National Minimum Wage

Rachel Reeves Excerpts

Wednesday 15th January 2014 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House celebrates the 15th anniversary of the introduction of the National Minimum Wage, which falls this year, and the contribution it has made to making work pay, boosting living standards and tackling in-work poverty; notes that, before the National Minimum Wage was established, poverty pay was widespread and that the Conservative Party and many Liberal Democrat hon. Members opposed its introduction; further notes that families are on average £1,600 worse off a year and that the National Minimum Wage is now worth less in real terms than in May 2010; further notes that the Government has not backed up its promise to name and shame firms not paying the minimum wage; calls on the Government to strengthen enforcement of the National Minimum Wage, including by increasing fines for non-payment of the National Minimum Wage and giving local authorities enforcement powers; and further calls on the Government to encourage employers to pay a living wage and take action to restore the value of the National Minimum Wage so that the UK can earn its way out of the cost of living crisis and to help control the cost of social security.

For me, the proudest achievement of the previous Labour Government was the introduction of the national minimum wage. It was important because, as we know, the best way out of poverty is work and because taxpayers should not have to pick up the bill of subsidising bad employers. Making work pay is also vital to getting the social security budget under control and we will not allow the Government to let the national minimum wage wither on the vine.

Fifteen years ago, on 1 April 1999, the national minimum wage took effect. We should and do celebrate the difference it has made to millions of people. We have also called this debate today, at a time of difficulty for so many low-paid workers and with low pay a growing problem across our country, to call on the Government to take action to strengthen the minimum wage, crack down on rogue employers and restore the value that the minimum wage has lost over the past three years. We call on them to do more to build a stronger economy that enables people to earn their way out of the cost of living crisis.

[Ms Karen Buck (Westminster North) (Lab)]

Social care workers do one of the most important jobs in our society. Does my hon. Friend share my concern that in my borough, Westminster, and, I am sure, in others, social care workers are not even guaranteed the minimum wage as the travelling time between appointments is not counted for the purpose of payment?

[Rachel Reeves]

An investigation by the Low Pay Unit looked at pay rates before the national minimum wage was introduced and back then one worker in a residential care home was paid just £1.66 an hour. I agree that today, too, people working in that sector are too often exploited and that their employers get round the legislation.

The Low Pay Unit considered pay before 1997 in a range of industries. I mentioned residential care but it also came up with other examples, such as a factory worker who was earning just £1.22 an hour in 1997 and a person working in a chip shop in Birmingham who was earning just 80p an hour. That is sheer exploitation. It is poverty pay and it was taxpayers who picked up the bill.

Let us also remember what Government Members said back then. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), now Secretary of State for Work and Pensions, said in 1997 that a minimum wage would

“negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 297, c. 526.]

The right hon. Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, said back then that a minimum wage would have to be

“so low as to be utterly irrelevant”

otherwise

“it would price people out of work.”—[Official Report, 17 March 1997; Vol. 292, c. 617.]

The right hon. Member for Sevenoaks (Michael Fallon), now the Minister of State responsible for business and enterprise, said that a minimum wage

“will add costs to British business”.—[Official Report, 11 July 1997; Vol. 297, c. 1240.]

And the right hon. Member for Witney (Mr Cameron), now Prime Minister and then a parliamentary candidate in Stafford, darkly predicted in 1997 that a minimum wage would lead to a rise in unemployment.

[Mark Tami (Alyn and Deeside) (Lab)]

Conservative Members are very keen on calling for us to apologise for things. Does my hon. Friend think that it is time for them to apologise for such comments?

[Rachel Reeves]

It is not just the Tories who should apologise; the Government’s junior coalition partners should apologise, too, because they were worried back then as well about the impact of the minimum wage. In 1994, their then leader attacked Labour’s

“umbilical attachment to a national, high-rate minimum wage”

and said that

“a national minimum would…force many on to the dole”.

The Liberal Democrats went into the 1997 general election with a manifesto commitment not to a national minimum wage but to a

“regionally variable, minimum hourly rate.”

Let us be grateful that they did not get their way. Despite the then Opposition fighting the legislation tooth and nail, line by line, clause by clause, using every trick in the book to slow, frustrate and obstruct its progress, the national minimum wage became law.

[Caroline Dinenage (Gosport) (Con)]

I am grateful to the hon. Lady for her fascinating history lesson. I wonder whether her bit of paper also says that 500,000 people lost their jobs under the previous Labour Government and whether she agrees that the announcement made this morning demonstrates the Government’s absolute commitment to ensuring that no employer will be able to exploit their employees by paying unfair wages.

[Rachel Reeves]

Two million jobs were created under the last Labour Government and employment reached a record high, so I am not sure where the hon. Lady gets her statistics from.

I have quoted the former leader of the Liberal Democrats but, back then, where was the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable)? He was nowhere to be seen in the debates. He was nowhere to be seen on the voting record. On Second Reading and Third Reading, he failed to vote. Apparently, he abstained because he had reservations about a minimum wage. Perhaps he will stand up today to profess his concern for the plight of the low-paid. I am happy to take an intervention from the right hon. Gentleman if he wants to make one.

[Ian Mearns (Gateshead) (Lab)]

Although the Secretary of State for Business, Innovation and Skills had reservations about the minimum wage, many of my neighbours who worked in the security industry on 90p or £1 an hour back then are eternally grateful for the Labour Government’s action in introducing the minimum wage. It made a massive difference to their lifestyle.

[Rachel Reeves]

I thank my hon. Friend for that intervention, which reminds me of a story that my predecessor as MP for Leeds West told me. He saw a job advert in our constituency for a security guard back in the mid-1990s that said, “Pay, 90p an hour. Uniform provided. Bring your own dog.” Those were the sort of jobs that existed back then, but members of this Government opposed the national minimum wage legislation. I look forward to hearing what the Secretary of State for Business, Innovation and Skills has to say later, but people will be entitled to ask him where he was when we abolished the scandal of jobs paying less than £1 an hour and when British workers won the right to be paid a decent minimum wage.

[Grahame M. Morris (Easington) (Lab)]

Notwithstanding the Secretary of State’s reservations about the minimum wage, what does my hon. Friend think about the reservations of ordinary working people about the Government’s plan to give 100% bonuses to bankers at the Royal Bank of Scotland? Will that be well received?

[Rachel Reeves]

Many people earning £6.31 an hour will be shocked and outraged to find out that bankers this year will get bonuses worth more than they earn, but they will be even more shocked to find out that they are the ones who are paying for those bonuses.

[Alex Cunningham (Stockton North) (Lab)]

I am suspicious about a tomato company that is expanding in my constituency. It appears to be replacing Stockton workers with people from overseas and paying them the minimum wage. I am told that those foreign workers are charged accommodation costs, so reducing the value of that wage. The company will not answer my letters. Does my hon. Friend understand my suspicions?

[Rachel Reeves]

I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Today’s Glasgow Herald reports that the fine will go up to £20,000 from where it is today. Surely, that is not nearly enough, given that hundreds of thousands of people are not even paid the very minimum wage of £6.31 an hour.

[Rachel Reeves]

At the Labour party conference, my right hon. Friend the Leader of the Opposition called for the fine to be increased to £50,000, and I support that. It is also important that companies that get out of paying the minimum wage are prosecuted, and we are not seeing that under this Government.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

With regard to the advert about the security guard and the dog, I remind my hon. Friend that the RSPCA refused to allow the dog to work, yet the security guard had to do so.

My hon. Friend is running through a list of the abstentions in the vote on the minimum wage. Please do not leave out the separatists in Scotland, who I think were washing their hair that night.

[Rachel Reeves]

I thank my hon. Friend for drawing the attention of the House to the voting record of other Members of Parliament on that night.

Thanks to Labour Members of Parliament and a Labour Government, for the first time in history, in England, Scotland, Wales and Northern Ireland, British workers had a legal floor below which their hourly pay could not fall. Slowly but surely during the following years the rate rose. It was attacked every step of the way by many Government Members and, in 2003, when the Labour Government announced a 16% increase in the minimum wage over two years, the right hon. Member for Twickenham attacked the policy directly, saying that it would set a dangerous precedent.

The result of the minimum wage was to boost the wages of nearly 2 million low- paid workers, two thirds of whom were women. It helped to lift 1 million children out of poverty and every authoritative economic study concluded that it brought no negative employment effects, despite the warnings of Government Members. No wonder that a survey of academic policy experts conducted by the Institute for Government judged the national minimum wage to be the greatest policy success of the past 30 years. It is now a policy supported by the CBI and the TUC, whose nominees work together on the Low Pay Commission. It is seen by the British people as a vital British institution, underpinning basic rights and decency in the way our economy works.

[Mr David Hanson (Delyn) (Lab)]

rose—

[Susan Elan Jones (Clwyd South) (Lab)]

rose—

[Rachel Reeves]

I give way to my hon. Friend the Member for Clwyd South (Susan Elan Jones).

[Susan Elan Jones]

When Members are a little shy, they should have a little encouragement from the rest of us. I worry that some Government Members are a little shy. They are not usually frightened of defending their party in government. Would they like to do so now, and will my hon. Friend allow them to do so?

[Rachel Reeves]

I have already made the offer to the Secretary of State, but we have not yet heard from him. All Members are welcome to make interventions, but in the meantime I will take an intervention from my right hon. Friend the Member for Delyn (Mr Hanson).

[Mr Hanson]

I confess that I was here when we voted for the minimum wage. I did vote for it, having stayed up most of the night, because I was kept up by the Conservative and Liberal Democrat Members who ensured that we did have to support that with our votes.

Does my hon. Friend accept that the additional spending power given to many millions of people, including in my constituency, which was spent locally, helped to boost jobs in retail, on the high street and in locally produced goods?

[Rachel Reeves]

I congratulate my right hon. Friend on his work in helping to put the national minimum wage on to the statute book. He is absolutely right to suggest that one of the contributions to the cost of living crisis that we see today is that the national minimum wage has not kept pace with the increase in prices during the last few years. The introduction of the minimum wage did indeed help to boost the spending power of workers.

[Julian Smith (Skipton and Ripon) (Con)]

rose—

[Mr Brooks Newmark (Braintree) (Con)]

rose—

[Rachel Reeves]

I am so shocked. We have two interventions from Government Members. I will happily give way to not one, but two Government Members.

[Julian Smith]

As a fellow Yorkshire Member, I thank the hon. Lady for allowing me to intervene. Will she welcome this week’s announcement on inflation at 2%, and will she accept that this, as well as the Government’s phenomenal job creation results, are a key part of the package of getting people better paid in this country?

[Rachel Reeves]

For 41 of the 42 months that the Prime Minister has been in office, prices have risen at a faster rate than wages, and that continues to be the case. The only month that it was not the case was in April last year, when bank bonuses were deferred from March to April to take advantage of the cuts in the top rate of tax from 50p to 45p. [Interruption.] That is the only month in which prices grew at a slower rate than wages, not for ordinary workers, but the privileged few who the hon. Gentleman’s party always supports.

[Mr Newmark]

Will the hon. Lady—[Interruption.]

[Mr Newmark]

I fear that the hon. Lady’s answer might have frightened my colleague away. I promise that I will not run away after she answers me. Will she at least acknowledge that this Government, by raising to £10,000 the level at which tax hits, thereby taking 2.7 million people out of taxation altogether, have indeed helped the low-paid?

[Rachel Reeves]

Work by the Institute for Fiscal Studies has shown that, taking account of all the changes to taxes, tax credits and benefits since the Government came into office, the average worker is now £850 worse off. The hon. Gentleman points to one thing, but the VAT increase means that people are worse off, as do the tax credit changes. Overall, when all those things are added up, people are worse off, not better off. I hope that he will stay a little longer than his colleague to hear a bit more of the debate.

We know that we need to build on the success of the national minimum wage, because today we face a new challenge: getting our economy working for working people and tackling the worst excesses of insecurity and exploitation in our labour market.

[Mel Stride (Central Devon) (Con)]

Further to the point made by my hon. Friend the Member for Braintree (Mr Newmark), does the hon. Lady not accept that the pressure on living standards is a function not just of wages, but of the costs that average families face? Will she thank the Government, as I do, for having frozen council tax during the period we have been in office, unlike her party, which doubled it during its period in office?

[Rachel Reeves]

If the hon. Gentleman looks at what has happened to living standards, he will see that the average worker is £1,600 worse off than they were in 2010. I am surprised that he applauds what the Government are doing—I certainly do not—because workers in his constituency are worse off, not better off, after three and a half years of Conservative government.

[John Robertson (Glasgow North West) (Lab)]

Does my hon. Friend agree that Government Members, after giving up attacking us on the minimum wage, have now moved on to more sinister things, such as workers’ right, zero-hours contracts and a vast increase in the number of people in part-time employment, to mask the fact that people are so much worse off than they ever have been? The outlook for those people now is something we never saw until the Government came to power.

[Rachel Reeves]

I thank my hon. Friend for that intervention. The reality is that under this Government we have seen record numbers of workers on zero-hours contracts, record numbers of people who want to work full time having to work part time, and wages failing to keep up with prices. The average worker is now £1,600 a year worse off and the number of people being paid less than the living wage is up from 3.6 million in 2010 to more than 5 million today. The value of the minimum wage has fallen by 5% over the past three and a half years. For a full-time worker that means a real-terms pay cut of £13 a week.

[Mr David Hamilton (Midlothian) (Lab)]

Is my hon. Friend as surprised as I am that Government Members are not supporting good employers? There are good employers in my constituency who are arguing very clearly that undercutting the minimum wage is affecting their business. They want good employers, not bad ones.

[Rachel Reeves]

I thank my hon. Friend for that intervention. We saw similar things when Labour introduced the national minimum wage in the first place, because in many cases those who benefitted were the good employers who wanted to pay their workers a decent wage and who were being undercut by the cowboys.

[Jim Shannon (Strangford) (DUP)]

I congratulate the Opposition on bringing this matter before the House for consideration—we all have an interest in it. Does the hon. Lady share my concern about those in long-term apprenticeships who are not receiving the minimum wage? That has been brought to my attention on a number of occasions. They are glad to have the experience and a vocation at the end of it, but in my opinion they also deserve the minimum wage, which many of them do not receive.

[Rachel Reeves]

There is an apprentice rate for the minimum wage, which is important, but we need to ensure that more people are doing good-quality apprenticeships so that at the end of them they can get jobs not only at the minimum wage, but above it. My worry is that too many of the current apprenticeships do not offer the decent training that will enable people to get a good-quality job.

[Steve Rotheram (Liverpool, Walton) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that while it was a brave Labour Government who brought in the national minimum wage, they were working in conjunction with the unions, which were pivotal to bringing in the policy? It will be the unions, working together with the Labour Government in 2015, that will introduce a living wage.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Trade unions, including the Union of Construction, Allied Trades and Technicians, of which he is a member, did a huge amount of campaigning for the introduction of the minimum wage and campaign today to ensure that more people are paid a living wage. I will say a little more about what we are willing do in government to ensure that more people are paid a living wage above the national minimum.

