. All these will provide a much needed financial boost to businesses and free up money to spend on employing more staff, among other things. This was a Budget that backed businesses and, as a result, backed employment.

It is my belief that this Government’s work on welfare and employment is one of their greatest achievements. I have spoken on this subject in your Lordships’ House previously. It has been stated many times in this Chamber, in the other place and elsewhere that the coalition Government inherited a dire financial situation—but we must not forget that this was not the only legacy that their predecessors left behind. This Government also inherited a culture of worklessness, one whereby welfare could and often did pay more than work and where generations did not work. Let us not forget that children and young people who live in households where adults do not engage in any form of employment are not only the most deprived in our society but also the most likely to follow this path once they leave full-time compulsory education. This generational cycle of worklessness was a key factor in the rising levels of welfare dependency and poverty in our communities. Alongside this, there were also vastly high levels of unemployment.

There are now 1.3 million more people in work than when Labour left office. Unemployment now stands at 7.2%, the lowest for the past five years. The number of young people in work has increased by 43,000 in the past three months and the employment rate has now hit a five-year high with a record 30.1 million people in jobs. The OBR has forecast that over the next five years a further 1.5 million jobs will be created, with real earnings growing every year.

It is however important that we remember that employment is not merely a matter of statistics. Every position filled means another family have the security of a regular pay packet. We must not forget that this pay packet is put back into the economy both in taxation and in consumer spending, supporting yet more jobs and growth. Nor should we forget the great benefit to the person’s individual well-being. I am sure noble Lords will agree that work gives people pride and confidence. As an employer, I know that people tend to work for two reasons. The first is to earn a living and the second is to get job satisfaction. On the contrary, being out of work sometimes creates depression and has an adverse effect on people. Work is good for people’s mental health, their physical health and their general well-being—benefits that have been demonstrated repeatedly. Dependency is not liberating. It constrains people and prevents them from achieving their ambitions. What is more, if we can get more people in work, some of them will receive salary progressions and improve their standards of living.

The Government deserve recognition for trying to ensure that we have a fair welfare system to support those in genuine need. Since benefits were capped, 9,200 households have moved into work or reduced their own benefit claim. Some 4,300 of these households have found jobs. We have heard many times that it is the Government's aim to reward those families who want to work hard and get on. Here we are seeing that, as a result, thousands of people are finding jobs and moving off benefits. It was not right that tens of thousands of households received far more in benefits than the ordinary hard-working family earns. We cannot underestimate the resentment and anger felt by hard-working families who saw others who made a conscious effort not to work being rewarded handsomely by the state. This caused tensions within our communities, which is understandable. To have people saying that they “could not afford to work” was absurd. Britain must be one of the few countries in the world where this was the case. Social security should be for people who find themselves out of work and are trying to get back into employment. Few people would disagree with these aims.

I pay tribute to those who offer people the chance of work. The rise in employment is not created by Government alone. It is being fuelled by businesses and entrepreneurs across the country. They should be congratulated. As the economy continues to improve they are feeling increasingly confident about employing more people. I have spoken many times in this Chamber and elsewhere on the importance of supporting small businesses. As has been said many times, SMEs are the lifeblood of the British economy. An ambitious and thriving small business sector is vital for steering the economic recovery in the right direction. None of the early signs of recovery that we are seeing today would have been possible without these small businesses. Their importance comes not only in the money they can make but also in the jobs they create. We must ensure that the systems are in place to aid them in doing this. The National Insurance Contributions Act, given Royal Assent recently, was one such measure. The employment allowance will give businesses and charities a much needed tax cut as a result of the Act. This will benefit over 1 million businesses, with almost 500,000 being taken out of paying national insurance contributions altogether. Businesses will, more often than not, spend these savings on their business—investing it, increasing wages and creating jobs.

Let us also not forget the smallest of businesses, those which currently have no employees at all. The allowance will create a strong incentive for sole traders and new and start-up businesses to hire their first employee. The number of self-employed people has risen. I hope that soon they will have more employees of their own, creating wealth and jobs through innovation.

