Economic Justice Commission

Alan Brown Excerpts

Tuesday 11th September 2018 Westminster Hall

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. Like others, I commend the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) on bringing forward the debate, and on the work he does as the chair of the all-party parliamentary group on inclusive growth. In his opening comments he mentioned a moral mission, and I certainly agree with that. Frankly, more politicians need to get behind this subject. I share the sentiment of the hon. Member for Ellesmere Port and Neston (Justin Madders), who thought that more Members would be present. This important subject needs more than a one-hour Westminster Hall debate.

I agree with the right hon. Gentleman on the issues he raised, including deindustrialisation, growth and the squeeze on wages, and the fact that the rich are getting richer meaning that we need a new economic model. I commend his reflection on Labour’s 13 years in power in which it did not address that. Labour has certainly moved on from the days of Peter Mandelson talking about having no problems with people getting filthy rich; that is progress. I also commend the work of the commission and its report, with its intention of stimulating debate about necessary changes to the UK economy. I also welcome how it considered Scotland in the round, not as an afterthought.

Who can argue against the principle that prosperity and justice should go hand in hand? As I said, I agree with the comments of the right hon. Gentleman, and I look forward to hearing the Minister’s response to his challenge to her to outline which principles in the report she disagrees with.

We are aware that the gap between the wealthiest and the poorest is increasing all the time, and I am concerned that the UK Government do not seem realise that or care about it. As the report sets out, the UK economy is not working and the nations and regions are diverging even further. Fundamental reform is required, and the ultimate aspiration must be a fair economy that has economic justice hard-wired into it. That in turn will make for a stronger economy.

The report also highlights issues that my colleagues and I have been going on about for a while. The UK economy is overly reliant on household consumption, excessive household debt and further increasing property prices—it is as if we never learnt the lessons of the financial crash 10 years ago. Sure as fate, another crash will come. The report also outlines that the UK has a serious investment problem, sitting at about 4% below the OECD average. Just today I was at a civil engineering briefing where it was noted that the UK is ranked 24th on infrastructure investment. We obviously need greater investment in infrastructure, and true regional and national investment in infrastructure would help to rebalance the economy. That must be looked at seriously.

Scotland has been playing catch-up, because before the creation of the Scottish Parliament we were always overlooked on infrastructure. I welcome the report’s call for greater borrowing powers for the Scottish Parliament to allow for greater investment in infrastructure. I am interested to hear what the Minister will say about that.

The report also outlines that there should be further devolution, as the UK is

“one of the most centralised states in the developed world”

and, as was touched on, the “most geographically unbalanced economy” in Europe. These matters are connected, and they are particularly pertinent to me as just today I have received written answers from the Scotland Office saying that the Secretary of State for Scotland has no interest in devolving further powers to Holyrood. He does not even want the Scottish Parliament to have the same powers as the Northern Ireland Assembly when it sits. That is a sad indictment of the Secretary of State’s ambition for Scotland. Again, I look forward to what the Minister will say about further devolution of powers.

On the workforce and the balance between the working and non-working population, the report highlights the risks associated with an ageing population, which is a bigger issue in Scotland than in the rest of the UK. I agree with the recommendation that immigration policy should be devolved to Scotland. It is predicted that we will need an additional 860,000 contributing workers by 2041, so we need control over immigration.

The report shares the Scottish Government’s ambition to tackle the gender pay gap. Complementary policies on that and gender balance deserve further consideration. The report says that

“all firms above 250 employees should be required to publish their pay scales—both ranges and averages by role—to employees within their firms”.

Thanks to the Scottish National party, we have the Gender Representation on Public Boards (Scotland) Act 2018, which sets the objective that 50% of non-executive members of public boards should be women. It also requires steps to be taken to encourage women to apply to become non-executive members of a board. That gender balance will help us towards a fairer and more understanding economy.

On fairness, the report suggests that everyone aged 21 and over should be paid the real living wage, and I concur. In Scotland, a higher percentage of workers receive the living wage, but until Westminster takes action and provides legislation it will not become a reality for all.

The report says that it has

“already drawn on the Scottish government’s Fair Work agenda”

in suggesting

“the establishment of a new national productivity agency, skills policies and a ‘good jobs standard’”,

which could deliver fairer working practices. The SNP Government are striving towards that, and it is time for the UK Government to do likewise and have a dramatic rethink about how the economy works. Otherwise, I look forward to the day when we have an independent Scotland, where a Government who have the correct will and desire can implement those policies.

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[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is an absolute pleasure to serve under your chairmanship for my first Westminster Hall debate, Mr Hollobone.