[Mr Jim Cunningham (Coventry South) (Lab)]

The freeze in council tax, which was mentioned earlier, looks good on the surface, but councils are not being compensated for it, and they are stacking up a problem for two or three years down the road, when there will be massive cuts to services.

[Rachel Reeves]

My hon. Friend is absolutely right. Many councils, including mine in Leeds and his in Coventry, have been hard hit by the cuts to the local authority grant, which are affecting some of the services that the most vulnerable people rely on.

[Guy Opperman (Hexham) (Con)]

Can we get to the nuts and bolts of policy? Will the hon. Lady give the House an assurance that policies such as the petrol duty freeze and the council tax freeze—[Interruption] I am sorry, but the hon. Member for Rhondda (Chris Bryant) is chuntering so much that it is hard to hear him—would be continued under a Labour Government were they to be elected?

[Rachel Reeves]

I suggest that Government Members look at what we are debating: the national minimum wage. I know they do not want to talk about it, because they did not support it in the first place, but it would be nice if they could talk about its impact on their constituencies. However, I think we may have to wait for another occasion.

We have a Government who opposed the national minimum wage when it was introduced and who are not enforcing the legislation properly today. Thanks to an investigation by the independent Centre for London, we know that as many as 300,000 workers are being paid less than the minimum wage. We have reports of workers having the costs of uniforms, accommodation, transport or training illegally deducted from their pay packets. We have shocking accounts of working conditions for some people in sectors such as elderly care which hurt not only employees but vulnerable people who need a reliable and good-quality service from people who are paid a decent wage. There are stories of legal loopholes being used to bring in migrant workers who are, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, forced to work at exploitative rates of pay that also undercut and undermine the pay and conditions of all workers.

Despite that, the number of enforcement cases opened or registered has fallen in every year of this Tory-led Government, and it is now at less than half the level it was in the last year of the Labour Government. Since this Government came into office, just two prosecutions have been brought for non-payment of the minimum wage. They have repeatedly said that they will name and shame firms that are flouting the legislation, but they have not named a single one.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making a very powerful speech. Does she agree that perhaps one of the reasons the national minimum wage has not been enforced is that Government Members are not 100% committed to it? For example, the hon. Member for South Northamptonshire (Andrea Leadsom) has called for businesses with three employees or fewer to be exempt from the national minimum wage, as well as from regulations on maternity and paternity rights.

[Rachel Reeves]

Not only are Government Members not 100% behind the national minimum wage; they cannot even bring themselves to say “national minimum wage”.

[Charlie Elphicke (Dover) (Con)]

The Government are asking the Low Pay Commission to review the minimum wage with a view to increasing it. Does the hon. Lady welcome that—yes or no?

[Rachel Reeves]

The hon. Gentleman is a little behind the curve. That is what the Low Pay Commission does: that is what we set it up to do.

The failure to enforce the legislation properly has contributed to a worrying rise in in-work poverty. It used to be thought that if someone got a job, put in the hours and put in the effort, they would be paid enough to keep them and their family out of poverty and have a decent standard of living—that was the deal. But today, for the first time since records began, the majority of people in poverty are in work and the majority of children in poverty are brought up in working households. It is just not good enough that in today’s Britain an honest day’s work does not bring in a decent day’s pay.

[Dame Anne Begg (Aberdeen South) (Lab)]

Does my hon. Friend agree that perhaps the best way to make savings in the welfare bill would be to make sure that people are not just in work, but in well-paid work, so that they would not have to depend on welfare?

[Rachel Reeves]

I could not agree more with my hon. Friend. If more people were paid a living wage, if the minimum wage were enforced and if more people who want to work full time were doing so rather than working part time, all those things would help bring down the rising costs of social security.

A Britain where people who are putting in the effort and the hours still cannot make ends meet cannot be right and it is not fair. A Britain where parents who want to spend more time with their family and children but can hardly see them because they have to take on a second job is not right and it is not fair. A Britain where a young worker who wants to go to evening classes to improve their prospects but cannot because they have to take on an extra shift in the evening just to make ends meet is not right and it is not fair. A Britain where a woman cleaning the offices of well-paid executives before they arrive in the morning and who is still at work in the evening serving on the supermarket tills is not right and it is not fair.

This is not just an injustice to those families. It is, as my hon. Friend has said, imposing cost on the rest of us as well, because lower pay means more money spent on tax credits and housing benefit. The bills of in-work poverty are rising faster than this Government can cut people’s entitlements. It also means less tax and national insurance going into the Government’s coffers. If we want to get the costs of social security under control and if we want to put our public finances on a sustainable footing, we need to get our economy working for working people, so that we can all earn our way out of the cost of living crisis that this Government have created.

What solutions do Government Members have to offer? As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has indicated, the hon. Members for Christchurch (Mr Chope), for Wellingborough (Mr Bone), for Cities of London and Westminster (Mark Field), for Windsor (Adam Afriyie), for Clacton (Mr Carswell) and for Bury North (Mr Nuttall) sponsored a Bill that would have enabled employees to agree with their employers that they should not be paid the minimum wage. The hon. Member for South Northamptonshire (Andrea Leadsom) has said that people working for businesses with three employees or fewer should not have to be paid the minimum wage. The hon. Member for Esher and Walton (Mr Raab) has said that 16 to 21-year-olds should not have to be paid a minimum wage. The hon. Member for Shipley (Philip Davies) has said that disabled workers should not have to be paid the minimum wage. Shame on them and shame on the Conservative party. It is the same old story from the same old nasty Tories. Their only answer to our economic problems is to cut taxes for the richest and cut pay for the poorest.

[Andy Sawford (Corby) (Lab/Co-op)]

The push to stop a minimum wage for 16 to 21-year-olds is appalling at a time when the Government have made life so difficult for that group of people in our society through their changes to the education maintenance allowance and the increase in tuition fees, which the Liberal Democrats, of course, promised would not happen. It is absolutely wrong and we must fight it.

[Rachel Reeves]

I could not agree more with my hon. Friend. With almost 1 million young people out of work—250,000 of them for more than a year—hitting them further by saying that they should not be entitled to a minimum wage is doubly unfair, cruel and callous.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Is not a further point that there are many threats to wages in rural communities in particular—where the cost of living is higher—not least as a result of this Government’s shameful decision to abolish the Agricultural Wages Board, which protected the pay of many low-paid people?

[Rachel Reeves]

I thank my hon. Friend for that intervention and for his work on these issues as a shadow Environment, Food and Rural Affairs Minister.

Labour Members know that a strengthened minimum wage and practical policies to promote the living wage are essential to building a recovery that works for working people and to securing rising standards of living for the future. That means stronger penalties and effective enforcement against rogue employers who flout the minimum wage. It means plans to restore the value of the minimum wage, which has been lost over the past three and a half years. It means the Government doing their bit to support the campaign for a living wage by setting an example with their own employees and contracts, as Labour councils are doing up and down this country, and it means the Government sharing the savings to the Treasury with employers who commit to paying the living wage, as we will do with our Make Work Pay contracts.

The national minimum wage is one of Labour’s proudest achievements. It was opposed by the Tories every step of the way, while their coalition partners tried to water it down and frustrate its purpose, and the current Business Secretary sat on his hands. That is why we cannot trust the Tories or their Liberal Democrat supporters to protect the minimum wage, why we cannot trust the Tories to enforce or strengthen it, and why we cannot trust them to deal with the cost of living crisis.

It therefore again falls to Labour to protect and strengthen the national minimum wage by increasing fines for those who exploit workers; investigating rogue employers and enforcing the law properly; restoring the value of the national minimum wage and catching up the lost ground of the past three years; and encouraging employers who can do so to go further and to pay the living wage.

I suspect that when the Secretary of State gets to his feet, he will tell us how he now supports the minimum wage and wants it to be increased and to be enforced better. If that is his way of apologising for his past sins, so be it, but I must warn him and his Government that we will be watching. Working people who are struggling to earn a living and to survive the cost of living crisis need more than warm words and liberal promises; they need action, and only a Labour Government will deliver that.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 10th September 2013 Commons Chamber

[Mr Osborne]

Of course, the key thing about social security and welfare is that it should encourage people into work. One of the remarkable achievements of my right hon. Friend the Secretary of State for Work and Pensions is that the number of workless households is now at a record low in this country. That is a huge achievement. Since the Opposition have been raising all these questions about living standards and wages, perhaps they would like to hear what the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), a member of their shadow Cabinet, has been saying. He said:

“From 2004 onwards…families on ‘median incomes’—millions of workers—…were feeling the strain…people were working just as hard as ever—but were not getting on”.

He presented his findings to the Cabinet in 2010 but they got buried:

“We picked it up too late. It was very late in the day, is the truth”.

[Rachel Reeves (Leeds West) (Lab)]

The truth is that working families have paid the price for the three years of flatlining under this Chancellor. Prices have risen faster than wages for 37 of the 38 months that he has been in office. I have a quiz question for the Chancellor this morning. Can he tell the House which one of those 38 months is the odd one out and why?

[Mr Osborne]

First, may I welcome the hon. Lady back and congratulate her and her husband Nick on the birth of their baby, Anna?

There has been wage restraint in the public sector, but I thought that, as shadow Chief Secretary, the hon. Lady supported that. When she gave her speech about fiscal discipline before going on maternity leave, she supported wage restraint in the public sector. I am not clear whether she has changed her policy.

[Rachel Reeves]

The right hon. Gentleman obviously does not get the bonus point. He might find the truth embarrassing, but I must tell the House that the only month in which real wages rose was the month when bank bonuses soared by 80%, as the highest paid took advantage of his tax cut for millionaires. Rather than cutting taxes for the richest, why does he not help families facing the cost of living crisis on his watch?

[Mr Osborne]

When the shadow Chancellor was the City Minister, bank bonuses were £14 billion a year. They are now a fraction of that. Indeed, the income tax rate in every year of this Government is higher than in any year of the previous Government. By the way, inequality is now at its lowest level in this country since 1986. We have taken difficult decisions and tough action to ensure that our economy turns the corner. All those things were opposed by the Labour party, but as a result, because of low mortgage rates, because of the large tax-free allowance and because we are creating jobs in the economy, we can hold out the prospect of an improvement in the long-term living standards of the British people.

Living Standards

Rachel Reeves Excerpts

Wednesday 4th September 2013 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House believes that the Government is failing to turn things around for the UK’s hard working families; notes that this has been the slowest economic recovery on record, and that the Government is out of touch with the difficulties faced by ordinary families; recognises that average earnings are almost £1,500 a year lower in real terms than they were in 2010; notes in addition that tax and benefit changes since 2010 are costing families an average of £891 in 2013-14 according to the Institute for Fiscal Studies; further notes that the Government is making hard-working families pay more than their share to bring down the deficit while cutting income tax by an average of £100,000 for the 13,000 people with incomes over £1 million; and calls on the Government to ensure that the recovery is strengthened, sustainable and its benefits fairly shared by getting more people into work, bringing forward capital investment, as recommended by the IMF, introducing a compulsory jobs guarantee, backing fair taxes by reintroducing a 10p rate of income tax, paid for by a mansion tax on houses worth over £2 million, taking action on rip-off rail fares and soaring energy bills, standing up for families in the private rented sector, reforming the pensions industry, curbing payday lenders and implementing long-term reforms to banking, infrastructure planning and the skills system.

During the 2010 election campaign, the Conservative party made the rather bold claim that it would strive to

“see an economy where not just our standard of living, but everyone’s quality of life, rises steadily and sustainably”.

Looking back more than three years on, time has served that particular Tory manifesto pledge disastrously, as it has so many others. It is no wonder that people are feeling let down. Today, average earnings are almost £1,500 a year lower than they were when that pledge was made.

Since the end of 2010, the UK has seen the biggest fall in workers’ income of any country in the G7. Prices have risen faster in the UK than in any other major economy. It is another broken promise from this out-of-touch Prime Minister.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

Does the shadow Chief Secretary accept Labour’s responsibility for its catastrophic stewardship of the public finances, which left this country with a budget deficit in excess of 11% of GDP?

[Rachel Reeves]

As the hon. Gentleman knows, there was a global financial crisis that hit every country in the world, and all countries are now dealing with the aftermath. As the Office for Budget Responsibility and the Institute for Fiscal Studies have said, budget deficit reduction has now stalled, not because the Government have not cut public services or put up taxes for ordinary people but because unemployment remains too high and economic growth too weak to get the deficit down.

This Prime Minister is ripping up the record books when it comes to overseeing falling wages for ordinary workers. Average wages have been falling behind prices for 37 of the 38 months of David Cameron’s prime ministership. Which month is the odd one out? It is April of this year, when the bankers reaped the rewards of deferring their bonus until George Osborne’s cut to the top rate of tax was implemented. That tax cut resulted in 13,000 people with an income of more than £1 million receiving a tax cut worth on average £107,000. That is four times average earnings in this country.

The rest, ordinary people, will be on average £6,660 worse off by the end of the Parliament. That is enough to have paid for the family weekly shop for more than a year and a half. Although he has said repeatedly, “We’re all in this together” and “Those with the broadest shoulders should bear the greatest burden”, how can families trust this out-of-touch Prime Minister, who has prioritised millionaires over millions of working people?

[Ms Karen Buck (Westminster North) (Lab)]

I thank my hon. Friend for giving way, and I am sure that Members on both sides of the House would like to welcome her back from her maternity leave. Does she share my concern that 4.8 million people are now earning below the living wage? Does she agree that that is a concern not just for them, because of their low living standards, but for the state and the Government? Social security benefits are having to rise to compensate for that low pay, so the number of in-work claimants of housing benefit alone has gone up to 1 million, with a 50% rise since 2010.

[Rachel Reeves]

As my hon. Friend will know, the number of people earning less than a living wage has gone up from 3.4 million in 2009 to 4.8 million today, which means that 20% of the work force in this country is now earning less than a living wage. My hon. Friend is absolutely right to point out that that means more pressure on the Treasury, more money spent on tax credits and more money spent on housing benefit. As I said in answer to the earlier intervention, the budget deficit reduction plan has stalled because those payments are going up as the economy is not growing in the way that it was supposed to.

[Alok Sharma (Reading West) (Con)]

The Labour motion contains a long list, including a lot of things that the Government are already doing. I also note that it does not call for a temporary cut in VAT, which was one of Labour’s flagship policies. I know that Labour is a policy-free zone at the moment, but is that another abandoned policy?