Another welcome measure is the removal of the jobs tax on young people under the age of 21. As a result of this, employer national insurance contributions will be removed altogether on 1.5 million jobs for young people. Youth unemployment is falling, but it is important that more is done to get young people into work. We can see from the experience of previous generations that the longer the period spent out of work as a youth, the longer the time spent out of work later in life. I am pleased that, thanks to this measure, the future is looking brighter for young people in this country. This will also come as a great benefit to the businesses that employ them. A young, vibrant and skilled workforce is a benefit for us all.

We should also welcome the rise in the number of women in employment. As someone who has spoken many times about female empowerment, it is most welcome that the number of women in employment has reached a record high, with more than 14 million in work for the first time. The number has increased by over 500,000 since the election. Getting into employment should not be something that people are expected to do alone, particularly for those who have never worked before. It can be a daunting process. I am pleased that the Government’s Work Programme is helping people into work. Unlike the short-term focus of previous schemes, the Work Programme is geared towards not just getting people into work, but keeping them there. It is helping large numbers of people escape the misery of long-term unemployment and get back into real jobs. Through this scheme, providers are rightly paid according to results. They have the flexibility to design support systems that address the needs both of the individual and of the local labour market. So far the scheme has helped 208,000 jobseekers find lasting work, including 17,560 young people. This is evidence that there are jobs available, but we must work to ensure that all the measures are in place to get those who need jobs into them.

It is my belief that this Government are committed to lowering unemployment and helping people back into work. However, we must not be complacent. More needs to be done to increase employment and train people to fill the jobs. To enable us to achieve that, we should not rely on my business, which is financial services, but expand our manufacturing activities and undertake more business overseas. We must increase our trade with India, China, Brazil and Africa. There are considerable opportunities in Africa, where I was brought up and with which I still have connections. Given our historic ties with a number of African countries, we must promote more trade with them. Also, we should increase apprenticeships and train more people in different trades and businesses.

13:44

[Baroness Turner of Camden (Lab)]

My Lords, I should like to thank the Minister for introducing a debate on this important subject. He referred to growth, and many of us welcome that, but we have other concerns. What sort of growth, we must ask? What kind of work, and what is the effect upon many families struggling against poverty? The growth is clearly mainly in London and the south-east. The remainder of the country, particularly the north, is not doing so well. Unemployment in the north is around 10%, compared with 5% in the south-east. The parts of the country that are most affected are those that have faced deindustrialisation. The factories that once provided employment for the local population have disappeared. Many industries, like the steel industry following privatisation, have disappeared altogether. This is the process which was started under the Administration of the late Baroness Thatcher.

Concerns about the lack of balance in the economy have been voiced by many noble Lords in the debate. The Government seem to accept that rebalancing is necessary if growth is to continue, but obviously much more needs to be done. It is accepted that we need a more skilled workforce, and in that respect I support the efforts that the Government are making to promote apprenticeship training. Much more needs to be done in that direction for young people. Equally, more should be done to encourage young people into science and engineering studies. A number of years ago, when I was a member of the Equal Opportunities Commission, we ran the WISE campaign, which stood for Women Into Science and Engineering. We had some success in that regard and we could do with another campaign now. We need campaigns to generate more enthusiasm.

As to what work is like nowadays, again, there has been concern about the work that is available. There is talk of zero-hours contract work and of work that is low-paid. Sometimes individuals must take several small jobs because one job simply does not pay enough. This is particularly the case for women, because childcare is too expensive for many people. There was recently a TUC conference for women at which many stories were told of the treatment of people on zero-hours contracts, as well as appalling stories about very low pay. Concerns were expressed that the austerity cuts, from which everyone is expected to suffer, impact more heavily on women. Although there has been growth, wages generally seem to be stagnant. I am glad to say that there has been talk of raising the minimum wage, but it needs to rise by more than the amount suggested for it to be of real assistance. What we really need is the living wage to lift people out of poverty.

