Budget Resolutions and Economic Situation

Andrew Gwynne Excerpts

Wednesday 20th March 2013 Commons Chamber

[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.

--- Later in debate ---

[Mr Bailey]

I think those costs have dropped by 0.15%, which the public might think—well, shall we say that they have had to bear a huge sacrifice for a minimal improvement and drop in interest rates? I am concerned—this point has not been mentioned by anyone in the House, including those on the Front Benches—that the Government’s current predictions are based on December figures from the Office for Budget Responsibility. We might think that that is okay, but since May 2010 the OBR’s predictions have been conspicuously inaccurate and over-optimistic. If its predictions for the next two years are equally inaccurate and over-optimistic, we are in real trouble. That may not be the case, but if we look at the Library research papers, most other independent commentators and assessors of our economic position predict a lower rate of growth than the OBR. That is of concern and underlines the Chancellor’s failure to put in place measures to combat that issue.

On the opportunities available currently in the economy, the emergency Budget, in order to be successful and meet the Chancellor’s targets, was predicated on an assumption of exceptionally high investment and exports. Since then, the eurozone has had problems. It takes 47% of our exports but is the lowest-growing export market.

[Andrew Gwynne]

My hon. Friend is right to mention the May 2010 indicators. One crucial indicator before the emergency Budget showed that investor and consumer confidence were returning to the economy.

[Mr Bailey]

Absolutely—as I have said, the Chancellor’s apocalyptic utterances frightened many people into paying off their debts and not spending, which had an impact on consumer spending and subsequently on business.

If our largest export market is stagnating, we look abroad to Brazil, Russia, India and China. The Government have done good work on expanding our exports to the BRIC countries, but they are less than a tenth of our exports to Europe. Anyone who has the idea that we can transform our economy simply by expanding our exports to BRIC countries is living in cloud cuckoo land. I do not mean to say that expanding our exports to BRIC countries is not necessary, but it will not in itself turn the economy around.

We have heard a lot in the debate about the impact of corporation tax and making this country an attractive place for inward investment, but the reality is that investment is stagnating. Industry tells me that, above all, it wants a coherent, co-ordinated and focused Government response. The Prime Minister went, with his entourage of business men, to China, Brazil, India and so on to bang the drum for Britain—I am glad he did so—and the Chancellor has announced the lowest rate of corporation tax for companies investing in this country. However, those things are no good if, at the same time, the Home Secretary—we recognise that the Prime Minister has his problems with her—implements a visa regime that deters people from those countries who want to invest here. That is totally incoherent and economically illiterate.

I welcome some measures, such as those on construction, but the Government’s current construction programme is only a fraction of the Labour Government’s programme. The Government’s programme will take a long time to materialise in terms of economic growth and consumer expenditure.

I also welcome the Government’s investment in the Technology Strategy Board and the catapult centres, which have enormous potential. That leads me to a debate that the Government should have but are not having on how best to invest our scarce resources. All the evidence I get from industry, and particularly from manufacturing industry, says we need more money to be spent on high-quality research and development and implementation. Catapult centres would do that, and we need more money spent on them.

However, we also need more money to be spent on investment allowances rather than on corporation tax. It bothers me that the Government believe almost as an article of faith that a reduction in corporation tax will stimulate inward investment, but they are not considering whether there is a better way of spending that money on alternative ways of investing in British companies. Manufacturers say that investment in R and D is a much more attractive and economically beneficial way of stimulating the investment we need in this country. A large amount of money will be forgone with the reduction in corporation tax. Would that money not be better spent by providing better investment allowances, which will enable British companies to invest, employ and export more, and generally to contribute to the economy? A lot of companies that invest here do not pay much tax anyway, and those that might come could as equally be attracted by an attractive investment allowance regime as a reduction in corporation tax. So far, the evidence in favour of a reduction in corporation tax is not strong, which is why we are not seeing the level of investment that the Government had hoped for.

Low-carbon vehicles are important to the north-east and to my own area in the west midlands, and the motor industry is investing in them. I welcome the Chancellor’s announcement of a commitment to that. However, previous announcements in previous Budgets, particularly on company car taxation and the write-off threshold, have caused confusion and actually delayed investment in this area. I hope that in the Budget and in the Red Book there are indications that that will change, and that we will have the level of commitment and certainty that will encourage our motor industry to continue its investment in this area and become a world leader in an expanded market.