[Rachel Reeves]

The list of the Government’s failures could have been an awful lot longer, but we wanted a motion that would fit on the Order Paper. He talks about VAT—[Interruption.] I would be grateful if he listened to my answer. Two years ago the shadow Chancellor said that as an emergency measure VAT should be cut to stimulate the economy. In the two years since, the economy has flatlined. The shadow Chancellor also said that as the economy gradually moved into the recovery stage, the emphasis should be on infrastructure investment, which I think is important. It is because the economy has flatlined for two years that family finances are in the state they are in today.

[Mark Tami (Alyn and Deeside) (Lab)]

Is my hon. Friend not struck by the fact that the interventions from Government Members seem to be addressing everything but living standards? The TUC has shown today that Flintshire, which my right hon. Friend the Member for Delyn (Mr Hanson) and I represent, has suffered the biggest fall in living standards in Wales.

[Rachel Reeves]

It is interesting that the interventions from Opposition Members refer to the challenges their constituents face owing to falling living standards. It is a shame that hon. Members on the other side of the House want to talk about anything but that.

I would like to talk about a family I met this week. On my first day back from maternity leave, I visited a family in Thurrock who told me what they were up against. The father, once a partner in a thriving small business, lost his livelihood three years ago during the recession. Desperately trying to keep up their mortgage repayments, he has spent the past three years taking whatever work he could get through employment agencies, often on the minimum wage and often on zero-hours contracts. He recently found a permanent job as a driver which, topped up with evening shifts doing deliveries, gives the family a bit more security, but it falls far short of making full use of his talents and experience.

The wife abandoned her dream of training to be a primary school teacher so that she could hold on to her relatively secure but modestly paid job in retail. Their daughter is studying for university and should do well, but she worries about fees. All of them pointed to a gaping and growing disconnect between their rates of pay and the costs they face for travel, housing and other basic necessities. Under this Government, the situation is getting worse for such families—families who want to get on in life.

[The Financial Secretary to the Treasury (Greg Clark)]

It is possible that the hon. Lady has said something significant: that the Labour party has dropped its commitment to the temporary VAT cut. Given that as recently as June the shadow Chancellor said that he was committed to it, what has happened since then to cause it to be dropped?

[Rachel Reeves]

The shadow Chancellor said in his conference speech two years ago that VAT should be reduced from 20% to 17.5% as an emergency measure to stimulate the economy. The reality is that since then the economy has flatlined and we have continued to argue for that, but he has also said that as the economy slowly begins to move into recovery mode—we hope that the growth over the past two quarters will continue—the emphasis should move to infrastructure investment. Were we in government today, our priority would be the £10 billion of infrastructure investment that the International Monetary Fund has called for.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

May I bring my hon. Friend back to the real-life situations that real people face? Is she aware that in Islington the cheapest subsidised place for full-time child care costs £164 a week? The minimum wage is £212 a week and the London living wage is £272. Is that reality not why it is so hard for so many people in Britain today to make ends meet?

--- Later in debate ---

[Rachel Reeves]

Of course, since the Government came to office, 400 children’s centres have closed and the child care element of the tax credit has been cut, making it harder and harder for ordinary families to afford child care.

Under this Government, the situation is getting worse for families such as the one I mentioned and those in my hon. Friends’ constituencies. One in 10 people who want to work more hours cannot get more shifts; 700,000 people are working more than one job, most of them out of desperation rather than choice; and 1 million people are thought to be on zero-hours contracts. Incidentally, zero MPs from the Government side turned up to the Westminster Hall debate on zero-hours contracts organised by my hon. Friend the Member for Sunderland Central (Julie Elliott).

[Lisa Nandy (Wigan) (Lab)]

My hon. Friend is making a strong case. The workers at the Hovis factory in my constituency recently rejected the replacement of full-time staff with agency workers on zero-hours contracts, but does she share my concern that so few people are able to stand up against that and that increasingly it is young people who are trapped in insecure, low-paid work, which means they have no ability at all to plan their lives or to budget?

[Rachel Reeves]

I thank my hon. Friend for that intervention; she is absolutely right. The Resolution Foundation produced an excellent report, published this morning, warning about low pay becoming entrenched. It does not just affect workers at the start of their careers; low pay this year results in low pay the next year and the year after that, which is particularly worrying.

Zero-hours contracts often mean that workers are vulnerable. As my hon. Friend the Member for Wigan (Lisa Nandy) said, they are unable to plan for the future and unsure of their ability to pay the rent or the bills each month. Let it be remembered that no Tory MPs or Liberal Democrats, apart from the Minister responding, could be bothered to turn up to debate that issue.

As my hon. Friend the Member for Westminster North (Ms Buck) mentioned, we learnt today that 4.8 million people are now earning less than the living wage. Figures I commissioned from the House of Commons Library show that almost 60% of new jobs created since the spring of 2010 have been in low-paid sectors. This is the economy that the Tory-led Government are building: low-paid, part-time and insecure, making life tougher for families.

[Mr William Bain (Glasgow North East) (Lab)]

Three in 10 of my constituents who are in work earn less than the living wage. Two weeks ago I spoke with a constituent from Robroyston. He had been a construction worker before the crisis started but is now in insecure, part-time work and facing child care bills of £200 a week. Is it not the case that under this Government the economy is just not generating the number of good-paying jobs that allow families to meet the cost of living?

[Rachel Reeves]

Two thirds of children growing up in poverty have parents who are in work. I think that goes to the heart of the issue of low pay and its impact on families. It is no wonder that payday lenders are among the fastest growing businesses on the high street. Some of them charge interest rates as high as 7,000%. Families, desperate to pay the rent and provide for their children, are being dragged into debt because they are not being paid enough.

The use of food banks—I am not sure whether the Minister has visited one—continues to rise. In my constituency the main food bank is struggling to find larger premises because demand has outstripped all expectations. St Bartholomew’s church in Armley in my constituency is now distributing food parcels to many desperate families. Its work, and that of St George’s Crypt, is a wonderful example of the active citizenship and community spirit in Leeds, but food banks are damning evidence of the Government’s record on living standards.

[Gavin Barwell (Croydon Central) (Con)]

The hon. Lady is right to focus on the issue of low pay. Will she tell the House what has happened under this Government to the level of income tax paid by someone working full time on the minimum wage?

[Rachel Reeves]

I will tell the hon. Gentleman what the IFS says: the average family is £891 worse off as a result of changes to taxes, tax credits and benefits. That takes into account not only the change in the personal allowance, but the cuts to tax credits and all the other changes, such as the VAT increase, that have put pressure on families. Taken in the round, that is the impact on ordinary working families. The Prime Minister says that he is trying, but that is not enough for a family struggling with the bills and the rent and worrying about the increasing gap between what they take home in pay and the cost of some of the basics.

[Alison McGovern (Wirral South) (Lab)]

Given what my hon. Friend is saying, did she share my surprise at the Prime Minister’s response to the issue of school uniform costs raised at Prime Minister’s questions today? It was bizarre to hear him dismiss so quickly the cost of school uniforms, which every parent in my constituency knows is a massive issue.

[Rachel Reeves]

I often hear about that from constituents, particularly this week, when children go back to school. The costs of the summer holidays are past, but those can be very expensive for many families, especially if they receive free school meals and have to provide an extra meal a day during the holidays. The cost of going back to school is also expensive. There is the cost of school uniforms, a new pair of shoes and a school coat—all the basics which sometimes I think the Government just do not understand.

In the face of such challenges, there is a distinct lack of urgency from the Government. For all the warm words, they do not get the reality facing families. Energy bills are up £300 a year, while energy companies enjoy huge profits.

[Mr John Redwood (Wokingham) (Con)]

I am glad that the hon. Lady is highlighting this issue. She is right that in the last couple of years under Labour there was a huge reduction in living standards, and the coalition Government have not yet reversed it. Does she now think that her party was wrong to implement policies of very high and rising energy and fuel prices, which are one of the main reasons people are in this bind?

[Rachel Reeves]

We have said that we would abolish Ofgem and create a new energy watchdog with real teeth to force energy companies to pass on price cuts when the cost of wholesale energy falls. Meanwhile, under this Prime Minister’s watch, energy giants are enjoying a £3.3 billion windfall. That shows the warped priorities of this out-of-touch Government. Rail fares are another example, increasing by up to 9% a year. We would apply strict caps. We have said that we would introduce a new legal right for passengers to be entitled to the cheapest ticket for their journey; this Government are giving powers back to train operating companies to increase some fares by up to another 5% beyond the cap. Again, that shows the warped priorities of this out-of-touch Government.

On housing, there are now 3.8 million households in the private rented sector, including more than 1 million with children. Research shows that many are being ripped off through hidden fees and charges costing tenants £76 million a year.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Does my hon. Friend agree that the atrocious slowdown in house building led by this Government has contributed to rising rents, making life incredibly difficult for families and meaning that they cannot do the extras such as getting broadband in their homes, which is vital for their children’s education and their own social inclusion?

[Rachel Reeves]

We have said of the private rented sector that we would require a new national register of landlords.

This Government are presiding over the lowest level of house building since the 1920s. We have said that we would build new affordable homes, and the IMF has said that the Government should bring forward investment in infrastructure. Perhaps we should listen to the IMF.

The Prime Minister and the Chancellor now claim that their economic plan has worked after all, but two quarters of positive growth do not begin to repair the damage from three years of flatlining. Three wasted years have left permanent damage as businesses have lost vital investment opportunities, and almost 1 million young people are out of work. That is why families are suffering; that is why deficit reduction is so far off track. Yet we have a complacent Government. They have no idea of what they have put families through, no idea of the damage they are still doing, and no plan to put things right. Three years in government and still no British investment bank; three years in government and banking reform is being watered down; three years in government and one in five apprentices say they have received no training; three years in government and the number of 16 to 18-year-old apprentices is down by 13% this year; three years in government and major infrastructure projects are stalled; three years in government and life is getting tougher for ordinary families.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

My hon. Friend is making an incredibly powerful case about the warped priorities of this Government and the consequences and costs for households. It is little wonder that 80% of payday loans are for the basic costs she is talking about—housing, travel, rent and food. Is it not another example of this Government’s warped priorities that in three years of clear warnings they have done nothing about the legal loan sharks in our society, and is that not why we would make a difference in government?

[Rachel Reeves]

She has done fantastic campaigning work on that issue. Labour has said that we would cap the cost of credit, as she has called for.

A one nation Labour Government would be taking action now to secure the recovery and to build a more balanced economy that boosts the living standards not just for the few at the top but for the many. We would act on the recommendations of the IMF to support and secure the recovery by bringing forward £10 billion of infrastructure investment. We would build 400,000 affordable homes, creating more than half a million jobs and making our economy stronger for the long term. We would support house building, encourage private sector investment, and create apprenticeships. A one nation Labour Government would be confronting the scandal of youth and long-term unemployment by introducing a compulsory jobs guarantee.

[Geraint Davies (Swansea West) (Lab/Co-op)]

I am sure that my hon. Friend knows that household lending from banks is at the same sort of level—3% lower than in 2008—but lending to businesses is 30% lower. Is not the real problem that three quarters of new jobs are low-paid because businesses are not being given support by the banks and the Government are not forcing them to act in the interests of high-paid jobs and growth for the future?

[Rachel Reeves]

We have had Project Merlin and the funding for lending scheme, and yet lending to small businesses falls and falls.

A one nation Labour Government would offer guaranteed work for young people and those who have been unemployed for over two years—work that they would have to take. We would cut the welfare bill and help people to gain the skills and experience they need to join the work force for the long term. A one nation Labour Government would reform our banking and energy sectors, improving our infrastructure planning and building a skills system that ensures that everyone can play their part. A one nation Labour Government would make fairer choices to ensure that the benefits of growth are fairly shared. We would reintroduce the 10p tax rate, helping 25 million basic-rate taxpayers; and we would not be cutting income tax or increasing pension tax relief for the very wealthiest while cutting tax credits for hard-pressed families. Different choices, different priorities: this Government and this Prime Minister do not get it.

As the LSE growth commission said earlier this year:

“prosperity is strengthened when everyone has the capacity to participate effectively in the economy and the benefits of growth are widely shared”.

[Alok Sharma]

rose—

[Rachel Reeves]

I will not give way to Members who have already intervened, but I will give way to those who have not yet made an intervention.

That will be the difference between us at the next election. We have a Tory party that is out of touch with the challenges facing families and that believes in the outdated orthodoxy that if the rich get richer, the wealth will trickle down; a Tory party that will not stand up to vested interests or stand up for British families; a Tory party that has overseen three years of falling wages; and a Tory party that offered warm words about the living wage at the time of the election, followed by a surge in the number of people working for less than the living wage over the past three years.

Meanwhile, one nation Labour, even in opposition, has driven forward this campaign. Labour councils are paying the living wage to their staff and extending it through procurement chains. Fifteen Labour local authorities are now accredited living wage employers, with another 80 in the pipeline. Labour is committed to doing all it can in government to support the spread of the living wage, and is now working with Alan Buckle, deputy chairman of KPMG International, to look how this can best be done.

All the examples that I am sure we will hear in this debate about the rising numbers of food banks, payday loans, part-time jobs and zero-hours contracts make it all the more galling for the Chancellor to have claimed earlier this summer that wages were rising.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Lady is making a very powerful speech, to be fair, and she has made some important points about zero-hours contracts. Is she aware that Rhondda council is implementing zero-hours contracts for some of its workers, and it is a Labour-run council? Will she join me in condemning its actions?

[Rachel Reeves]

Zero-hours contracts can work for some people, but their growth has led to far too many people not having the flexibility they need. No one has said that zero-hours contracts should be banned, but the exploitation of far too many workers is resulting in all the power shifting to employers and not to employees.

The most recent figures show that real household disposable income fell by 1.7% in the latest quarter—the biggest fall for 26 years. The Chancellor claimed that living standards were improving and that incomes were rising. We all know why he made that desperate claim. [Interruption.] The Secretary of State for Education says that disposable incomes are rising, but the figures show that they fell by 1.7% in the latest quarter—the biggest fall for 26 years. People will find it very surprising that he claims that living standards are improving when for so many families across the country exactly the reverse is happening. We all know that Lynton Crosby, the head of Conservative electoral strategy, a job he shares with the part-time Chancellor, has told the Prime Minister—just one of the things he has been telling him—that he should be relentlessly focusing on living standards. Yet, as the Secretary of State for Education has shown, the Government are out of touch on living standards, leaving ordinary families out of pocket. It is one rule for millionaires, another for our ordinary workers; one rule for train companies, another for the hard-up commuter; and one rule for the energy companies, another for people getting higher bills through their letterboxes. Rents are up, house building is down. We have the worst Prime Minister on living standards since records began. The Prime Minister is out of touch, and hard-working families are out of pocket.