In discussions about employment in this House on previous occasions, it was suggested that people should “get on their bikes” and go to where the work exists. That is no longer a good idea because the problem is housing. In London and the south-east generally there is a housing crisis which has resulted in a shortage of social housing, and private renting is desperately expensive. All this indicates that although there is growth, particularly in the south-east, there are still major problems for many people, who face insecurity both in employment and on the housing front. The Government’s employment policies have simply added to that insecurity.

We have seen a series of measures from the Government designed to diminish or totally remove the employment rights that have been fought for over the years. It is now very difficult for a dismissed worker to claim for unfair dismissal. If, after coping with a series of bureaucratic steps he or she eventually gets to a tribunal, it will cost almost £1,000 in fees. Workers injured at work will find it more difficult to claim compensation because of changes to the law, and whistleblowers will now lose their protection if they attempt to warn about unsafe practices in the workplace.

There is also the government scheme of “shares for rights”. Employees are given shares in a company in return for surrendering all employment rights. I am glad to say that these schemes do not appear to have had much success, but all this indicates that the Government prefer to have a workforce with no workplace rights at all. This adds further to feelings of insecurity and of course encourages bad employers to behave even worse. In this House we defeated some of the proposals, but the Government later defeated our amendments in the Commons. I strongly believe that a well paid, well trained and respected workforce is far more likely to produce sustainable growth than an insecure one. After all, no one likes to feel that they are disposable.

As for training, the Government should not pay too much attention to what the media have to say about trade unions. I speak as a former trade union official. Unions are committed to the education and training of members. Unionlearn, the TUC’s education department, is highly respected for the work it does among people who missed out on training earlier in their careers. The automotive industry, which has been doing quite well, has involved the unions and has received their support. I gather that this is what happens in Germany. That was explained in some detail by my noble friend Lord Monks in his speech earlier.

There is some growth and some improvement in the employment figures, but clearly very much remains to be done. Again, I thank the Minister for his speech. It has given a number of us an opportunity to air our problems, and I hope that he will pay attention to what we have said this afternoon.

13:51

[Baroness Sherlock (Lab)]

My Lords, this is another wonderful debate. It is one of those times when it is impossible to be the opposition person responding because if I responded to all the things I wanted to today I would be here twice as long. I was beginning to wonder if it would be a job better suited to one of the robots my noble friend Lord Giddens told us about. If they can do stand-up comedy, I am sure that they can respond to a House of Lords debate rather better than the average human.

I have a growing list in my back pocket of noble Lords who I want to one day have a cup of tea with and pick their brains about things that are nothing to do with the subject under discussion. The noble Lord, Lord Shipley, puts more passion into exports than anyone I have ever heard. I would love to talk to the noble Lord, Lord Bilimoria, about beer one day or the noble Lord, Lord Holmes of Richmond, about the Olympics. He increasingly has a speaking style so engaging that I forget that half the time I disagree with him—sadly I do—but I commend him on keeping us awake while offering up subjects for disagreement.

The temptation at this point is for all of us to take the latest labour market statistics, cherry pick them nicely and then throw them across the Chamber in suitable fashion. Obviously, I will do a bit of that because noble Lords would be disappointed if I did not but I will try not just to do that. I want to try to pull out some of the ongoing problems that we all—I hope—accept and acknowledge across the House, on which, while we may disagree on the reason for them and the prescription, we are able to send a signal to those listening to this debate or reading about it outside that all of us in this House take seriously the challenges facing British workers and are committed to doing something about them.

I welcome the rise in the employment rate. It might be small but it is a positive move and one in the right direction, and I am glad to hear about it. However, I want to look a bit underneath that rise at some of the issues that remain. First, an unemployment rate of 7.2% means that 2.3 million of our citizens are unemployed. I thank my noble friend Lord Haskel for reminding us that behind these numbers are human stories—there are 2.3 million individual crises that we need to take seriously. We all need to guard against ever sounding complacent even as things improve. I am also conscious that the number of people unemployed for more than two years has risen and we need to think quite carefully about the question of long-term unemployment—of which more in a moment.

