Budget Resolutions and Economic Situation

Alison McGovern Excerpts

Wednesday 20th March 2013 Commons Chamber

[Mr David Lammy (Tottenham) (Lab)]

I am very grateful to follow the right hon. Member for Haltemprice and Howden (Mr Davis). I agree with part of what he said about competitiveness, and I will come back to that.

On today’s announcements, I think that most Labour Members would want to welcome the changes made to national insurance contributions, in particular, and the help for employers. Changes to personal allowances are valuable for the poorest in our society. Clearly, the scrapping of the fuel duty escalator and lower beer prices will help considerably.

Beyond that, I want to concentrate my remarks on rebalancing the economy, which the hon. Member for Bristol West (Stephen Williams) talked about. I felt that the Chancellor should have emphasised that, but we heard very little about it. As we saw in the figures published last week by the Office for National Statistics, a fifth of our economic output is attributable to London. One could draw from that the conclusion that Londoners are twice as productive as people in other regions of the country. The hon. Gentleman, in talking about his region, wanted to emphasise that London and the south-east are getting a bigger share of the pie than they should be. I want to challenge that basic assumption.

Underlying much of the Chancellor’s analysis—certainly my constituents would want to communicate this—is the question of whose London we are talking about. Should we be entirely preoccupied with those in the City of London, with an elite arriving from Russia, China or the middle east, or with the very many Londoners who did not see sufficient for them in the Budget that he described? The north-east and east of London, as a sub-region, is ranked 113th in terms of economic activity, and there are only 139 sub-regions across Britain. Of the 20 constituencies with the highest number of unemployed people, seven are in London. Of the 20 constituencies with the worst child poverty, nine are in London. This is not a London that feels as though it is benefiting considerably from economic growth; it is a London that is really struggling. We needed to hear from the Chancellor a whole series of announcements that could meet the challenges of unemployment and child poverty, and a London that does not feel as though it is working for Londoners.

The Chancellor could, then, have had more to say about infrastructure here in this city. He could have announced that the Government would bring forward a hybrid Bill on Crossrail 2, which will benefit hugely the transport infrastructure of London—and it will be in need of such benefit after High Speed 2 is complete and we have extra people in London’s transport system, which is creaking from the point of view of someone who is on the tube in the peak hours early in the morning or going home late at night. All we have heard about so far from the Mayor and the Chancellor is a small extension to the Northern line, when in fact we needed to hear something big and major. We hear hon. Members pooh-pooh the need for greater investment in infrastructure; HS2 was that, but we heard nothing more from the Chancellor today.

We heard a huge boast about how planning changes are generating growth in house building, but house building has fallen to a level unseen in this country since the 1920s, and that was during the depression. The situation is absolutely dire. Some 59% of Londoners are renting—the highest proportion since before the second world war. There was a settlement in London whereby people could rent, get a council property and be part of the social housing fabric of this country, or own, but that has gone backwards—59% of people are renting.

Although I will look at the detail of the housing policy announced by the Chancellor, I am concerned that the proportion of people renting will increase as a result of buy-to-lets. Like my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), I want to see the detail to see whether the measures will extend to those who want to buy homes in order to rent them out. I do not think that that will ease the situation.

What we needed to hear was a Government commitment to house building, which would be a far more responsive approach to local government in particular. Local governments in London have between them committed £1.6 billion to house building in London. It is not sufficient, but that is their commitment. Islington hopes to complete its target of about 1,600 homes by 2014, and Southwark wants to complete, I think, 1,000 homes by 2020. As my hon. Friend has said, a small change to how the Treasury allows local authorities to borrow against their assets, with changes to the Treasury’s prudential rules, would allow for a huge expansion in local government house building. London local governments estimate that 54,000 new homes could be built over this next period, which is a significant amount that would go some way to meeting the needs of those currently in temporary housing.

A statement on infrastructure and Crossrail 2 and a big announcement on house building, not just house-purchasing—particularly for those who want to buy to let—would have been acceptable.

I am also hugely disappointed that the Chancellor did not once mention youth unemployment, which is having a devastating effect on every single region, town, village and major city throughout the country. He said nothing about it. The Work programme is not working and the Youth Contract is shaping up to look like the old youth training scheme. We need real growth for our young people, but we have heard nothing about it from the Chancellor. He boasted about 55,000 extra apprenticeships in London, but 40,000 of those apprentices are over-35, which is an indication of how much trouble we are in.

We needed to hear more about what a balanced economy looks like. Margaret Thatcher made a deal in the 1980s. [Hon. Members: “Hear, hear!”] Government Members are applauding, but what was that deal? It was to base our economy on two sectors, namely the financial sector—look where that has led us—and the service economy, which is largely retail. Retail alone is not sufficient for our young people and we should have learned more about what a balanced economy looks like.