Infrastructure

Rachel Reeves Excerpts

Tuesday 12th February 2013 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House notes with concern the latest GDP figures from the Office for National Statistics, showing that the UK economy has now shrunk in four of the last five quarters; believes that investment in infrastructure is vital to the economy’s short term recovery and long term prosperity; further notes that, half way through the Government’s term of office, many of the major projects promised in the National Infrastructure Plan are yet to start work; further notes the admission of the Deputy Prime Minister, in the House Magazine of 24 January 2013, that the Government cut capital spending too deeply, and that figures from the Office for Budget Responsibility show that in the first three years of this Government’s term it has spent £12.8 billion less in capital investment than the last Government had planned; further believes that private sector investment has also been hit by weak demand and confidence in the UK’s flat-lining economy, and uncertainty resulting from the Treasury’s dithering, delay and lack of leadership; welcomes the independent review of long-term infrastructure planning undertaken by Sir John Armitt; and calls on the Government to act now to kick start the UK’s flat-lining economy by genuinely bringing forward infrastructure investment including building thousands more affordable homes.

We have secured the debate to urge the Government to take action to invest in infrastructure projects to create jobs and to boost confidence in our flagging economy, and to strengthen our productivity and competitiveness for the future. We all recognise the importance of infrastructure investment. The Prime Minister has said that

“getting construction projects off the ground is critical.”

The Chancellor agrees, saying that

“investing in Britain’s economic future is the priority of this Government”

and adding that infrastructure investment was critical in

“laying the foundations for future economic success.”

It should come as no surprise that the Government’s grand rhetoric has not been matched by grand actions. Dithering without a strategy for growth, they have cut too far and too fast, choking off demand and stifling the economic recovery.

[Mr Rob Wilson (Reading East) (Con)]

Will the hon. Lady join me in thanking the Chancellor and the Government for the £600 million Heathrow link investment that they will be making in my constituency?

[Rachel Reeves]

Maybe the hon. Gentleman would like to intervene again and tell me when that investment is going to happen. The reality is that so much of the investment is not happening right now when we need jobs and growth. We have lost more than 120,000 construction jobs since the Government came to power.

[Mr Wilson]

I thank the hon. Lady for giving way a second time. Would she like to join me in welcoming the £12 million investment in the University Technical college that is opening in September in my constituency?

--- Later in debate ---

[Rachel Reeves]

That intervention says it all. It is all jam tomorrow from this Government.

The last set of GDP figures demonstrate the scale of the Government’s economic failure. The economy shrank by 0.3% in the fourth quarter of last year, demonstrating once again the desperate need for a strategy for growth. Since the Chancellor’s spending review two years ago, out of the G20 economies Britain has been 18th out of 20 when it comes to economic growth—worse than the USA, worse than Canada, worse than Germany, worse than France and worse than Turkey. So much for the Prime Minister’s global race.

[Mrs Anne Main (St Albans) (Con)]

In the previous Parliament, I was fortunate to serve on the Select Committee on Communities and Local Government. The Committee examined why houses were not being built under the previous Government, and 400,000 planning permissions not implemented. Surely the hon. Lady ought to be looking at what is stopping building. The permissions have not been stopping. The banks were not lending under the previous Government. This is a deeply entrenched position.

[Rachel Reeves]

House building was down 8% in 2012 and the think-tank Policy Exchange has warned that the Government could end up presiding over the lowest level of house building since the 1920s. That is the record of the hon. Lady’s Government—not one, I would imagine, that she is proud of.

The Prime Minister says that we are in a global race, but in reality we are hardly out of the starting blocks. The Chancellor has been told time and again—most recently by the International Monetary Fund—that if economic growth undershoots expectations, the Government should boost the economy with greater infrastructure spending. Well, growth has undershot and the economy is shrinking. Over two years, economic growth has been 15 times less than the Chancellor promised in 2010.

[Neil Carmichael (Stroud) (Con)]

Will the shadow Chief Secretary join me in thanking the Chancellor for the £45 million invested in the Stroud to Swindon railway line, work on which has just begun, and which will make a huge difference to my constituency?

[Rachel Reeves]

I wonder whether the next Government Member to intervene will congratulate the Chancellor on spending £12.8 billion less over three years than the plans he inherited from the previous Labour Government.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I hope that I do not excite the shadow Minister so much that she delivers her baby early. What does she think about the fact that once again the Government have kicked into the long grass the problems of congestion in air traffic in the south-east? Money could be invested in that without the need to spend any public money. Why are they kicking that into the long grass?

[Rachel Reeves]

It is being kicked into the long grass because of weak leadership. It is desperately disappointing for businesses wanting to invest today that no decision will be made and no report published from the man charged with conducting the review until the next Parliament.

The Chancellor should take the IMF’s advice and use the March Budget to rethink the Government’s failed economic plan. We told the Government that to cut too far and too fast would hurt the economic recovery and that the country needed leadership, not warm words. That is why since the Government choked off the economic recovery we have been calling for a boost to jobs and growth by bringing forward infrastructure investment, as the last Labour Government did in the aftermath of the financial crisis.

[Jack Dromey (Birmingham, Erdington) (Lab)]

With the Government presiding over the biggest housing crisis in a generation, was it not a mistake to cut £4 billion in affordable housing investment, leading to a 68% collapse in affordable house building, and to reject out of hand the proposal for the 4G licence money to be used to build 100,000 affordable homes, which would have added 1% to GDP and created hundreds of thousands of jobs and which was hailed by the CBI as just what the economy needed?

[Rachel Reeves]

That is why we urged the Government, before the autumn statement, to use the money from the 4G auction to start building 100,000 new affordable homes and why we urged the Chancellor to use a tax on bank bonuses for a programme for jobs and growth, with further house building and a job guarantee for young people. But the Chancellor did not listen—[Interruption.] Clearly, the Liberal Democrats do not want to listen either. With every project delay, every investor put off and every job lost in the construction sector, we lose ground to our global competitors. With the economy flatlining and no growth over the past year, the case for action is irrefutable. We need to bring forward public investment, create hundreds of thousands of jobs, kick-start the flatlining economy and get the construction industry moving again.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Does my hon. Friend agree that the flatlining of our economy and our failure to invest is having a major impact on young people? In my constituency, there are more people out of work than there were six months ago, and long-term youth unemployment is rising.

[Rachel Reeves]

Close to 1 million young people are out of work, and one third of them are now long-term unemployed—a waste of their potential and a waste to our economy, as we are losing out on their skills. We so desperately need that economic recovery.

There is still no sign of the Government sharing the country’s sense of urgency. Only 14% of the 576 projects listed in the Government’s infrastructure pipeline have started and just 1% of those are said to be operational. The Government’s record on infrastructure is a complete and utter shambles. Wherever we look, the strategy is failing to deliver—a perfect storm of uncertainty, incompetence and delay.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is making an excellent speech. She is talking about projects. One project that might be considered seriously is the GB freight route—the building of a dedicated rail freight line from the channel tunnel to Glasgow, linking all the industrial areas of Britain and able to take lorries on trains. Will she give that serious consideration?

--- Later in debate ---

[Rachel Reeves]

I know that that is something that my hon. Friend has worked on carefully and is discussing with Ministers and shadow Ministers. It is worth looking at such a scheme.

The Government’s national infrastructure plan is well worth reading. [Interruption.] Given that even the Deputy Prime Minister says that the Government have got it wrong on infrastructure investment, one would think that the Minister of State, Home Department, the hon. Member for Taunton Deane (Mr Browne), might listen to the debate, rather than just chuntering from a sedentary position. The national infrastructure plan exemplifies the vacuum of leadership from this Government, with more projects being kicked into the long grass. Let us take the A14, which was described by the former Transport Secretary as “a crucial strategic route” and

“a lifeline to international markets.”

Now the Treasury says that construction might just begin in 2018. The Mersey gateway, which has been highlighted as one of the world’s most important infrastructure projects, has still not had a preferred bidder announced. Today we found out that 45 winning bids for the regional growth fund—the Deputy Prime Minister’s pride and joy—have already walked away from the process, which is taking so long, with millions of pounds of public money gathering dust in Whitehall. Delay, delay, delay.

That inaction is costing jobs. The construction sector has lost 129,000 jobs since this Tory-led Government came to power. What a waste. No wonder that John Cridland, director general of the CBI, is asking the Government where the diggers on the ground are.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It was reported in The Guardian recently that total PFI liabilities are likely to be more than £300 billion. Will the hon. Lady confirm that, should the Labour party form the next UK Government, it will not return to PFI?

[Rachel Reeves]

PFI in my constituency built three new secondary schools and helped to rebuild primary schools, as well as building Sure Start centres. I would not have wanted any of those projects not to go ahead, so I do not share the hon. Gentleman’s criticism.

It is not just independent outsiders attempting to urge the Chancellor to change course and take action or saying that change is needed. Even the Deputy Prime Minister, in what he described as a “self-critical” mood, has stated:

“I think we’ve…realised that you actually need, in order to foster a recovery, to try and mobilise as much public and private capital into infrastructure as possible.”

He did not quite get round to saying sorry for a second time, but at least he has finally stumbled upon the problem. We said that cutting infrastructure spending too far and too fast would stifle the recovery, but the Deputy Prime Minister’s brief lapse of regret came two and a half years too late. That moment of self-realisation will not help the construction worker who has already lost his job, the children waiting for their new school or the new business waiting for improved roads. We do not need mea culpas; we need the Prime Minister, the Chancellor and the Deputy Prime Minister to change course.

[Mrs Main]

rose—

--- Later in debate ---

[Mr Rob Wilson]

rose—

[Rachel Reeves]

I have already given way to the hon. Members.

[Henry Smith (Crawley) (Con)]

You haven’t given way to me.

[Rachel Reeves]

I will give way to the hon. Gentleman. Perhaps he would like to explain why the Government have cut infrastructure spending by £12.8 billion over three years.

[Henry Smith]

I am grateful to the hon. Lady for allowing me to intervene. Does she welcome the thousands of new houses being built in the Kilnwood Vale neighbourhood in my constituency, in addition to the £26 million upgrade of Three Bridges rail station and the £53 million upgrade of Gatwick rail station, and so on?

[Rachel Reeves]

The problem is that this is just a wish list. Those things are not happening—as John Cridland says, the diggers are not on the ground. As I have said, housing investment is down 8% in just one year, and 129,000 jobs have been lost in the construction sector. I look forward to hearing Government Members explaining why they are supporting those policies.

[Geraint Davies (Swansea West) (Lab/Co-op)]

My hon. Friend will be aware that the Chinese have a five-year plan involving $1.5 trillion of investment in strategic new industry and infrastructure, and that their economy has been growing at 10% a year for 10 years. Is it not time that we took some lessons from growth economies such as China, and indeed Brazil, which is investing some $66 billion in its fiscal stimulus? Let us get on with it.

[Rachel Reeves]

The economic and political system in China is a bit different from that of the UK, but what we must learn from other countries is that we need a proper industrial strategy if we are going to create the jobs and growth that we need, and if we are going to excel and win the global race that the Prime Minister has talked about.

Two weeks ago, at Treasury questions, the Chancellor said that I was being “creative” with the facts when I said that he was spending less than Labour planned to on infrastructure investment. He said that I was being misleading on his record on investment. He had to withdraw that slur. Channel 4’s “FactCheck” has looked into his claims. The verdict is in, and I quote from its conclusion:

“Latest figures from the ONS show that Mr Osborne’s claim to have spent more on infrastructure than what Labour had planned is wrong.”

The Chancellor has refused to come to the House to put the record straight, so let us do that now. According to the Office for Budget Responsibility—which the Government set up—the Government are spending £12.8 billion less in capital investment compared with the plans they inherited from the last Labour Government. They are cutting too far and too fast. I am happy to take an intervention on that point.

[Mrs Main]

Will the hon. Lady give way?

--- Later in debate ---

[Rachel Reeves]

Yes, I would like to hear why the Government are spending £12.8 billion less.

[Mrs Main]

The Labour Administration had a target for rail freight interchanges, and the Howbury Park project was given the go-ahead in 2007. However, no work has yet been done. Should not the Labour Government have insisted on proper investment being put into the project, which would have benefited the local area?

[Rachel Reeves]

I have generously let the hon. Lady have another chance at intervening, but she did not explain why, in the first year of this Parliament, her Government spent £3.2 billion less than the last Labour Government planned to spend, or why, in their second year, her Government spent £2.9 billion less than the amount in the plans they inherited. Nor did she explain why, in the third year of this Parliament, they spent £6.7 billion less than we had planned. When the Chancellor says that he has matched the plans of the last Labour Government, he is just plain wrong.

[Mr Brian Binley (Northampton South) (Con)]

I thank the hon. Lady for giving way, and I wish her well with her impending delivery. What figure would she place on the capital expenditure budget for this year, if there were a Labour Government at this time?

[Rachel Reeves]

In the plan set out by the last Labour Government for 2012-13, the amount was £48.4 billion. In the plan set out by this Government, it is £41.7 billion. We had a plan to halve the deficit during the course of this Parliament. This Government wanted to go further and eliminate the structural deficit in that time. The reality is that they are borrowing more than the amounts set out in the plans left by the last Labour Government. They are not borrowing it to invest in infrastructure, either. They are spending £12.8 billion less on infrastructure than the last Labour Government, but they are spending £13 billion more on social security. Why is that? It is because there are more people out of work and more people claiming tax credits as a result of this Government’s failure to get the economy growing again. They are spending £13 billion more than they had planned to on social security. Is that really what they came into power to do? No, but the reality is that their decision to cut as far and as fast as they did has choked off the economic recovery. The result has been an economy that has flatlined for two years.

This Government are lethargic in the face of a flatlining economy, and inept in the face of long-term challenges. They came in and abandoned Labour projects, such as the plans for 715 schools, in a tranche of ideologically motivated cuts. Then, having at least partly recognised their mistake, they announced a new school building programme in 2012. Progress is painfully slow, however, with work planned to start only sometime in the spring. More delay. It is simply not good enough. This is a Government without a plan for the present and without a vision for the future—[Interruption.] If any Liberal Democrats would like to intervene, I look forward to hearing from them. [Interruption.] If someone just wants to mutter from a sedentary position and does not have the guts to intervene, that is their problem, not mine. Do we have an intervention from the Liberal Democrats?

--- Later in debate ---

[Mr Deputy Speaker (Mr Nigel Evans)]

That means me. Members should speak through the Chair.

[Rachel Reeves]

I do not know how the hon. Gentleman bought his house, but when I bought mine, I had a mortgage because I could not afford to buy it outright. That is why schemes such as PFI were introduced. I am not sure what school, hospital or children’s centre in the hon. Gentleman’s constituency he would prefer not to have opened during the last Labour Government. I bet a lot more of those things opened under the last Labour Government than have been opened under this Conservative and Liberal Democrat Government.

The reality is that what the Government are doing is hurting business confidence. The director general of the British Chambers of Commerce has described the Government’s plan for infrastructure as

“hot air, a complete fiction”.

[Chris Heaton-Harris (Daventry) (Con)]

rose—

[Rachel Reeves]

I will give way to the hon. Gentleman if he would like to explain why even the director general of the British Chambers of Commerce thinks that the Government’s plans are hot air.

