Employment: New Jobs

Debate between Lord Eatwell and Lord Freud

Monday 27th January 2014 Lords Chamber

[Lord Freud]

My Lords, the point that I have been making is that those jobs lost in the public sector have been more than replaced—by a factor of three—in the private sector right the way round the country. That includes the regions as much as the south. Let me make a point about efficiency in the public service. The size of the workforce has decreased by 15% since 2010, so the Civil Service is now the smallest since the Second World War, but output has not decreased. Productivity in DWP, for example, has been steadily improving, and improved by 12% in 2011-12.

[Lord Eatwell (Lab)]

The Minister has referred continuously to “good news”. He has just referred to issues of efficiency in the public sector. Will he refer to the collapse in productivity in the private sector, which is the counterpart of the high level of employment, as also good news?

[Lord Freud]

Well, my Lords, I have very good news for the noble Lord. We are currently restructuring the benefits system to help with that productivity issue. One of the things that universal credit does is to make sure that we have as flexible a labour force as possible. That is something that employers around the country welcome.

Guardian’s Allowance Up-rating Order 2013

Debate between Lord Eatwell and Lord Freud

Monday 18th March 2013 Grand Committee

[Lord Freud]

It is worth just reminding noble Lords that we have to take pretty urgent action to tackle the situation left by the previous Government, which was an unsustainable welfare bill that has been rising and that continues to rise, as I said, from 11% in 2007-08 to more than 13% today.

[Lord Eatwell]

That is a good point, which I forgot to bring up. Could the noble Lord tell us whether that rise is due to the change in the rate of benefits or to the recession?

[Lord Freud]

That is a complicated and rather interesting question, so if the noble Lord will accept this I would like to reflect upon it and write to him. One thing is that in the past couple of years we have in effect held level the number of people on out-of-work benefits. It is really quite a complicated question, and I shall go away and try to come back to him with a proper answer.

My noble friend Lord German asked about the 2013-14 savings. The three-year freeze of the basic rate and the 30-hour element of working tax credit have saved £975 million from 2011-12. The three-year freeze of child benefit saves £1.25 billion from 2011-12, and uprating certain elements of tax credits by 1% saves £320 million for the same period.

On the automatic stabilisers, the multiplier that we use is decided by the OBR, which is using a rate of 0.6 for welfare spending. That compares with a fiscal multiplier for capital expenditure of one. Clearly, one of the attractions of moving an extra £5.5 billion into infrastructure over the next two years is that it has that larger multiplier effect. The investments for the next two years are in new roads, science infrastructure, free schools, cutting the rate of corporation tax and increasing the annual investment allowance to £250,000. The OBR has said that it expects the level of GDP to be higher as a result of Autumn Statement policies.

My noble friend asked about the location of the reports on tax credits. I shall send the link to the relevant website. I apologise that it is difficult to find.

On the point raised by the noble Lord, Lord Eatwell, about who pays and about the rich, there are very good reasons for changing the top rate of tax, not least that the analysis of the rise from 40p to 50p, which was meant to have raised £2.5 billion, found that it raised considerably less. HMRC has found that it would raise at most £1 billion, and even less than nothing when indirect effects are taken into account. Clearly, that analysis is of the rising effect; one could look at the argument the other way when one starts to reduce it.

[Lord Eatwell]

My Lords, can the Minister elaborate on that point? In the Treasury’s initial assessments, and despite what seemed to be the obvious impact of the cut in top-take tax from 50% to 45%, its estimates were far lower than £1 billion. It has therefore significantly increased its estimate of the take; I refer to the estimates published at the time of the announcement of that measure. Will the Treasury publish a full assessment of the impact of the change in tax rates? Will it do so on a rolling basis, because we will know much more in four years about what has really happened during the past year than we know now?