[Alison McGovern (Wirral South) (Lab)]

Does my right hon. Friend agree that he is describing precisely the inequality that must be tackled before young people in this country really get a chance?

[Mr Lammy]

Absolutely. To have a Budget that places no value on our young people is extraordinary at this time. It is a Budget that is content that the growth in apprenticeships has come largely from retail and administration. The growth in apprenticeships has seen just 210 of the higher-level apprenticeships that we need, but 30,000 level 2 apprenticeships. A Budget that does not acknowledge that is deeply problematic.

It is only by having something to say on infrastructure, house building and construction that we can begin to get back to the balanced economy that this country has so dearly lost and that is necessary if we are to get back to growth.

Let me end on the importance of local government. We did not hear enough in the Budget about local government. We know from the pre-Budget report that there are further cuts to come in local government. We know that adult social services will be under immense strain over the coming months, as council leaders have to make difficult decisions. We know that things such as child protection will be under immense strain as councils make those decisions. It is wrong for the Government to cut 8% of their own spending, but to expect some London authorities to cut 33% from their budgets.

We needed to hear a Budget with investment in local government, something on infrastructure, something on housing and something for young people, but we did not.

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[Luciana Berger]

It is incredibly insensitive that that announcement was made today. People up and down this country will rightly be shocked by it. In a moment I will reference the fact that we are seeing the gap between the richest and the poorest in our society widen. The Government should be doing everything to ensure it is closed.

I acknowledge and welcome the extra money we have heard about today for infrastructure projects, but I note that the majority of it will not be delivered until 2015-16, while work on many of the projects is not expected to begin for years. We must not forget that the Chancellor has spent £12 billion less on infrastructure over the past three years than under the plans he inherited. What is needed is a plan to get our economy growing and to create more jobs across the country right now. The fact that we have a chronic shortage of jobs was reinforced to me last week when I held a jobs fair in my constituency, which was attended by 66 companies. They ranged from local businesses such as the Liverpool Dental Spa and Davey’s Chemists to big global companies such as Nutricia Danone. On the day, more than 500 different job and apprenticeship opportunities were on offer.

My jobs fair last Friday was a great event, with more than 2,000 people coming through the door. That far exceeded my expectations; we had printed only 1,000 welcome packs. Despite what the Chancellor would have us believe, I did not meet anyone whom he would describe as a shirker. That point was also made in a letter to the Liverpool Echo this week from Bernie Hunt of Kensington Fields, a section of which I want to share with the House. Bernie said:

“What a surprise I had on March 15. I called in at the Wavertree Jobs Fair…half expecting to have the car park to myself as Mr Cameron’s Welfare State dependents were supposed to be too busy watching daytime TV recovering from the dole fuelled bender from the night before. What I actually found was those desperate for the chance of a job, or even training for a job, packing the place to the rafters.”

The fantastic turnout reinforced the fact that people who are out of work are not shirkers, but the real problem is that there are not enough jobs. Even if we filled every one of those 500 job and apprenticeship opportunities available at the jobs fair, three quarters of those who attended would still have missed out.

We have learned today that 2.52 million people are still out of work, with youth unemployment at almost 1 million again. There are still more than five people chasing every job vacancy, and even those who can find work still have to accept lower living standards.

[Alison McGovern]

I hope that my hon. Friend will also comment at some point on apprenticeships and on the fact that part of the reason for the shortage of jobs in her constituency, and the mismatch of Government spin, is the rebadging of existing jobs as new apprenticeships. Does she not think that the Government should come clean about that?

[Luciana Berger]

I have spoken on a number of occasions on the issue of youth apprenticeships, particularly those for people under the age of 19. We have seen a decrease in the number of such apprenticeships. As my hon. Friend says, there is also the issue of the rebadging of different types of jobs. The House will have heard many a representation from the Labour Benches about the Government’s consistent claim to have created 1 million jobs in the private sector, but we know that many of those jobs are simply public sector jobs that have been rebadged.

There has also been a shift in the kind of jobs available. The number of people working in full-time jobs fell in the last quarter. It is now down 378,000 since the beginning of the 2008 recession, while the number of people in part-time work has risen by 572,000 in that period. Since the general election, people have taken an average £1,200 pay cut because jobs are so hard to come by.

--- Later in debate ---

[Alison McGovern (Wirral South) (Lab)]

Thank you, Mr Speaker. I am pleased to have caught your eye in this debate on today’s Budget.