[Chris Heaton-Harris]

I thank the hon. Lady for giving way; she is very much on broadcast rather than reception. On PFI, she mentioned her mortgage, so what would happen to her if she were unable to make the repayments on that mortgage?

[Rachel Reeves]

I hope the hon. Gentleman is not suggesting that the Government are not going to be able to make the repayments on their debt. We know that their triple A rating is under threat, so if this is a warning that the Government are planning on not paying their debts and the deficit back, it will be interesting news.

The CBI has warned the Government that

“businesses in Britain are looking for action and we haven’t seen any yet”.

Yesterday, the monthly index published by BDO showed that business confidence hit a 21-year low. That is the lowest level of business confidence since Norman Lamont was Chancellor and sterling was ejected from the exchange rate mechanism on Black Wednesday in 1992. I am sure that right hon. and hon. Gentlemen will remember that day. The Prime Minister certainly does—he was working for the Chancellor at the time. Confidence is now at those low levels again.

It is now clear: business has lost confidence in this Government, who do not have a plan for jobs or growth. It is hardly surprising, then, that the Government are failing to attract the private sector funds they need for their infrastructure investment. It is worth remembering how the Government’s plan to target £20 billion of pension funds for investment is going. Responding to a question from my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks), the Chief Secretary to the Treasury had to tell us that the Government were on course for just a 10th of their original target: £2 billion out of £20 billion raised.

The Government lack the policy framework to attract the long-term investment we need. Changes such as cuts to feed-in tariffs have had a detrimental impact on low-carbon investment. The CBI warned the Government that such measures have been

“damaging to business confidence, with implications not just for immediate investment decisions but for longer-term trust in government policy”.

It is no wonder that, last year, 50 companies, investors and industry bodies wrote to the Chancellor asking him to set a firm decarbonisation target for 2030 to give investors the confidence they needed. On energy policy, the Institution of Engineering and Technology has been clear in saying:

“Short-term uncertainty around UK energy policy…is very unhelpful and has the potential to… delay much-needed investment in all forms of energy infrastructure.”

According to the findings of a poll by KPMG, two thirds of businesses believe that the UK’s energy and water infrastructure is unlikely to get any better because of uncertainty about the policy framework.

From the business community, we hear resounding frustration when it comes to the Government’s infrastructure policy. The Government do not seem to understand that businesses long for certainty when attempting to grow, employ more people and build for the future. Those are the people and businesses that we need to encourage, not put off, and infrastructure is vital to that, but the Government’s ideological decision to cut infrastructure investment further and faster is hampering confidence rather than nurturing it.

Small businesses, the engines of growth, are still waiting for the Government to roll out universal broadband. The Government abandoned the commitment from the last Labour Government to provide broadband for virtually every household by 2012. When business needs this Government, they are nowhere to be found.

Fundamentally, the Government fail to understand the need for a comprehensive and long-term plan to build Britain’s infrastructure for the 21st century. That is why the Labour party has commissioned Sir John Armitt, chair of the Olympic Delivery Authority, to consider how long-term infrastructure decision making, planning, delivery and finance can be radically improved. The Olympics taught us what we could achieve together as one nation. With the right leadership and the right investment, and by building consensus around the long-term projects that are essential for our energy, transport and housing needs, we can compete globally, with a national infrastructure that is fit for the 21st century. Labour is therefore making the case for a British investment bank, which would help to support long-term finance for British businesses so that they could take risks and grow. That is especially urgent given that net lending to businesses has fallen by a staggering £13.5 billion over the last year.

Investing in infrastructure is about more than the tarmac on our roads or the bricks that make up our schools. It is about creating skilled jobs for our youngsters. It is about supporting the entrepreneurs who want to export and grow their businesses. It is about ensuring we can grow and operate across the globe. It is about attracting investment from abroad. It is about being ambitious in the face of challenges, and attempting to build a better country for the next generation.

The Prime Minister said in his new year address:

“This is, quite simply, a government in a hurry. And there’s a reason for that. Britain is in a global race to succeed today.”

Whichever way we look at it, however, this Government do not seem to be in a hurry to invest in our country’s infrastructure. Indeed, as I said earlier, they are spending £12.8 billion less on capital investment than the amount specified in the plans that they inherited from the last Government, which amounts to an 8% cut. A Government in a hurry? Hardly. Inertia is the watchword of this Government, at a time when what we need is action.

When other countries are investing in their infrastructure, aware of the benefits, this Government dither. On infrastructure, as on so much else, the country needs decisive leadership. Instead, we get incompetence, delay and cuts. It is time that we changed course.

[Mr Deputy Speaker (Mr Nigel Evans)]

Before I call the Financial Secretary to the Treasury, I should inform the House that a speaking time limit for Back Benchers will be announced when he has sat down. I advise Members not to think much beyond eight minutes for the moment.

[The Financial Secretary to the Treasury (Greg Clark)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that the previous administration’s final Budget planned to cut capital investment by 6 per cent more than this Government’s latest plans, in the period 2010 to 2014; further notes that this Government has increased capital plans by £20 billion at the Spending Review and at the last two Autumn Statements, by taking tough but necessary decisions to cut current spending, with a result that public investment as a share of GDP will be higher on average over this Parliament than it was under the previous administration; further notes that this Government announced £5.5 billion of extra infrastructure investment in the last Autumn Statement, including £1.5 billion for roads, £1 billion for new schools, £900 million for science and £1.8 billion for housing and local infrastructure; further notes that it has supported the largest investment in the railways since Victorian times under the High Level Output Specification; further notes that no national infrastructure plan existed under the previous administration whereas this Government has set out for the first time a multi-year long-term strategy for the UK’s infrastructure, with over 50 per cent of the Government’s top 40 projects and programmes due to be in construction, procurement or completed by the end of 2014-15; and believes that sweeping away red tape and developing new finance initiatives such as the UK Guarantees Scheme will also support up to £40 billion of extra important projects”.

I listened attentively to the hon. Member for Leeds West (Rachel Reeves), but there is little that can be said by Labour Members that should not start with an apology. Infrastructure, more than most issues, is an area of policy in which the present is haunted by the decisions of the past. By their very nature, major infrastructure projects must be planned years in advance, capital spending budgets must be allocated years in advance and private sector investment must be secured years in advance. All those things require a Government who can look ahead, anticipate the needs of the future, and make the necessary decisions in a timely fashion.

[Rachel Reeves]

Plans do need to be made for the future, so why did the Government cancel the building of 715 schools under the Building Schools for the Future scheme when they came to power?

[Greg Clark]

I should have thought that in two and a half years the hon. Lady would have learned the lesson from that. The deficit that Labour was running was greater than the deficit in any other G7 country. We needed to sort that out, and to create confidence in our economy. If Labour Members have not learned the lesson after two and a half years, what hope is there for the future?

The economic arguments advanced from the Opposition Benches sometimes purport to draw on the wisdom of John Maynard Keynes, but Keynes recommended that Governments should run a surplus in the good times, enabling spending, especially on infrastructure, to take place in the lean years.

--- Later in debate ---

[Mrs Anne Main (St Albans) (Con)]

I profoundly disagree with the motion, particularly what it says about “dithering” and “delay”. I am all for a bit of dithering and delay, but I would call it caution and sensible planning. I am speaking up for the environment because I want us to take a considered approach to planning as well as kick-starting our economy. Carpenters have the old adage, “Measure twice and cut once.” We should be very careful that we get our infrastructure right rather than just dashing forward and building on any old place.

The motion stresses the need to get Britain building, but we need to have a cohesive approach, not a mad dash for growth without considering local communities or what is actually needed. I am concerned that we are intrinsically entwining planning and the Treasury. I want to make sure that we are giving these matters due consideration and are not trampling over communities, historic landscapes, and, importantly, the green belt, but getting our infrastructure right and getting it in the right place.

I want the infrastructure debate to be associated with economic benefit, local regeneration and jobs, but never to lose sight of the environment. The two are intrinsically linked. Local communities need to ensure that plans are not granted in a hasty fashion just to join the ranks of unimplemented or badly located permissions. The absence of a joined-up approach to getting our infrastructure right and ensuring that there are full appraisals of alternative sites for large, private-funded proposals, such as those for rail freight interchanges, is likely to result in a developer-led scramble to see who can get their project through first, and it will often not end up on the best site for the local area or for national economic growth. That can also affect investment in other sites that may be more suitable, but which are starved of potential investment as investors hold fire in case another rival site gets permission through the planning system.

I want to make sure that we ask where we need to deliver such infrastructure in Britain. It is obvious that large infrastructure projects can create jobs and they should, if possible, be based in those areas where there is a need for those jobs, while at the same time doing minimum harm to the environment. That would be a win-win situation for everyone.

There has been a “minded to grant” decision on a rail freight terminal in my constituency. According to the developer of the site, it will create more than 3,000 jobs, the vast majority of which will be blue collar. Such a development could—I agree with the Labour party on this—provide a considerable boost for a struggling local area if it had the work force. It would be a shot in the arm for an area that needed those jobs. In St Albans, however, we are fortunate to have an unemployment rate of just 2.5% and the vast majority of those 1,155 people are white-collar workers. In fact, we have a deficit of blue-collar workers. Beyond that, neither my constituents—some of whom would be situated 100 metres from the development—nor Hertfordshire county council want the site, we are not a regeneration area, and the site will depress our local house prices, concrete over 10% of our green belt and compromise commuter routes into London.

The site has had three refusals, but on the Friday before Christmas, there was a volte-face and the “minded to grant” decision was made. Residents were stunned, because, if we compare and contrast the situation with that of a nearby site in Upper Sundon, just a few miles north of St Albans, we will see—this may be coincidental —that it has all the supposed national benefits that I believe we should be looking for and none of the drawbacks, or very few of them. The site is located in an old quarry—it is not on the green belt—and a ready, accessible work force, who would not need to travel in an unsustainable fashion, want it. It is also on the M1, which I am pleased to say is being upgraded, as we have heard from the Government today.

The site is in the central Bedfordshire development plan and has the support of the council, which would make the planning process simple and, I hope, amicable. Luton airport is also nearby, which is also looking to expand. The site will have easy accessibility to roads and road freight. From the economic point of view, the site is located near Luton, where the most recent figures show that 5.6% of the population are unemployed, most of them blue-collar workers.

I want to marry up those two happy coincidences, but I am concerned that the prevailing mood—driven by the Opposition in particular—is that, in the name of economic necessity, we must give permission to build at whatever cost. [Interruption.] The hon. Member for Leeds West (Rachel Reeves) would not let me intervene when I wanted to ask her whether she agreed—

[Rachel Reeves]

I did!

[Mrs Main]

The hon. Lady’s list did not include the point that economic infrastructure should be put in the correct place.

[Rachel Reeves]

Of course it should.

[Mrs Main]

The hon. Lady says from a sedentary position that it should.

[Rachel Reeves]

Will the hon. Lady give way?

[Mrs Main]

I will take another minute from the hon. Lady.

[Rachel Reeves]

Of course infrastructure investment should be in the right place, but there is no risk of any infrastructure under this Government. That is the problem that we have been trying to highlight today, and the hon. Lady seems to welcome that lack of investment.

[Mrs Main]

I point out to the hon. Lady that in 2007, under her Government, the Infrastructure Planning Commission granted the decision to build Howbery park, against much opposition from local residents, on the green belt, on the basis that the Strategic Rail Authority said that it should be situated just about there. However, not a shovel has been turned on that development —the previous Government did nothing about it. I do not see why we should not have a strict rule that infrastructure must be placed exactly where it is needed, not where a developer happens to want it, which may lead to a situation such as that in Alconbury, which ended up with the Trojan horse of a business development park because it never got the rail links it was promised. That is not what we should be doing with our infrastructure. It should be in the right place and linked to the right work force.

If we are going to allow the development of much-needed housing, we should also look at why we have 142,000 unimplemented planning permissions that have already been granted. Across England, the figure is up to 400,000. Our priority should be to look at what has already been granted and ask why it was not built in the first place or why it was not built according to the planning permission that was granted to it, as in the case of Alconbury. If we do not make sure that infrastructure is correctly located, future generations will judge whether we had proper stewardship of our countryside.

We should examine historical permissions, both for large-scale infrastructure developments and large housing developments, that have not come to fruition. We must not just speed up the planning process and churn out more permissions that can be banked for five years, because that does not help the economy by ensuring that development happens where there is economic need and where there are people who can take up the job opportunities that are created.

A clear-sighted strategic decision-making process that was more “steady as she goes” would give investors confidence that they would not end up with permissions granted but never see the developments delivered properly in the way that was envisaged. If people want to get involved in strategic rail, there are many spin-offs such as people working on the site and promises of additional infrastructure upgrades to support the development. However, all those things fail if the developer never puts a spade in the ground and does not deliver the site as it was envisaged. All the potential jobs that are linked to such planning permissions never actually happen.

That has happened under previous Governments, and not only the last Government. However, the Opposition are now arguing that we should rush through more planning permissions and accuse this Government of dithering. I ask the Treasury to please be a bit more cautious and not to do what the previous Government did in allowing loads of permissions to be granted that never delivered what they should have delivered. We should consider applications slowly, cautiously and carefully to ensure that instead of a developer pushing the area where he would like to build, developments are built where we want them to be built and where communities want them to be built. That would be in the best interests of this country as a whole.

To return to the site in St Albans, it will not benefit my constituency one jot to have a rail freight interchange. It would probably benefit Sundon quarry and the surrounding area because of the jobs that it would create, but it would not benefit my constituency if it happened in Radlett. I hope sincerely that the “minded to grant” decision is suddenly reversed to match the original three refusals, because those refusals were sensible. Two of them came under the previous Government, so I hope that Labour Members would approve of them as well. The harm that will be done by that development certainly does not justify its going ahead, especially where an authority slightly further up the road would like to have such development, very much as the hon. Member for Swansea West (Geraint Davies) said his area would.

We should encourage development to go where communities would welcome it, and where it fits in with our with our bigger, broader strategic plan for the economy of this country.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 29th January 2013 Commons Chamber

[Mr Osborne]

Yes I can. Again, it is an inconvenient truth that we are spending billions of pounds more on capital spending than was setout in the Budget that half of them opposite, who were in Parliament before the last election, voted for. We are making those choices: they oppose everything because they have nothing to offer in this place.

[Rachel Reeves (Leeds West) (Lab)]

That is an incredibly complacent answer from the Chancellor. Does he not agree with the Deputy Prime Minister that the coalition Government in fact cut capital spending in infrastructure projects too far and too fast, and that this has hampered growth and the economic recovery?

[Mr Osborne]

We are spending more on capital than the plan set out by my predecessor, the right hon. Member for Edinburgh South West (Mr Darling)—the plan that the shadow Chancellor voted for. We have increased capital spending in the 2010 spending review and increased it in autumn statements since. That is why we are spending more money on roads, and it is completely hypocritical for the Labour party to complain about capital spending cuts that would have been deeper if they had stayed in office.