I congratulate the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) on securing this debate. The IPPR’s Commission on Economic Justice has produced a thoughtful and wide-ranging report on our economy, and it is absolutely right that this House should debate it and its recommendations. I thank him for bringing it to the House and for introducing it, and I congratulate the IPPR and the commission on their contribution to the public debate.

We can all agree that the issues raised today are of fundamental importance. Tackling low pay, boosting equality and putting fairness at the heart of society, while building on the strength of our jobs market and on economic growth, are issues that affect all our constituents. I will start by simply reflecting on where we are now. We have a deserved reputation for being a great place to do business, with high standards, respected institutions and the reliable rule of law. We are an enterprising and successful economy, built on firm foundations: the skills of our workers, the quality of the infrastructure, and a fair and predictable business environment.

The Government are committed to building an economy that works for everyone, to raising living standards and to growing our national wealth, not just for today, but for future generations. That commitment is demonstrated by our progress since 2010: near-record levels of employment, with more than 3.3 million more people in work than in 2010, unemployment at a record low, income inequality down, fairness in the tax system—the right hon. Gentleman spoke about the wealthiest 1% in this country, but the top 1% contribute 28% to income tax and the top 5% contribute nearly 50% of income tax—and absolute poverty falling.

[Alan Brown]

In terms of rebalancing the economy and an economy that works for everyone, can the Minister explain how cutting the rate of inheritance tax and cutting capital gains tax help the poorest in society?

[Kelly Tolhurst]

One of the things we have absolutely seen is that putting wealth back into the system creates wealth. That is one reason why we have these measures and why we take some of these fiscal decisions—to ensure that we are fuelling wealth to be spent in order to benefit the lowest in our society.

We recognise the progress that has already been achieved in improving the life chances of millions around the country, but the right hon. Gentleman is right that we must not be complacent. For all our many strengths, we have businesses, people and places whose level of productivity is well below what can be achieved. That is why the Government have launched ambitious and transformative plans for our economy and for employment. The industrial strategy deliberately strengthens the five foundations of productivity: ideas, people, infrastructure, the business environment and places. It is a strategy that is being implemented with, not just for, British enterprise. It provides a template for the partnership between Government and the private sector that is required to solve productivity issues. Through the “Good Work” plan, the Government are supporting people to seize those opportunities as the labour market is changed by technological advances. I will talk about those today.

The Government’s industrial strategy is our long-term plan for building a Britain that is fit for the future. It sets out how we will help businesses to create better, higher paying jobs in every part of the UK. It focuses on the necessary investment in the skills, industry and infrastructure of the future. It ensures that our country and its citizens can embrace and benefit from the opportunities of technological change. We need to prepare to seize those opportunities. That would be necessary at any time, but Britain’s decision to leave the European Union makes it even more important.

Technology is transforming the world of work. That means we must invest in our workforce. We have committed to establishing a technical education system that rivals the best in the world, to stand alongside our already world-class higher education system. As part of wide-ranging reforms, we will invest an additional £406 million in maths, digital and technical education. Technological progress and a faster pace of change create opportunities but also challenges for those who may find themselves needing to learn new skills to find a job. We will therefore embed a culture of career-long learning through a new national retraining scheme that supports people to re-skill and grow their earning power throughout their lives.

We should not forget that it was the Conservative party that introduced the national living wage, delivering the lowest earners their fastest pay rise in 20 years. In April this year, we increased the national living wage by 4.4%, from £7.50 to £7.83. That increase is expected to benefit more than 2 million people and means that a full-time worker on the national living wage will see their pay increase by over £600 over the year.

Our industrial strategy also sets out what we are doing to make sure that the UK is the best place in the world to start and grow a business, which will create new jobs. We firmly believe in business as a force for good in society.

[Alan Brown]

Will the Minister give way?

[Kelly Tolhurst]

I will make some more progress.

Our corporate governance reforms are driving changes in how our largest companies engage, at board level, with employees and external stakeholders. Significant changes to the corporate governance code will strengthen workers’ voices in boardrooms by requiring boardrooms to put in place robust employee engagement mechanisms, while new laws will require companies to report how they engage with employees and have regard to their interests. Amplifying the voices of employees and external stakeholders will improve boardroom decision making, deliver more sustainable business performance and build confidence in the way businesses are run.

We are also introducing pay ratio reporting, requiring quoted companies to compare CEO pay with average worker pay, supported by an explanation of why the ratio is consistent with pay, reward and progression policies in the wider workforce. Under the revised UK corporate governance code, remuneration committees will have to engage with the workforce to explain how executive remuneration aligns with wider company policy. These changes will help to ensure that boardroom pay is connected with wider workforce pay and not set in an artificial bubble.