We also still have a serious youth unemployment problem, as highlighted by my noble friends Lord Monks and Lady Donaghy. Some 912,000 young people are unemployed. That is virtually one in five of all young people. The Minister offered up the caveat that that includes people in further education. At this point I am tempted to quote from the ONS footnotes which explain that, in accordance with international guidelines, people in full-time education are included in the youth unemployment estimates if they have been looking for work in the past four weeks—I will stop myself there not to bore the entire House. The guidelines are quite clear as to who is included. Even if young people in full-time education are excluded, and even though many of them may actually be looking for work, we still have the significant number of 628,000 unemployed 16 to 24 year-olds. It is really serious. The Minister said that we are not where we should be when we come to NEETs. A million young people are not in employment, education and training. That is a tragedy for our country. The number of young people claiming jobseeker’s allowance for more than 12 months has doubled under the Government, so we have a significant issue. Last year, long-term youth unemployment rose to its highest level for 20 years and there are still more than 226,000 young people unemployed for more than a year.

I, like many noble Lords, worry about the regional variation. I do not want just to look crude north and south but if I go down the road from Durham, where I live, to Stockton, the number of young people claiming JSA for more than 12 months has nearly trebled under this Government. However, it is not the worst. If I go down to Yorkshire or Lancashire, in Dewsbury and Burnley, long-term youth unemployment is 10 times what it was in 2010. It is not just a northern problem. In Wiltshire, the north of Swindon has seen long-term youth unemployment increase more than fivefold. There are areas where there is a really significant problem. If we cannot offer hope to young people then what do we have to offer them? It is a tragedy not just for the country, which misses out on all their gifts, but for each of those individuals. As the noble Lord, Lord Sheikh, described, the depression and mental challenges that can come from being out of work are very serious and we must therefore all take it seriously.

In terms of prescription, is the Minister ready yet to accept that it was a mistake by the Government to abolish the highly successful Future Jobs Fund, established by the previous Labour Government, which helped more than 100,000 young people into work? After all, his own department evaluated it positively, showing that it had produced net benefits of £7,750 a head after taking account of tax and benefit changes. What about the Youth Contract that replaced it? That was supposed to generate 160,000 wage incentive payments by the spring of next year. The scheme started in April 2012 and by last month there had been just 10,030 payments. Can the Minister tell the House what plans the Government have for getting the Youth Contract back on track? The mainstream youth Work Programme, which has been referred to by many noble Lords, is also having some fairly serious problems. New figures out show that just one in five people who has been on the Work Programme for two years finds a job. In fact, people are more likely to end up back in Jobcentre Plus than they are to end up in work.

As for the sick and disabled people that the Minister referred to, performance for people on employment and support allowance is pretty terrible. Today’s figures show that job outcomes at the 12-month stage are consistently around one in 20, or 5%. According to the Work Programme invitation to tender, that is what you would expect if there were no programme at all. Do we have a programme that is no better than doing nothing at all? Can the Minister tell us what the Government are doing to address that?

The second issue I want to focus on, raised by many noble Lords, is the state of the labour market and the rising insecurity faced by many of those who are lucky enough to be in work. Too many people are still stuck in temporary jobs or in short or zero-hours contracts that make it harder to get a mortgage or save for a pension. All these add to pressures on our social security system. My noble friend Lord Haskel mentioned the issue raised by my noble friend Lady Hollis about people in more than one job who cannot get into the pension system. When we debated the Pensions Bill last month the noble Lord, Lord Freud, indicated that there was some uncertainty around how prevalent zero-hours contracts were. Under pressure from the shadow Business Secretary, the ONS has now revised its figures and now estimates that there are 583,000 people on zero-hours contracts, up from 183,000 in 2010, which is a more than threefold increase.