I want to talk about three issues: interest rates, under-employment and the place of young people in our economy. Before I do so, let me be clear that in today’s Budget we heard conclusively that the Government have failed on every economic test they set themselves. We heard the Chancellor having to announce those debt figures. How he must feel he has let himself down, but he has not just let himself down; he has let the whole country down. He is not just the downgraded Chancellor; he has now had to come and tell us how much more he is borrowing.

The Bank of England has kept interest rates at a historic low. The Chancellor had more to tell us about the framework within which the Bank of England operates. When he was talking about the arrangements for setting interest rates in the Monetary Policy Committee, I noticed that some Government Members’ eyes were glazing over slightly, so let me give them a warning. The Prime Minister has lauded the low interest rates, and he is right to do so, because, frankly, it is the only thing that has gone right. In fact, the Government’s saving grace of low interest rates has resulted from the use of the one economic tool that is not under their own management. While the Governor of the Bank of England has got his foot to the floor in holding interest rates low to try to support the economy, the Chancellor keeps slamming on the brakes. Is it any wonder that we are seeing such poor growth? Under the Chancellor’s stewardship, we should have had growth of about 5.5%; in fact, it has been less than 1%.

It is important that the Bank of England uses its economic tools properly. What the Chancellor said about having a broader remit and taking the long-term view on interest rates is extremely important, and I welcome that discussion. But let us be clear that using monetary policy in this way will not help rebalancing; in order to achieve this, we need serious investment. Government Members need not take my word for it; they need only listen to the Business Secretary, who has clearly been listening to the shadow Chancellor, because they seem to be in agreement that we need a different plan. When the Chancellor made his announcement about the national insurance position of small companies, I wondered whether he had taken a leaf out of the shadow Chancellor’s book and it was an announcement about the Government’s commencing our five-point plan. The Minister is giving me a tentative smile, and being a cheerful soul I will take that positively. Before Government Members talk in too-positive terms about the Budget and the level of income tax, they should worry about food prices, house prices, housing costs, and the real value of the money in people’s pockets.

The Government must address under-employment. Sadly, unemployment has gone up today, but we should be grateful that, despite the fallout from the crash, it has not reached the extreme levels of Greece and Spain. Some people say that they cannot understand why unemployment is not worse when growth is next to zero. In fact, the Chancellor said today that it continues to be a surprise. I do not know why he thinks that, because what is going on is under-employment. People cannot get the hours they want.

I have asked Ministers about under-employment on three occasions in the past month and they have not provided an answer. I have asked the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), and the Leader of the House, and on 25 February the Chancellor dismissed out of hand my concern about under-employment. Nobody in government seems to accept that it is a problem. They talk about their 1 million new jobs, but I believe that up to a fifth of them could be the result of reclassification.

On the growth in part-time work, my constituents tell me that they cannot get the hours they want. I hope that I have made it abundantly clear to Ministers that this is a massive problem.

[Luciana Berger]

Has my hon. Friend, like me, heard stories of local supermarkets receiving more than 30 applications for increased hours in order to meet the new requirements for tax credits? The unavailability of those hours means that people are struggling to get by as a result of the decrease in tax credits.

[Alison McGovern]

Of course I have. I thank my hon. Friend for flagging up the issue of the changes made to tax credits, which mean that people now have to work for 24 hours, rather than 16 hours. That alteration has added insult to injury and disintegrated work incentives.

All Ministers need to do is look at their own labour force survey, which shows that between 2008 and 2012 under-employment went up from just over 2 million to just over 3 million. Do Ministers read the labour force survey? They should do so if not. Spare capacity in our economy is causing real problems. Not only does it hold back our economic development, but it causes real unhappiness.

Hon. Members may remember the Prime Minister talking about a general well-being index when he came into office, but I dread to think what its results would be given people’s misery at not being able to get all the hours they want at work in order to put food on the table for their family.

On the subject of unhappiness, I must mention youth unemployment. Just under 500,000 young people are claiming the dole. Treasury Ministers need to speak to people at the Department for Work and Pensions and find out what on earth is going on. They cancelled the successful future jobs fund in favour of the failed Work programme; the Government’s claims about apprenticeships are, as has been said, simply a rebadging exercise; and the DWP itself knows that its policies are failing. I have asked questions about the Department’s business planning projections, which show that the number of people under 24 to whom it will have to pay the dole before the end of this Parliament is going to increase. That is a disaster for our country. We need a better policy to help young people get into the labour market.

In the time remaining, I want to say what I think that policy should be. We have hammered local authorities despite the fact that it is basic economics to understand that unemployment forms in clusters. Specific localities face significant unemployment, especially among young people, who want a place in the labour market.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Is my hon. Friend as concerned as I am that the areas that will be hardest hit by local government cuts are those that tend to have the highest levels of unemployment?