[Rachel Reeves]

It is simply not correct to say that the Government have matched the plans of my right hon. Friend the Member for Edinburgh South West. The Office for Budget Responsibility says that in the first three years this Government are spending £12.8 billion less on infrastructure than the plans that they inherited. It is £6.7 billion lower in this year alone. But if the Chancellor and Deputy Prime Minister are now so concerned about the shrinking economy, why do they not listen to the advice the International Monetary Fund gave them last week and use the Budget in March to rethink their failed economic plan?

[Mr Osborne]

I do not think that the hon. Lady is being completely straight with the House about the numbers she is using—[Hon. Members: “Withdraw.”]

The Economy

Rachel Reeves Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

As always, my hon. Friend makes a good point. We need people with experience in compliance and enforcement, and we are expanding employment in those areas. That is the right thing to do and it should have been done a long time ago.

The previous Government set out plans to increase fuel duty above inflation last year, this year and again in 2013 and 2014. However, as a result of repeated action by this Government, pump prices will remain at least 10p per litre lower for the remainder of this Parliament than they would have been had the Labour party remained in government.

[Rachel Reeves (Leeds West) (Lab)]

Slide 24 of the report by the Institute for Fiscal Studies shows that, including fuel duty changes and the changes to the personal allowance and tax credits, a one-earner couple with two children will be £534 worse off on average as a result of the changes in the autumn statement. Will the right hon. Gentleman confirm that?

[Danny Alexander]

No, I cannot confirm that. I do not recognise those figures—[Interruption.] Labour Members are waving bits of paper—

--- Later in debate ---

[Rachel Reeves (Leeds West) (Lab)]

The Opposition welcome this opportunity to debate the state of the economy, the Chancellor’s record over the past two and a half years and the measures he has introduced in the autumn statement. Last Wednesday he came to the House and admitted that he had failed—failed to get the economy moving, failed to meet his borrowing targets and failed to listen to our advice and change course.

First, though, let us go back to the heady first months of this coalition Government—when they were still getting on, when they were fraternising in the rose garden. In the 2010 spending review, the Chancellor decided to implement a programme of unprecedented fiscal contraction. We said it was not the right time to cut demand, given that the economy was only just recovering from the global financial crisis, and that the cuts went too far and were being implemented too fast.

[Kwasi Kwarteng (Spelthorne) (Con)]

Is it not true that we are actually spending more than we were two years ago and that no real cuts have been made? What would the hon. Lady like to say about that?

[Rachel Reeves]

There is one particular area where the Government are spending more money, and that is welfare, on which they are spending £13.6 billion more during this Parliament, because more people are out of work or in part-time work and so receiving more tax credits. That is a sign of the Government’s failure, not of their success.

In the 24 months since the spending review, where have we got to? How much progress has been made? Is the Chancellor’s plan working? The verdict is in. We now know that borrowing and debt figures have been revised up for this year, for next year and for every year of this Parliament. The Government are borrowing £212 billion more than they planned. They said that five years of austerity would be difficult, but that it was necessary to support our economy, and they said that it might hurt, but that it would work. Well, it has not worked, but it has hurt, and we are no closer to clearing our deficit than we were two years ago. [Interruption.]

[Hon. Members]

Bye, bye!

--- Later in debate ---

[Rachel Reeves]

Thank you, Madam Deputy Speaker. Perhaps the hon. Gentleman did not like the answer to his intervention. Fair enough—I would not be pleased to hear that my Government were spending an extra £14 billion on welfare because of their failure.

This year the economy will shrink by 0.1%. The Chancellor’s two gap years—two years of painful cuts, more borrowing and no growth—are a shocking indictment of a failed plan. He stands up and tells the nation that the British economy is healing and that he is equipping Britain to win in the global race, yet over the 24 months since the spending review the UK economy has grown by just 0.6%. In the same period, the US economy grew by 4.1% and the German economy by 3.6%. Helpfully, the International Monetary Fund’s world economic outlook data allow us to put together a league table of 184 countries based on total growth between 2010 and 2012, so we can now analyse our performance in the global race that he describes with this Government at the helm. Of those 184 countries, where do Members think Britain comes? We are 158th. It is a relegation battle. We are behind Togo and Namibia, Albania and Macedonia, but there is no need to worry—apparently we are hot on the heels of Mali, Samoa and Fiji! We are the worst performing G7 country, apart from Italy. In the global race, Britain is well and truly in the slow lane with this Chancellor at the helm.

[Mr MacNeil]

Does the hon. Lady agree that the context she has rightly given the House is the reason the Scottish referendum on independence will be won in 2014?

[Rachel Reeves]

I will let the good people of Scotland make their decision when the time comes, but I believe that we are stronger together—stronger united than divided.

The worst aspect of the Chancellor’s two wasted years is the long-term damage being done to our economy. Every month of inaction, every failed initiative and every growth forecast downgraded is another hammer blow to the work force, our businesses and our national infrastructure. The skills and motivation of British workers are going to waste, with one in three of our 2.5 million unemployed out of work for more than a year and 3 million of those with jobs wanting to work more hours, but unable to find the work. In reality, we are falling behind, and the Chancellor has nobody to blame—not the snow, not the royal wedding, not the eurozone.

I agree with the chief economist of UBS, George Magnus—[Interruption.] [Hon. Members: “He’s gone!”] Obviously the hon. Member for Spelthorne (Kwasi Kwarteng) does not want to hear what the chief economist of UBS has to say. I will send him a copy of Hansard. George Magnus said that the Chancellor’s excuse

“falls under the category of ‘Sorry Miss, the dog ate my homework’”.

He also said that

“the problem I think that the Chancellor has with the eurozone is that we are just like them. We have this single-minded focus on austerity and the lack of growth is basically crippling our ability to meet our fiscal targets.”

I agree that the Chancellor and his economic plan are to blame. Two and a half years of austerity, two and a half years of this Chancellor, and what do we have to show for it? We have no growth, more borrowing and a tragic waste of time. [Interruption.] It is good to see the hon. Member for Spelthorne in his place again.

A year ago the IMF warned:

“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example…the United Kingdom) should also consider delaying some of their planned consolidation.”

At that time the IMF was predicting 1.6% growth this year; now the OBR tells us that the economy is more likely to shrink by 1.6% this year.

[Gordon Birtwistle (Burnley) (LD)]

Would the hon. Lady like to comment on the 6.4% collapse in GDP in 2008, and at the end of her speech will she enlighten us all on what her economic policy will be?

[Rachel Reeves]

Like other countries around the world, our GDP contracted during the global financial crisis. Germany and the United States have managed to recover that growth; we have not, because our Chancellor chose a different course—austerity—when jobs and growth are needed to get the economy moving and the deficit down. Unlike this Government, we recognise that we need to take action to stimulate jobs and growth. That is why we have said there should be a national insurance holiday for small businesses taking on new workers and a bank bonus tax to fund a programme of youth jobs, and that we should genuinely bring forward infrastructure investment and temporarily cut VAT to 17.5%. Those are the policies that would get the economy moving, get jobs back in our economy and help to bring the deficit down in a sustainable way.

[Andrew Gwynne]

The Government have placed great emphasis on the views of the Office for Budget Responsibility. My hon. Friend will be aware from reports in today’s media that Robert Chote of the OBR has suggested that the UK need not fear losing its triple A rating. Does she see us losing our triple A rating as a ringing endorsement of this Government’s economic policies?

[Rachel Reeves]

Let us see what the rating agencies have to say in the new year. Of course we are on negative watch, but it was not we who said the rating agencies should be the be-all and end-all. Indeed, they were giving Lehman Brothers a triple A rating until that company crashed and almost took the global economy with it. It was the Chancellor who said that a triple A rating would be the watchword of his chancellorship, so if it were to go, it would be a damning indictment of what this Government have presided over.

What was the Government’s response to all the bad economic news last Wednesday? Let us give credit where it is due. The Chancellor now agrees with us that we should not go ahead with the fuel duty increase in January; he agrees with us that introducing regional pay in our public services would be costly and impractical; he agreed with us that we should reverse the relaxation of restrictions on pension tax relief for the very rich; he agreed with us that it was a mistake to implement deep cuts to capital programmes such as Building Schools for the Future; and he agreed with us that cutting investment allowances risked damaging incentives for long-term wealth creation. We propose the creation of a British investment bank to support small businesses, and the Chancellor has produced a pale imitation of that, but I am afraid that all these measures are too little, too late—robbing Peter to pay Paul. Smoke and mirrors will not hide the lack of a real, purposeful growth strategy.

The chief executive of British Airways summed it up yesterday when he said:

“I don’t see an agenda for growth.”

I agree, and so does the Office for Budget Responsibility. Taking into account all the Government’s measures from the autumn statement, the OBR has concluded that they will add just 0.1% to UK GDP over the next five years. The economy is shrinking this year. Growth next year—forecast at 2.9% just two years ago—is now forecast at just 1.2%. Indeed, we have seen downgrades not just this year and next, but the year after.

[Charlie Elphicke (Dover) (Con)]

Why does the Institute for Fiscal Studies say that there would be £200 billion more borrowing under Labour’s plans?

[Rachel Reeves]

There is £212 billion more borrowing under this Government’s plans.

Families will continue to feel the Chancellor’s failure in their wallets and their homes. Average earnings will not outpace inflation until the second quarter of 2014. It will take even longer for families to recover the loss to their living standards that this Government’s economic failure has cost them.

The lack of growth and the increase in borrowing under this Chancellor have meant that he has had to come back and ask the country for more. And who are the Government asking to bear the brunt of the past two and a half years of failure? Luckily, Andrew Neil asked the Chief Secretary to the Treasury that question on BBC1 last Wednesday. He asked him whether

“those who are on ordinary incomes are suffering a lot more than most”.

The Chief Secretary to the Treasury replied: “That is absolutely right.” That was the only sense he spoke all day. It is no surprise that he is increasingly described as the Conservatives’ favourite Liberal Democrat in the Cabinet. Apparently, they regard him as easier to deal with and more persuadable. The Chancellor’s favourite Liberal Democrat has finally told the country what we have known for a long time: that this Government are asking ordinary families to foot the bill for their economic mess.

The facts speak for themselves. Analysis by the House of Commons Library shows that a one-earner family on £20,000 with two children will lose £279 a year from next April. Slide 24 of the Institute for Fiscal Studies report shows that a two-income family with children will lose £534 as a result of the changes, including all the measures in the autumn statement. Slide 17 of the IFS assessment shows that middle and lower earners will lose most as a result of the autumn statement, with the poorest 40% losing more than the richest 10%. How can that be fair? And this is all to pay for the Government’s £212 billion of extra borrowing. They are hurting those who are trying to get on and do the best for themselves and their families. That cannot be fair.

Mothers across the country will be worried about the real-terms cut in maternity pay, worth £180, that the Chancellor announced last Wednesday. That comes on top of other deep cuts that will hit pregnant women on low incomes, such as the abolished Sure Start maternity allowance and the health in pregnancy grant. This is further proof that the Government are out of touch and simply do not understand the pressures families are facing, day in, day out.

[Gavin Shuker]

What assessment has my hon. Friend made of the impact of the changes, particularly those relating to people on low incomes, on the overall growth of the economy? It strikes me that they are exactly the people we ought to be encouraging to spend right now.

[Rachel Reeves]

My hon. Friend is right. It is a false economy to cut the incomes of the lowest paid, because they will have less money to spend in their communities. What really matters, however, is the real impact that the changes will have on their living standards and those of their children.

The Resolution Foundation has said that 60% of the cuts to benefits and tax credits will hit working households—that is, those who are trying to get on in life. Given that the welfare bill is forecast to be £13.6 billion higher in this Parliament than the Chancellor thought it would be—another target tossed aside—perhaps it is time for the Government to concentrate on getting people back to work in order to reduce the welfare bill. In February this year, the former employment Minister, now the Secretary of State for Justice, said:

“The Work Programme is doing a good job and is on track. It is helping long-term unemployed people into work.”

And only today the Chief Secretary to the Treasury said that the scheme was going well, but we now know that for every 100 people who are unemployed, the programme has seen only two people back into work. If that is the Government’s idea of a programme that is on track, I would hate to see one that is not.

It is not surprising that OBR documents released last week showed that the number of people claiming jobseeker’s allowance was set to rise from 1.58 million this year to 1.69 million in 2014, and that the number forecast for 2016 had been revised up by 340,000. That will be a third of a million more people receiving JSA compared with the number forecast in March this year.

Let us not forget that the Prime Minister dismissed the last Labour Government’s future jobs fund, which helped 120,000 young people back into work, yet an impact analysis for the Department for Work and Pensions found that we all gained £7,750 per participant through wages, increased tax receipts and reduced benefit payments. This Government ditched a plan that worked for one that has failed, so we will not be lectured by them on welfare or on job creation.

At the same time, one group of people continue to gain from the Chancellor and the Chief Secretary’s policies. If someone earns more than £1 million a year, next year they will receive an average tax cut worth £107,000. It beggars belief that while taking from families on low incomes with one hand, the Chancellor gives to millionaires with the other—there is one rule for the very richest, another for everyone else.

[Charlie Elphicke]

The hon. Lady talks about the Government favouring the richest, but if we look at the distributional impact of tax and benefit reforms on the IFS slides to which she has referred, we can see very clearly that the richest 10% lose £260 in net income whereas everyone else is far less disadvantaged. Does she not agree that the richest are shouldering more of the burden?

[Rachel Reeves]

If the hon. Gentleman thinks that those on average incomes being worse off by £534 year is not very much, it is up to him to justify that to the people of Dover and Deal. Page 17 of the IFS analysis shows that the poorest 10% are 1.6% worse off, the second decile are 1.7% worse off, the third 1.3%, the fourth 0.6% and the top only 0.5%. The four lowest deciles—those on the lowest and modest incomes—are being hit hardest by the changes in the autumn statement, while those at the top get off relatively unscathed. That is the reality and if he wants to put that slide in his leaflets in Dover and explain it to his constituents, I am sure that they would appreciate it.

As I have said, it is one rule for the richest and another for everyone else. The poor are expected to work harder or else they will be made poorer, but apparently the rich will work harder only if they are made richer. It is the same old out-of-touch Tories and their Liberal Democrat accomplices.

There are some who think that the Chancellor is a master of political strategy; his autumn statement was clearly delicately put together. He said that borrowing was down this year, but that is only by using money from the sale of 4G contracts, which has yet to happen. He said that his cuts were targeting the workshy, when in reality they hit working people. He said that austerity was necessary for us to compete with our global competitors when, after two years of austerity, we have fallen further behind. He lived up to his reputation as a part-time Chancellor, because it was a statement that worried more about tomorrow’s headlines than the economic reality. For all of the Chancellor’s cynical political games and for all the smoke and mirrors, the real story is being felt across the country. Living standards are being squeezed, long-term unemployment is rising, borrowing is up, growth is flatlining: it is a story of a failed Chancellor and his Lib Dem accomplice desperately trying to find a way out of the mess their economic failure has got them into.