I can confirm that the next Labour Government will outlaw the exploitative use of zero-hours contracts by banning employers from insisting that zero-hours workers be available even when there is no guarantee of work, by stopping zero-hours contracts that require workers to work exclusively for one business and by ending the misuse of zero-hours contracts where employees are in practice working regular hours over a sustained period anyway. We will put in place a new code of conduct for their use. Workers are feeling seriously insecure and I am sorry to say—as my noble friend Lady Turner pointed out—that government action has made them in practice less secure by watering down many of the protections workers have enjoyed in health and safety, against unfair dismissal and in other areas.

We then come to the point raised by many noble Lords: the cost of living crisis and the problems of low pay. This year marks the 15th anniversary of the national minimum wage, which I regard as one of Labour’s great policy successes—it boosted pay at the bottom without leading to a loss of jobs and it has wide support. I was talking to a couple of students in Durham recently over coffee, and when I explained about the days before the minimum wage, they were staggered. They had no idea that relatively recently you could just pay somebody whatever you wanted. They were amazed. In 15 years it has now become so commonplace that no one can imagine what happened previously. I know that the Government have changed their position, and I acknowledge that they have accepted it was a mistake to oppose the introduction of the minimum wage, but it is worth remembering that before the minimum wage people were being paid as little as a pound an hour. The Low Pay Unit found a worker in a chip shop in Birmingham being paid 80p an hour and factory workers earning £1.22 an hour. This was really serious. However, unfortunately, low pay has got worse under this Government. Working people have seen the value of their wages fall by an average of £1,600 a year, while the value of the minimum wage has fallen by 5%.

The challenge here, I suggest, is that the Government have not ensured proper enforcement of the minimum wage. Some 5% of jobs pay below the minimum wage, according to the Low Pay Commission, but only two employers in four years have been prosecuted. What are the Government going to do about that? Labour has called for a tenfold increase in penalties for companies that do not pay the minimum wage, and we want to see better enforcement, including giving local authorities new powers in this area. We have launched a review of low pay, led by Alan Buckle, deputy chairman at KPMG International. A Labour Government would encourage employers to pay the living wage through new “Make Work Pay” contracts, under which firms who sign up to be living wage employers in the first year of the next Parliament will benefit from a 12-month tax rebate of up to £1,000 and an average of £445 for every low-paid worker who gets a pay rise. In replying, could the Minister tell the House what the Government’s strategy is for tackling the problem of low pay in Britain? I would also be very interested to hear his response to the questions from my noble friend Lady Donaghy and other noble Lords on the gender pay gap and those from a number of noble Lords, including the noble Lord, Lord Giddens, on inequality.

We also have the problem of underemployment. Record numbers of people now want to work full-time but can get only part-time jobs. According to the latest statistics, 1.5 million people are approaching that position. That kind of insecure, irregular and low-paid work adds to social security bills, so that the Government are now on course to spend £15 billion more on social security and tax credits than they budgeted for in 2010. In particular, the total cost to the Exchequer of those working part-time but who want to be full-time is estimated to be £4.6 billion. While I am on techy numbers, I have another question for the Minister. I am sure that he, like me, has dug into some of the small print in the new labour market statistics. I would be fascinated to know what he thinks about the reasons for a couple of things. It seems that the number of hours worked by both full-time and part-time workers has fallen, but that the hours worked in second jobs have gone up. As far as I can tell, the increase in employment seems to be accounted for by self-employment. Could the Minister tell the House what he thinks that is telling us? Does it raise any alarm bells, either about people having to take second jobs to be able to feed their families or about the kind of drift to self-employment of the unattractive kind described by my noble friend Lady Donaghy in her excellent speech?

It would be reasonable to ask me to talk about what Labour would do instead, so I will finish by doing that. First and foremost, the challenge is to ensure that everyone who can work and should be working is in a job. The centrepiece of Labour’s economic plan is a compulsory job guarantee for young people and the long-term unemployed. Anyone over 25 who has been receiving JSA for two years or more, or anyone under 25 for a year or more, would get a guaranteed job paying at least the minimum wage for 25 hours a week and training for at least 10 hours a week.