[Alison McGovern]

That is precisely my concern. In fact, there is a correlation between the level of unemployment in a particular local authority area and the extreme nature of the cut it faces—the more people out of work, the bigger the cut. That makes no sense at all when we all know that some of the most successful back-to-work programmes have been led not by central Government, but by local authorities, which understand much better than Whitehall the barriers that people face in getting into work.

I cannot emphasise enough how the hammering of local authorities has impeded our ability to get young people into work. That is especially true of Merseyside. The biggest barrier to the economic development of Merseyside and the Liverpool city region is the skill level. We need a positive, proactive, local approach to improve people’s skills and help them get back to work. We heard nothing from the Chancellor about that problem in his Budget.

If the Chancellor were here, I would ask him whether he realises the damage that he is doing. I hope that the Exchequer Secretary will pass on that question. Constituent after constituent comes to my surgery despondent about their chances of getting a decent job. They want desperately to work more hours, but are not able to get them. I ask Ministers to come with me to Jobcentre Plus in Bromborough and meet the people there who are depressed and despondent. I ask Ministers to think about whether they could have done better today. They are already adopting some of Labour’s five-point plan. Could they not adopt some of our other policies too? I think that they could have done better today. My constituents deserve a lot better.

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[Angela Smith]

But the country is becoming less productive. In fact, productivity has declined by 2.4% over the last year, storing up massive problems for the future.

On borrowing, the Chancellor told us that national debt would be falling as a percentage of GDP by 2015-16 and that he would bring down the deficit. It is no secret now that he will miss the first target by a mile, with the OBR saying that debt will not start falling as a share of GDP until at least 2017-18. As for borrowing, it was 6.6% higher for the first 10 months of the 2012-13 financial year than for the same period in 2011-12.

[Alison McGovern]

Is my hon. Friend as worried as I am that so far the Chancellor does not have a very good record at hitting the OBR forecasts? Let us not rely on him for hope.

[Angela Smith]

I completely agree with my hon. Friend. Indeed, when it comes to growth, the Chancellor stood at the Dispatch Box in 2010 and confidently told the House that by this financial year the economy would be on the mend, with growth forecast at 2.8%, but we now know that his forecast was out by 2.5 %. Today, he had to downgrade growth for this year yet again, to 0.6%.

We have a downgraded Chancellor who has sucked demand out of the economy with his ill-thought-through VAT hike and his draconian cuts to public spending. Those cuts have gone too far, too fast. If the latest estimates are right, spending cuts have so far wiped 1.4% of growth out of the economy, and the biggest cuts are yet to come. But at least the millionaires of Sheffield and Barnsley will have extra money in their pockets this April when the 50p tax rate is abolished.

The measures that the Chancellor has introduced today will go nowhere near to addressing the problems that he has caused. Instead of plan B, we have inadequate measures that do not even go halfway towards addressing the problems facing the country. The child care package announced yesterday, for instance, is designed to help hard-pressed working families, but unfortunately it will not come into operation until after the next general election. Once again, it is jam tomorrow. There is not much on offer for the parents and families struggling with the costs of child care today.

There is no doubt that house buyers might be thankful for the help being offered today, but a quick look at the Chancellor’s record on housing does not bode well. This is the same Chancellor who, in 2011, unveiled what was termed a “radical and unashamedly ambitious” strategy to give the housing industry a “shot in the arm”. My right hon. Friend the Leader of the Opposition referred to this earlier. At the heart of that strategy was a scheme which the Chancellor claimed would help 100,000 to people to buy their own homes. To date, just 1,500 people have realised that dream. That is a 1.5% success rate, which is almost as bad as the Work programme—or as good, depending on which way we look at it.

A year later, we had what was described as the Government

“rolling its sleeves up and doing all it can”.

That included introducing a £10 billion guarantee scheme which, while welcome, has yet to deliver a single penny of support for house building. It took the Government six months to release details of the scheme, and it will not be open to receive bids until April this year. Last year, housing starts fell by 11% to below 100,000, which is less than half the number required to meet housing need, and I am not convinced that the help announced today will kick-start the stagnant housing market.

Then we come to infrastructure. The £3 billion a year—£15 billion over the next decade—is nowhere near what we need to invest in roads, schools, transport and housing if we are going to get the economy growing again and build for our economic future. If, as now seems possible, we are entering the third recession in as many years, we needed to see something much more dramatic today. However, the Chancellor has failed to deliver.

Let us take VAT as another example. The Opposition have said that he should temporarily reverse his VAT hike, because consumers need help and they need it now. Reversing the hike would have alleviated some of the pain they are feeling, and it would have helped the pound in their pocket go a little further.