[Several hon. Members]

rose—

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 11th December 2012 Commons Chamber

[Mr Osborne]

I have to say that the reaction to the autumn statement from the business organisations of Britain was very positive. It was warmly welcomed because we are maintaining control of the public finances, which is a prerequisite for stability and recovery, and because we are taking steps to cut the corporation tax rate and increase the annual investment allowances. I still do not know whether Labour supports the cut in corporation tax. Its Front Benchers have been sending out confused messages on that over the past couple of days. Perhaps we will hear from the shadow Chancellor when he gets to his feet.

[Rachel Reeves (Leeds West) (Lab)]

The Chancellor knows that business success is key to getting our economy growing, to getting the deficit down and to creating jobs. Will he therefore tell us what was the judgment of the Office for Budget Responsibility on the impact on growth of the measures that he announced in the autumn statement last week?

[Mr Osborne]

The Office for Budget Responsibility said that there was a measurable impact on growth in the short term, and of course we have to pay for this in the long term, so it has taken that into account. I have always said that we want to improve the long-term supply potential of the British economy, and one of the most encouraging signs is that the UK, which was becoming a less and less competitive place to do business, is now back in the world’s top 10 competitive economies.

[Rachel Reeves]

I am not surprised that the Chancellor does not want to answer my question, because the OBR’s assessment is that his measures will add just 0.1% to UK gross domestic product by 2018. That must also be set against the fact that growth has been downgraded this year, next year and every year of this Parliament. Is it not the truth that the Chancellor has no plans for jobs and growth, and that that is why the Government are set to borrow an extra £212 billion during the course of this Parliament, breaking the fiscal rules that he gave to this country?

[Mr Osborne]

When the Labour party was in office, its approach led to the economy shrinking by 6% of GDP. We have set in place plans to ensure that the deficit it left us is dealt with and that our economy is more competitive. I would have thought that the hon. Lady would welcome the fact that we have over 1 million new jobs in the economy and a record rate of small business creation. That is something to celebrate in our economy.

Income Tax

Rachel Reeves Excerpts

Wednesday 28th November 2012 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House notes that HM Revenue and Customs figures show that 8,000 people earning over £1 million will gain an average of £107,500 from the Government’s decision to cut the top rate of income tax from April 2013; further notes that figures from the Institute for Fiscal Studies show that the Government’s changes to tax allowances for pensioners will mean that 4.4 million existing pensioners will lose an average of £83 from 2013-14, while thousands of people turning 65 will lose £323; and calls on the Government to announce in the Autumn Statement that it will not go ahead with its proposal to cut the top rate of tax for the richest earners at a time when the economy is flatlining, millions of pensioners on middle and low incomes are paying more, and when wider tax and benefit changes being implemented in 2012-13 will result in families with children losing an average of £511.

In March this year the Chancellor of the Exchequer stood in this House to deliver his Budget. It was a revealing moment. Having previously said that we are all in it together and insisted that those with the broadest shoulders should bear the greatest burden, the Chancellor announced a tax cut worth, on average, £107,000 for those earning more than £1 million a year. It was the moment that the Government’s façade of fairness disappeared for good. In these tough times, against the backdrop of the biggest squeeze in living standards for a generation, and with the economy flatlining, the Chancellor prioritised millionaires above millions of working people. That is why we have called this debate: to question the priorities of the Government, to stand up for pensioners and families who are being hit hardest—

[Mr Graham Stuart (Beverley and Holderness) (Con)]

The hon. Lady said that she wants to prioritise ordinary people over millionaires, so would the Labour party, if it were to come into government in 2015, reintroduce the 50p rate?

[Rachel Reeves]

We are hoping that Government Members will see sense and vote for the motion, and that the Chancellor will rethink his decision in next week’s autumn statement. It is not too late to reverse this change. I am not going to write the manifesto for 2015 now, but every single Labour MP will be voting against this tax change, which has not yet come into effect, so the Government can still think again.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Can the hon. Lady explain why only two Labour Members—the hon. Members for Newport West (Paul Flynn) and for Bolsover (Mr Skinner)—voted against the rise after the Budget statement in March?

[Rachel Reeves]

We have already debated this; when we debated the Finance Bill, Labour MPs voted against the cut in the top rate from 50p to 45p, as the hon. Gentleman is aware.

Let us look at the facts. There are 30 million taxpayers in the UK—30 million people who go out to work each day and pay their tax—yet the Chancellor’s tax cut helps only the richest 300,000, of whom 8,000 take home more than £1 million a year. According to table 2.5 on page 30 of Her Majesty’s Revenue and Customs’ income tax liabilities statistics of April this year, their total income in 2012-13 is expected to be £18.4 billion, and they will pay £8.6 billion of tax on that income at the 50p rate. From next April, when the additional rate is lowered to 45p, they will pay £7.7 billion of tax on that income. This represents £860 million of lost revenue because of a tax cut for people earning over £1 million, and an average tax giveaway of £107,000 to each and every one of them—not just in one year but in each year to come.

[Andrew Bridgen (North West Leicestershire) (Con)]

rose—

[Rachel Reeves]

I give way, and I look forward to hearing a justification for that.

[Andrew Bridgen]

Will not the hon. Lady be honest with this House and this country? This was a Trojan horse of a tax brought in at the very fag end of the Labour Government as part of a scorched-earth policy that has been shown to have cost the Exchequer almost £7 billion already—something else that the previous Government messed up and that this Government have to put right.

[Mr Speaker]

Order. In using the word “honest”, it should be taken as read that Members are always honest in the Chamber.

[Rachel Reeves]

Thank you, Mr Speaker.

The increase in the top rate of tax from 40p to 50p was introduced to help to reduce the deficit because the last Labour Government thought that it was right that those with the broadest shoulders paid a little bit more towards achieving that. The fact that this Chancellor has reversed that and is reducing the top rate of tax shows that he thinks exactly the opposite—that his priorities are not with ordinary working people but with the richest 1%. [Interruption.]

[Charlie Elphicke (Dover) (Con)]

Will the hon. Lady give way?

[Rachel Reeves]

I will—and if the hon. Member for Beverley and Holderness (Mr Stuart) has an intervention to make, then he can make it.

[Charlie Elphicke]

Does the hon. Lady accept the calculation by the Office for Budget Responsibility that this proposal would cost £100 million—yes or no?

[Rachel Reeves]

Let us look at what Robert Chote, the chair of the OBR, says about the cut in the 50p rate:

“This is a judgement based on not even a full year’s data based in terms of how people have responded to the 50p rate, in particular in terms of those self assessment tax-payers.”

Indeed, we know that a series of larger-than-usual dividends were paid in the days and weeks just before the introduction of the 50p rate. For example, the Prime Minister’s friend Emma Harrison, who is the Government’s adviser on their welfare-to-work programme—we know how successful that has been—was paid on 1 April 2010, before the new tax year, which meant that her dividend was taxed at the old 40% rate, saving her £800,000.

That is why the Government’s claims about the yield of the 50p rate do not stand up. People have had the opportunity to anticipate the introduction of the new taxation rate by bringing their income forward, as they did when the rate was reduced. As the Office for Budget Responsibility and the Institute for Fiscal Studies said, it is difficult to produce a definitive estimate for the long-term yield of a tax that has been in place for only a short period, and it is fiscally irresponsible and wholly misleading to use figures from the first year to justify the policy.

[Charlie Elphicke]

I thank the hon. Lady for giving way again, but let me press her a bit more on this point. The OBR said that its calculation was a “reasonable and central estimate.” Does she disagree with that?

[Rachel Reeves]

Robert Chote has said:

“This is a judgment based on not even a full year’s worth of data”

and the estimates are very uncertain. Another group of experts at the IFS stated that

“by giving out £3 billion to well-off people who pay 50p tax…the Government is banking on a very, very uncertain amount of people changing their behaviour and paying more tax as a result of the fact that you’re taxing them…There is a lot of uncertainty, a lot of risk on this estimate.”

If the Government think that lots of millionaires who were not paying the 50p rate of tax will start flooding to these shores to pay the 45p rate—well, we will see what happens when the numbers come out.

[Charlie Elphicke]

Let us talk about those millionaires. Today’s Daily Mail states that the number of millionaires slumped from 16,000 to 6,000 after the 50p rate of tax was introduced, and that revenues fell from £13.4 billion to £6.5 billion. Does that show that if the rate of tax is increased too much, it will have a negative impact on the public finances?

[Rachel Reeves]

I thank the hon. Gentleman for at least highlighting that thousands of people with declared incomes of more than £1 million who were paying the 50p rate will get a tax cut next year. His figures show that in 2010-11 there were 6,000 people with declared incomes of more than £1 million, and 10,000 in 2011-12. A written answer that I received from the Exchequer Secretary to the Treasury on 19 June stated that 70% of people earning more than £250,000 were paying more than 40% in tax, and 80% of those earning more than £500,000 were paying the 50p rate. In the new year, each and every one will get a large tax cut.

If the Government honestly want people to pay their fair share of tax, they should spend more time and resources on tackling tax avoidance, not compensate the wealthiest by cutting the headline rate of tax. No wonder they have cut staff numbers at Her Majesty’s Revenue and Customs by 11%—they have just given up.

I am happy to debate the Government’s record on raising revenue through taxation. Last autumn, as a result of the slowing economy, projected income tax revenues across the board had to be written down by £51.2 billion by the Office for Budget Responsibility because of the weakness of the economy and the double-dip recession. Only last week, the Office for National Statistics released statistics showing that public borrowing in October was £2.7 billion higher than for the same month last year.

Over the first seven months of financial year 2012-13, the Government have borrowed around £5 billion more than for the same period last year. Why are we seeing that increase in borrowing? It is not as if the Government have not put up taxes for ordinary people or cut public services. The Chancellor’s flatlining economy has forced a 10% slump in corporation tax revenues, and VAT revenues are expected to be down by 2.5%. The Government can spend all the time they like defending a tax cut for millionaires, and Ministers as much time as they like in Cabinet arguing among themselves about why there has been no growth, but it is time they changed course and adopted a plan for jobs and growth.

[Mark Pritchard (The Wrekin) (Con)]

Whether the rate is 45p or 50p, does the hon. Lady accept the principle that a low-tax economy is better for Britain and for businesses to do business in Britain?

[Rachel Reeves]

The hon. Gentleman says, “Whether the rate is 45p or 50p”, but the difference between those figures is £3 billion that could be used to pay down the deficit, help families who are struggling with the rising cost of living or get rid of the granny tax that the Chancellor is introducing next year. The principle of having lower taxes is fine, but we have a deficit to reduce. I thought the Government believed we should be cutting that deficit instead of giving tax cuts. The Chancellor said that in his first Budget, but he has thought again since then and is giving a tax cut to the wealthiest while asking ordinary families to pay more. That is not what my constituents want, and I doubt it is what those of the hon. Gentleman want either.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend agree that, strangely, because the cut in the rate of tax was announced and then postponed, a number of people will doubtless try to do in reverse what they appear to have done when the tax was introduced? The Government will then say, “Ah, but in this year, not enough was raised through that tax.” It will almost become a self-fulfilling prophecy.

[Rachel Reeves]

Exactly that point about income profiling and not being able to estimate the impact of the tax because it has not been in place long enough was made by the IFS and the OBR. It is a shocking indictment of the Government’s priorities that the Chancellor has chosen at this time to give a tax cut to the few at the top—a tax break for millionaires—while asking working people to pay more. They are the same, old, out-of-touch Tories, and not one of their accomplices—the Liberal Democrats—had the nerve to stand up to the Chancellor.

[Paul Flynn (Newport West) (Lab)]

Studies show that those countries in the world that are happiest and have highest levels of contentment and well-being are the Scandinavian nations that have relatively high taxes and high minimum wages. Is it not strange for the Government to believe that we make the rich work harder by giving them more money but the poor work harder by taking money from them?

--- Later in debate ---

[Rachel Reeves]

My hon. Friend makes an important point. The work of Wilkinson and Pickett in “The Spirit Level”, and other academic research, has shown exactly that. Some people will be a lot happier next year—the 8,000 millionaires who will have their taxes cut—but ordinary working people who see their taxes go up will be a lot worse off and, I expect, not very happy with either their finances or the Government who have inflicted that situation on them.

In the same Budget as the Chancellor’s giveaway to the richest, buried in the small print as a tax simplification, was the Chancellor’s granny tax. The freeze in the age-related allowance for the over-65s will see 4.4 million pensioners who pay income tax losing an average of £83 each per year. People who turn 65 next year will lose most of all—up to £322. Listening to the Chancellor was like watching Robin Hood in reverse. Most pensioners who will be hit by the granny tax live on incomes that put them in the bottom half of income tax distribution. Those with a small personal pension of £67 a week—£3,000 a year—will be in line to lose under this measure. How insulting to pensioners who have worked hard all their lives, who have not earned large salaries, but who have done the right thing and saved responsibly so they could provide for themselves in later life.

[Mr David Anderson (Blaydon) (Lab)]

Does my hon. Friend recognise figures from Hansard that show that in the north-east some 4,000 taxpayers will benefit from the changes, but more than 278,000 will be worse off and they will mainly be pensioners? Does that not show all we need to know about the Conservative party?

[Rachel Reeves]

My hon. Friend makes an important point. People on modest incomes such as pensioners will lose out, while those at the top get a little bit more—well, not a little bit more; they will get £107,000 more next year from the Government. How insulting for those pensioners to see their taxes go up on the same day that millionaires have their taxes cut. Families, pensioners and young people cannot escape the Chancellor’s austerity programme—only millionaires can do that.

Pensioners have already seen their winter fuel allowance cut and their pension indexed to a lower measure of inflation. The increase in the state pension age for women has been brought forward, and the rise in VAT has added £275 to the costs faced by an average pensioner couple. Services such as the national health service, social care and local transport have been cut, and the TUC estimates that a single pensioner will lose access to services worth 11% of his or her income. No wonder so many people have spoken out against what the Chancellor is doing.

Age UK has stated:

“We feel it is disappointing that the budget offered a tax break of at least £10,000 to the very wealthy while penalising many pensioners on fairly modest incomes who are already squeezed.”

The chief executive of Saga has said:

“Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected”.

The National Pensioners Convention has said:

“We have been inundated by pensioners who are disgusted that those on around £11,000 a year will no longer get additional reductions in their tax…whilst those earning £150,000 or more will see their tax bills reduced…This is seen by many as the last straw…Pensioners feel they are being asked to bail out the super rich…and it’s simply not fair.”