As with the Welsh Assembly Government’s Jobs Growth Wales programme, we expect many of the jobs to be in small firms. Experience there has shown that once a company has invested six months in a new recruit, the chances are they will want to keep them on after the subsidy has ended. I was very interested by the speech made by the noble Lord, Lord Bilimoria, and I encourage him in a sprit of bipartisanship, given his own experience of entrepreneurship, to engage with us to think about how we can make this work best for small firms. I was very struck by the need to help young people as well to think about what their entrepreneurial skills could bring to the economy. When I sat on the commission on the riots, I met a number of young people who were in prison for riot-related offences. Many of them were very entrepreneurial indeed—just not in the way that we would want them to be. It was not directed. There is so much talent out there which we could capture and direct. It is important to give people a chance to be out there and to make sure there is a limit to how long they can spend disconnected from the world of work.

The investment in the compulsory jobs guarantee would be fully funded by repeating the tax on bankers’ bonuses—which, I note from the figures, are rising again—and by a restriction on pension tax relief for those on the highest incomes. We also need those young people to be able to move on and progress in the labour market, so Labour would take action to tackle the serious skills gaps that are holding back individuals and, indeed, our economy. A number of noble Lords made some very interesting points, including the noble Lord, Lord Shipley, and my noble friend Lord Soley about the skills challenge and how that is tacked in schools as well as in the economy. At its very simplest, almost one in 10 people on JSA does not have basic English and more than one in 10 do not have basic maths. If you do not have those skills, you are much more likely to make repeat claims for benefits and we need to do something about that.

I say to my noble friend Lord Soley that we do not have a problem just with coding skills but with IT skills as a whole—nearly half of those on JSA do not have even basic e-mail skills. If they are going to make job applications, not just online but to any employer, they need to have basic IT skills, and it is up to us as a country to make sure that we help them to do that. Labour would require jobseekers to take training if they did not meet those basic standards of English, maths and IT—not down the road when they fail to get a job but alongside their job search. I would also be interested to hear the Minister’s response to the broader and very important issues about productivity and skill levels raised by my noble friend Lord Haskel and other noble Lords.

There are some very serious issues here. We have some good progress being made, at least in headline figures, but some very serious problems in long-term unemployment and youth unemployment and in an economy with insecure jobs, poor pay and instability. We need to tackle these. Labour would pledge to get people into work, guaranteeing jobs for the long-term unemployed and the young unemployed. We will tackle the crisis in living standards and the scourge of low pay, address the skills gap and make work pay. We believe it is possible to get Britain working again, with decent jobs that pay enough to feed a family, not just at the top and in the rich areas but right across the country—in Stockton, Dewsbury, Burnley and Swindon. People deserve nothing less.

14:07

[Lord Freud]

My Lords, I have really enjoyed the debate. I thank noble Lords for the energy and effort they have put into some of these complicated issues. I particularly enjoyed the noble Baroness, Lady Sherlock, stealing the “Get Britain Working” slogan that we used in the last election, but that is a compliment. I enjoyed the first two sentences from the noble Baroness, Lady Donaghy, but the next sentence, about where my personal support lay in the Chamber, was incredibly dangerous so I did not like that. The rest of her speech I did not like at all.

To start dealing with the issues, at the core of what the noble Baroness, Lady Donaghy, and the noble Lord, Lord Haskel, said—the real attack on this—is, “Forget the quantity, feel the quality”. However, according to the figures, in the past three years, three-quarters of a million of the extra employment has come from managerial, professional and associate professional occupations. That is 70% of the rise in overall employment. The noble Lord, Lord Shipley, made a point about the importance of having quality jobs that come from the efforts on exports, having the most competitive export finance in the country and reducing the costs of energy. Those are the fundamentals and they create real business and quality jobs.

The noble Lord, Lord Monks, spoke about different parts of the country and the north-west in particular. Clearly, the Budget announcements work in that respect: the business energy package, for instance, helps firms in the north-west, including 27 CHP plants, while the SME package helps 481,000 SMEs in the north-west. The noble Lord, Lord Haskel, cavilled at the numbers going up, pointing out that the population is also going up, but the underlying employment rate is moving up to 72.3%. The most interesting thing is that, if the people in full-time education are taken out of the figures, we are now back in rate terms to the peak point that we reached before the recession. According to the projections of the OBR, we are now moving into new ground, at least on the quantity side.

I tried to go for the fundamentals in my speech and I think noble Lords might find it interesting to read it; it can be hard to take something in when you are listening to it. I was trying to say what was really happening. Productivity is really very interesting and I do not think we understand exactly what has been happening in our labour market in the past five years. We had a crash, the like of which we had not had in a very long time, so there are peculiar things happening. One of the things that was happening with productivity was that, clearly because of the impact on the financial sector, there were some odd moves. There are now forecasts from the OBR that productivity will pick up. Clearly, one of things that will happen as a direct result of that is that wages and take-home pay will start to move in the right direction.

The noble Lord, Lord Giddens, made a lot of interesting points, but one simple one was on income inequality. There is a figure, but the figure is the lowest now—as the Chancellor said—for 28 years. More fascinating were his technological issues and what we need to do about those if they happen. Clearly, as the noble Lord, Lord Bilimoria, said, there have been predictions like this regularly. The noble Lord, Lord Giddens, said that we were now really at a discontinuity, so perhaps it would be different this time. I think that was—in the jargon—such a shocking or disruptive event, however, that it is hard for us to expect the Government to sit down and be able to plan it through. When we see it really start to happen, we will have to work on it. We are getting jobs up, so we have not seen it yet. To respond to him, we have got, in universal credit, something effectively close to a negative income tax. We can actually make the adjustments. On the point made by the noble Lord, Lord Giddens, on the displacement of wealth, the interesting study that came out a few months ago from UBS showed that we were the only major country where the impact of the crash was seen evenly right the way along the income spectrum.

On the gender pay gap, there is a long-term downward trend for full-time employees, falling from 17.4% in 1997 down to 10% and it narrowed in all regions between 1997 and 2013. The noble Lord, Lord Monks, said youth unemployment was too high. On the other hand, it has been falling: the JSA claimant count has now been falling every month for 21 months: it peaked at 480,000 in December 2011 and is now at 295,000, so it is going in the right direction.

Turning to apprenticeships, the point raised was that demand exceeded expectations. That is why the Budget announced funding for more. As for the concerns of the noble Baroness, Lady Donaghy, about their low quality, all first-time apprenticeships will now involve a job and low-quality provision has been ended. My noble friends Lord Shipley and Lord Holmes said that we needed to ensure that youngsters were better equipped with career guidance by schools. Ofsted is also concerned that schools need to meet their duty better and it will give higher priority to guidance in school inspections. The effect of the increase in participation is coming through now and the latest data indicate that the proportion participating is still going up.

The noble Lord, Lord Haskel, simply said that I was wrong on the job guarantee, a point echoed by the noble Baroness, Lady Sherlock. I happen to have a pretty long memory about these schemes from various places. I can, and will, have a go at what is really wrong with that scheme, but I am more concerned about the people who are unemployed. We can help them—we know who they are—but we do not know about the youngsters who just disengage, who are called “inactive”. We all find it very difficult to do anything about that. It is probably where the most serious problem is, because if they are coming into the jobcentre, you have got them and can put them on any scheme you like. If they are not engaging, however, you have a problem.