The Opposition could not agree more. It is the same old out-of-touch Tories.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

To add to that litany of taxes on pensioners, annuity rates are in freefall; one cardinal fact of the past two and a half years is the collapse in annuity rates for pensioners. On top of those other attacks on their income, pensioners now find that their annuity rates are collapsing.

[Rachel Reeves]

I thank my hon. Friend, who is the shadow pensions Minister, for his intervention. I am sure he could add many other examples of pensioners being hard hit by the Government. The change in annuity rates is one example as the economy continues to flatline.

The rest of the taxpaying public look with disbelief on what the Government are doing, including the families with children, who are, on average, £450 a year worse off because of last year’s VAT rise, and another £511 a year worse off this year because of further cuts, freezes and reductions to benefits and tax credits; the couples with children who cannot increase their hours to the higher threshold introduced by the Government and who will have working tax credits withdrawn, which, in many cases will drop them below the poverty line; the families with incomes above £26,000, who are now losing all their child tax credit, contrary to the Prime Minister’s promises before the general election; and those on modest earnings with children at school, who will suffer cuts to services equivalent to 13% of their incomes.

The deterioration of the economic outlook on this Chancellor’s watch has led to the OBR revising projections on real disposable income per household down by £800 last year, by £1,100 this year and by £1,700 next year.

[Mr Jim Cunningham (Coventry South) (Lab)]

On tax credits, what does my hon. Friend think about a case I heard about two or three days ago, in which the application for tax credits was not even opened for three months?

[Rachel Reeves]

Given the cuts to departmental budgets, it is not surprising that some applications are not being processed and that, as a result, families are missing out on the tax credits to which they entitled, pushing them further into hardship.

How will households throughout the country feel next year, when those earning more than £1 million get a tax cut of £107,000? What is the Government’s message to people who work hard and want to get on in life? We remember when the Conservatives liked to think of themselves as the party of aspiration. Baroness Thatcher liked to claim she stood up for people who wanted to work their way up, and yet, under this Government, people who get a pay rise or promotion lose their child benefit. Imagine that! A person who earns £49,000 a year and has three children will lose thousands of pounds in child benefit if they take a pay rise or promotion. What a terrible position to put people in.

The truth about the Government is this: pensioners pay more, low-paid parents pay more, and a family working hard to get on in life and provide for their children pay more, but millionaires pay less. That tells us everything we need to know about the Government and their values. For many, 2012 will be remembered as the year the Chancellor’s drastic cuts began to hit home, but for the richest, 2013 will be remembered as the year they received their tax give-away from this Robin-Hood-in-reverse Chancellor.

Last week, the Prime Minister compared the economic situation we face to war. It is true that we are facing a period of national upheaval, but that is why it is crucial that the Government are a uniting force, not a dividing one. Is this really the time for a tax cut for the richest? During the second world war, the public queued to get their copy of the Beveridge report, because it set out the beginnings of a welfare state in which everyone had a stake. In the period of reconstruction after the war, that spirit and sense of national mission led to the creation of the national health service.

The Government do not understand the need for one nation politics, or the need to take people with them and share the burden of sacrifice fairly. Instead, they will be remembered as a Government who divided. Indeed, of the richest who are receiving the tax give-away, 85% are men, but around 70% of the revenue raised from direct tax and benefit changes will come from women. Fifty-two per cent. of those benefiting from the millionaires’ tax give-away are based in London and the south-east, but long-term unemployment is rising in the north. The poor are expected to work harder, because otherwise they will be made poorer, but the rich will work harder only if they are made richer. There is one rule for the very richest and another for everybody else. It is the same old out-of-touch Tories.

When the Chancellor came to the House to deliver his 2011 Budget, he said that

“now would not be the right time to remove it when we are asking others in our society on much lower incomes to make sacrifices”.—[Official Report, 23 March 2011; Vol. 525, c. 957.]

He was right then, and he is wrong now. He revealed his true colours in this year’s Budget.

[Andy Sawford (Corby) (Lab/Co-op)]

Does my hon. Friend recall the remarks of the parents whom she and I met at the Pen Green centre in Corby, who spoke about many local priorities, including vital local services such as our hospital? They did not believe the millionaires’ tax cut was the right priority for people in Corby and east Northamptonshire or for people throughout the country.

[Rachel Reeves]

Although my hon. Friend has been in the House for a lot less time than many Government Members, he speaks more sense than they do, on behalf of his constituents in Corby and east Northamptonshire, who sent a clear message to the Prime Minister two weeks ago when they elected my hon. Friend and booted out the Conservatives. He is right to stand up for their interests. They do not want the tax cut for millionaires; they want help for ordinary families, for pensioners and for young people getting back to work. That is what people in Corby and the rest of the country want.

The Chancellor waved goodbye to the pretence of being on the side of working people in this year’s Budget. He waved goodbye to saying, “We’re all in this together,” and, “Those with the broadest shoulders should bear the greatest burden.” The Budget was the U-turn that revealed his true motives and told people for whom he stands. People will not forget that, when times were tough and they needed support, the Government cared only for those who needed it least. The Tories are back to doing what they do best. It is the same old out-of-touch Tories.

[Several hon. Members]

rose—

--- Later in debate ---

[The Financial Secretary to the Treasury (Greg Clark)]

It is a pleasure to respond to this debate, not least because of the maiden speech made with such distinction by the hon. Member for Cardiff South and Penarth (Stephen Doughty), whom I warmly welcome to the House. He spoke in a way that was assured and fluent and with a degree of geniality that I think will make him many friends throughout the House. I have one issue of contention with him. He outed himself as a fan of Cardiff City and, since they are locked in a promotion battle with my hometown club of Middlesbrough, that will be a point of disagreement between us during the weeks and months ahead.

Call me naive, but I had hoped that, during an Opposition day debate, we might have heard something—anything—about the Opposition’s policy, but sadly it was not to be. At the end of this debate, their economic policy is, if possible, even more obscure than it was at the beginning. There are four fundamental matters crucial to this debate that both shadow Ministers—the hon. Members for Leeds West (Rachel Reeves) and for Newcastle upon Tyne North (Catherine McKinnell)—failed to address.

The first could not be more basic. What do the Opposition believe to be the purpose of the 50p rate of income tax? Is it to raise revenue, to punish the rich, as the right hon. Member for Oldham West and Royton (Mr Meacher) has said, or to serve as a piece of rhetoric? We need to know, because if the Opposition are clear that its purpose is to raise money, will the hon. Member for Newcastle upon Tyne North say—she is welcome to intervene—whether they will drop their support for the 50p rate if the evidence continues to support our assessment and those of HMRC and the OBR that it raised very little indeed and would be likely to cost the public purse even more? Will she be clear—is the argument that the rate raises money the criterion for the Opposition’s support for it, or is it a price worth paying just to send a message that they want to soak the rich?

Secondly, do the Opposition accept, in the words of HMRC, that

“high tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business”?

Do they accept HMRC’s assessment that high taxes are bad for the international standing of the country? I would be pleased to take an intervention from the hon. Lady. My hon. Friend the Member for The Wrekin (Mark Pritchard) asked the shadow Chief Secretary whether she subscribed to that view, and she could not answer. Is tax competitiveness important to the Opposition? We do not know. In their view, does it matter if the UK has the highest tax rate in the G20? Is that a concern or not? Does it make a difference to British competitiveness? The last time the hon. Member for Pontypridd (Owen Smith) was asked he said, “I don’t know.”

The third issue is whether the Opposition agree with the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who said that this measure should be only temporary. We have had no clarity on that from Opposition Front Benchers.

The fourth matter that the Opposition need to consider, given that they regard this tax as being so crucial—so totemic—that they wanted to call this debate about it, is whether they will send a clear message that they would restore it if they came to power. Again, we have silence. Let us bear in mind that we are now in the second half of the Parliament, and the time for posturing and procrastination is over. The time has come for the Opposition to tell the country what they would do in government—or do they simply not have the courage to face up to the need to be straight with the British people? I strongly suspect that this will be one of the last occasions when we debate the 50p tax rate as it gets shuffled off to the retirement home of meaningless gestures that the Opposition no longer have time and use for.

Labour is, to its core, the party of tax and spend, and, to be fair, it takes a very consistent view of both sides of the equation. With regard to spending, it is always a matter of “How much?” and not “To what end?”—of inputs, not outcomes; of the number in the headline on the press release, not what is achieved with the money. On taxation, too, for Labour it is all about the price tag—the headline rate, not the revenue actually raised, nor, indeed, the amount of tax that the wealthy actually pay. The top rate of tax paid by the rich in all but the last month of the previous Government was lower than what they pay now. The top 1% of earners now contribute over 27% of income tax revenue—far more than they did under Labour—and the effect of this year’s Budget is to take from the richest five times what they gave through the reduction of the 50% rate.

Of course, the tax system that we inherited from the previous Government was a mess—a typically socialist tangle of tripwires and loopholes which, as my hon. Friend the Exchequer Secretary made clear, we are taking action to close. Too much of the money made under the previous Government was in keeping with the ethos of the previous Government—short term, reckless and unsustainable; the boom before the bust. In future, if there is money to be made it will be done in the responsible way, through real enterprise and real innovation. As we seek to rebuild a productive economy on the ruins of Labour’s cardboard economy, this is the worst time to punish the producers, innovators and entrepreneurs on whom our future depends.

[Rachel Reeves]

If the Government are doing so well on the economy, why has it shrunk over the past year, and why is Government borrowing now rising, not falling?

[Greg Clark]

The hon. Lady will be aware that the record structural deficit in the G7 bequeathed by the previous Government has been paid down by a quarter.

As we seek to rebuild our productive economy, Labour Members know all about the power of the headline figure—that is why they have made such big play of the top rate of income tax. It is interesting that the shadow Minister was more familiar with the opinion polls than with the cost of this measure to the economy. If they think that it plays well to the gallery, then how do they think it plays to those who might or might not want to invest in this country, and who might create the new private sector jobs that a financially exhausted public sector can no longer pay for?

For our part, we want to create an economy in which those who prosper most are those who are best at creating wealth for all. That will require moderate tax rates, properly enforced, and the long, hard slog of tax reform and simplification. As in so much else, we have chosen the difficult path but the right one. Today’s debate provides further proof that Labour has made the opposite choice. As always, the politics are cheap but the consequences would cost our country dear.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Fuel Duty

Rachel Reeves Excerpts

Monday 12th November 2012 Commons Chamber

[The Economic Secretary to the Treasury (Sajid Javid)]

I beg to move an amendment, to leave out from “House” to the end and add:

“notes that as a result of the action this Government has taken to cut, cancel and delay fuel duty rises families will save around £159 on fuel costs by April 2013; further notes that under the previous administration’s plans, voted for by the Leader of the Opposition and the Shadow Chancellor, pump prices would be 10 pence higher than they currently are; also notes that motorists in island communities are benefiting from the fuel duty discount pilot scheme; recognises that this Government has introduced a number of other measures to support families including a £1,100 increase in the personal income tax allowance from April 2013, three years of council tax freezes and a cap on rail fares; commends that these measures have been in part affordable because of the Government’s record of success in tackling tax avoidance and evasion which is on track to raise an additional £7 billion per annum by the end of this Parliament; and welcomes the Government’s commitment to do more to help with the cost of living in the future subject to the constraints of the public finances.”

I see that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) has been abandoned by her boss—

[Rachel Reeves (Leeds West) (Lab)]

Where is your boss?

[Sajid Javid]

My boss is in Brussels on Government business. The hon. Lady’s boss is probably too busy cooking lasagne for someone. As usual, he is busy chasing the headlines and has left her to pick up the pieces.

Rising living costs have made life difficult for millions of households. I know that first hand. Like millions of others, I have lived under financial distress, so I know what it is like to worry about paying the bills and living within a tight budget, and the Government know about that, too. Times are tough. We inherited the biggest deficit in the developed world and the largest in our peacetime history, and international commodity prices continue to rise, raising the cost of living. Since May 2010, the price of wheat is up 72% and the price of Brent crude is up 31%. While talking about commodity prices, I note that the price of gold is up 40%. Had the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), not recklessly sold off the nation’s gold reserves, our country would be £10 billion richer. That is money we could have used to help hard-working families.

To clear up the mess left by the Labour party, we have had to make tough decisions, but we have prioritised the cost of living wherever we can. We have cut income tax, frozen council tax, capped rail fare increases and, moving on to the Opposition’s motion, we have delayed and cancelled the fuel duty rises that they supported.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 6th November 2012 Commons Chamber

[Danny Alexander]

My hon. Friend makes a very important point about care leavers. These ideas have been floated as part of a discussion within Government on the next phase of welfare reform. I will certainly make sure that his point is brought to bear in any discussions on that proposal.

[Rachel Reeves (Leeds West) (Lab)]

At a time when we are seeing cuts to the budgets for police, NHS and schools, it is right that last week this House gave the Government a mandate to negotiate a real-terms cut in the EU budget. However, instead of developing a strategy to deliver this, the Prime Minister has simply resorted to threatening a veto before negotiations have even begun. Of course, walking away is always an option for any EU Government, but can the Chief Secretary confirm that if Britain or any other country just turns up and uses the veto, the budget will rise in line with inflation anyway, costing British taxpayers an extra £310 million?

[Danny Alexander]

I start by congratulating the hon. Lady on the news that she is expecting a child, which was announced a few weeks ago. I am sure that the whole House would wish to join me in that.

Labour’s position becomes ever more extraordinary; its opportunism on Europe seems to know no bounds. That is why we have heard words of unease from several Labour Members who thought that Labour was a pro-European party. This Government have taken the toughest position of any European Government in these negotiations. We saw what happened with the previous Government’s negotiating tactics when they gave away half of Britain’s rebate. We are not going to do that all over again.

[Rachel Reeves]

I am not sure whether I caught an answer there. Frankly, the Chief Secretary should know better. After all, he was not only the chief press officer for the Cairngorms national park but the chief officer for Britain in Europe, and he should know that the only way to deliver a real-terms cut is to argue for one and build alliances to deliver it. Perhaps he should listen to his Cabinet colleague who said last week that it is “absolutely ludicrous” to threaten the veto now, weeks before the summit. Is that not just the desperate ploy of a weak Prime Minister with no influence, no allies and no strategy? He should get a good deal for Britain—a cut in the budget.

[Danny Alexander]

The hon. Lady was a pro-European once; I still am. We seem to be seeing an outbreak of amnesia on the Labour Benches. Not only has the hon. Lady forgotten what Labour did in the last multiannual financial framework negotiation, when it gave away half of Britain’s rebate by not forming any alliances and instead giving up vast amounts—billions of pounds—of Britain’s money, but the shadow Chancellor seems to have forgotten that more recently his party was running the largest structural deficit in the world economy in the good times, leaving this country more exposed than ever to the financial crisis. This country does not want amnesia from Labour—it wants an apology.