The guarantee scheme—the one we have got hold of—is fine: it is very like the Future Jobs Fund, which I never liked at the time; instead, we put in work experience. The outcomes of work experience are virtually the same as those of the Future Jobs Fund and the guarantee strategy, but it costs one-20th, and that is how to waste money. Even then, on the sums that I can see, there is not enough money put aside. We cost this policy from Labour at £2.6 billion every year, and very considerably less has been put aside. I am not going to make the joke much about how often the Labour leadership has spent the bank bonus taxes. It spent them on reversing the VAT increase, it spent them on more capital spending, it spent them on reversing child benefit saving and it spent them on reversing tax credit savings. It says that it is not going to do any of that now—it is going to spend them on this. Let us see how long that lasts.

[Lord Haskel]

We can keep spending the bonuses because the bonuses keep going up.

[Lord Freud]

Not by that much—not by a factor of 30, or whatever it is.

The noble Baroness, Lady Turner, spoke of her concerns about childcare. We have also been concerned about childcare. Clearly, not only will she have seen the announcement yesterday about the money for taxpayers but she will have also spotted that within universal credit the rate will now be 85%. I know that she and a lot of other noble Lords will welcome that.

My noble friend Lord Soley mentioned skills. I am sorry, he is not my noble friend: I quite like the noble Lord, Lord Soley, but cannot call him a noble friend. On skills, our priority must be to get English and maths training first. One of the things we are doing with universal credit is ratcheting up the requirement for getting people to the basic level of digital involvement. We are doing a lot of work currently to work out how to help people to get to that basic level. The noble Lord is looking at a slightly higher level—into coding. That would be something separate.

[Lord Soley]

I understand what the Minister is saying. However, many people who are not good at reading, writing and arithmetic actually have quite good keyboard skills, but that does not get picked up. You can see that with kids. My noble friend on the Front Bench leading for the Opposition referred to ex-prisoners. If you look at their digital skills they are actually very good but they are not targeted in a way that enables them to do jobs.

[Lord Freud]

That is a very good point. I looked a couple of years ago at a scheme that went very specifically for youngsters who had failed in the conventional exams-based syllabus. They were given a chance by various companies to work on computers. Actually, some of them did very well and it was a new recruitment line because they were just tuned that way. There is something very real there that one could probably expand.

My noble friend Lord Shipley—he is indeed my noble friend—raised procurement. That is a matter for the Cabinet Office. I will not predict anything for the next year.

On zero hours, people are more likely to be satisfied than dissatisfied with their hours, mainly because the flexibility suits their current circumstances. While there has been an increase in the estimate, that does not mean there has been a recent increase over that period in the number—as the noble Baroness, Lady Sherlock, would accept. The implication is that, even using the very largest estimate, we are talking about only three in every 100 workers. We are looking currently at making sure that the zero-hours system is appropriate and not abused. That is in hand at BIS.

We accept the point on the enforcement of the minimum wage. Employers who fail to pay can now be publicly named and shamed. That is on top of financial penalties, and civil and criminal proceedings for the most serious offenders. The minimum wage will rise by 3% from October this year to £6.50. That will produce a pay increase for more than 1 million people—the largest cash increase in the minimum wage since 2008.

It is clear, as my noble friend Lord Shipley said, that the Government inherited a very damaged economy, with high levels of unemployment and inactivity. We are now getting back on our feet. The better news on the economy is feeding through to an improving picture in the labour market. As a result, the number of people in work has now exceeded 30 million. We have record numbers of men and women in work and the highest female employment rate on record. As I said earlier, excluding students, we are now at an all-time peak in the employment rate and inactivity is the lowest on record. Given the context of what we have been handling in terms of the recession, that is an extraordinary achievement.

Despite the difficult global economy, over 1.3 million people more now have a job than in 2010—600,000 more than at the peak before the last recession. There are 1.7 million more people working in the private sector. Despite contrary perceptions, the rise in employment—both over the year and since the election—has been dominated by full-time permanent jobs. Things are still looking up. According to the OBR, the economy is expected to grow by 2.7% this year and the number of people in work is expected to increase by 3.3% by 2018. That does not take us quite to the figures I was working with when I wrote my report in 2007, but it does not leave them that far short.

Motion agreed.