Economic Affairs and Work and Pensions

Anne McGuire Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr James Clappison (Hertsmere) (Con)]

This is my first opportunity to make a contribution in this Parliament, and it is a pleasure, as always, to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), although I will not go down the same route as him. I wish to say a little about the work and pensions side of this debate, but before I do so may I deal with a subject that is somewhat associated with it: the proposal in the Gracious Speech for a limit on economic migration from outside the European Union? I warmly welcome that sensible proposal. Strangely, it was part of the Opposition amendment to yesterday’s motion, although it was not mentioned in the speech of any Opposition Member, including the Front Benchers. One can only speculate as to the internal problems in the Opposition on that matter.

Although I welcome the proposal, I note that the coalition agreement says that it is to be subject to consultation on the “mechanism” by which the limit is achieved. I urge my hon. colleagues to bear in mind that an important consultation has just taken place; call me old-fashioned, Mr Deputy Speaker, but I think that the most important consultation takes place when the voter goes into the voting booth and puts his or her cross on the ballot paper. Therefore, I respectfully invite my right hon. and hon. Friends to take account of the considerable concern expressed about immigration during the campaign.

It is right to engage in some consultation about implementation and, doubtless, the Government will have a queue of employers come before them. When I served on the Select Committee on Home Affairs we examined this very question. We heard from restaurant owners, farmers and people involved in the IT industry, and they seemed to be under the impression that the resident working population of this country was incapable of working on a farm, in a restaurant or in the IT industry. I suggest to my hon. Friends that when they hear such submissions from employers they gently point those employers towards the unemployment statistics, particularly those relating to young people in this country.

Those statistics show one of the most baleful inheritances from the previous Government. Given the speeches that we have heard today, Labour Members seem totally oblivious of the plight that they have left so many young people facing. We have heard a lot about child trust funds, but we have not heard so much about the lack of opportunities for young people who are about to enter their working lives and find themselves facing the prospect of the dole queue. After 13 years of a Labour Government, almost 1 million young people are out of work and there is a structural problem of youth unemployment. I say that because the level of youth unemployment was rising long before the recession took hold. All that has occurred under a Government who had promised at their outset to reduce unemployment among young people by 250,000.

A further 1.5 million older workers are out of work, and standing behind them, although not of course recorded in the formal unemployment statistics, are the many millions of people of working age who languish on out-of-work benefits. We cannot expect some of them to work because of the nature of their condition, but many of them are capable of work and indeed want to work but under the current system they are not receiving the help that they need, be it medical help, encouragement or training, to enable them to work.

In many cases—this is an important part of the problem—such people also lack the incentives to work. We talk a lot about providing incentives for better-off people to work—I am all in favour of that, because I support enterprise and hard work, seeing it as the way forward, unlike some Labour Members, whose view is to rely on the state for everything. However, we must consider also providing incentives for poorer people on benefits to get into and remain in work. All too often, the poorer person on out-of-work benefits, who may not have many skills and may have a patchy previous employment record, can find only low-paid employment. Under the current system, a large part of their money—their housing benefit and council tax benefit—is withdrawn from them the moment they start work. The moment a poor person who has been on out-of-work benefits gets into work they, in effect, face a marginal tax rate of 80% or 90%. They then find that out of the meagre proceeds left for them they have to pay the normal costs involved in getting to work, being prepared for work, dressing for work and so on. In addition, they have the fear of not being able to rely on the benefits system in the future for housing and all their other needs.

[Mrs Anne McGuire (Stirling) (Lab)]

Will the hon. Gentleman recognise that the previous Government implemented a proposal that meant that people could move into work from receiving benefits and still retain for two years their right to move back to receiving benefits? He is misrepresenting the current situation.

[Mr Clappison]

I am not misrepresenting it in any way. Labour Members were prepared to have a system in which 80% or 90% of income was withdrawn from people who went into work, through the withdrawal of council tax and housing benefit, and not very much has been done about that. I recognise that some Labour Members were aware of the problem, including the right hon. Member for Birkenhead (Mr Field) and some who have now left the House such as James Purnell and John Hutton. They were aware of the problem, but I suspect that they were blocked when they wanted to do something about it. The result is that 2 million people now say that they want to work but are on out-of-work benefits and are not included in the formal unemployment statistics, which amount to 2.5 million.

Labour Members have presided over a welfare system that is incredibly effective at trapping people on benefits once they get on to them, and it is a challenge for my hon. and right hon. Friends to devise a better system that will get people off welfare and into work. They are having to undertake radical action on this front at a very unpropitious time, when we are facing, as we all know, the appalling deficit that has been inherited. I urge them to turn their hands to this task, because it is too important to fail or to put in the drawer marked “too difficult to undertake”. It has to be undertaken, particularly for the sake of the younger people who are languishing on out-of-work benefits and are formally recorded as unemployed. This is a challenge for the future for my right hon. and hon. Friends; it is a challenge that has been neglected by the Labour party and so left for us to take up. It will contribute to solving the problem of the deficit, but we have to take the bold action that has not been taken for far too long—for 13 years of wasted opportunities, which have led to wasted lives and people who have been left, after a Labour Government, languishing on unemployment and out-of-work benefits.

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[Stewart Hosie (Dundee East) (SNP)]

I hope that the clock has not yet started, Mr Deputy Speaker; as the last person whom you will call to speak in your current role, I want to pay tribute to you. You have always been extraordinarily kind and generous to those on my party’s Benches.

Mr Temporary Deputy Speaker, it is a pleasure to follow two totally different maiden speeches, one from the hon. Member for Worcester (Mr Walker) and the other from the hon. Member for Bethnal Green and Bow (Rushanara Ali). They are different people from different constituencies and different backgrounds, but they have a shared determination to see an end to the blockade of Gaza. Many in the House share that determination, and I hope that we will see proper progress in the middle east during this Parliament.

Today’s debate is fundamentally about the economy and I am delighted to take part in the debate on the Gracious Speech today. I should like to comment on much of what the Chancellor said. His description of the economy left to the new coalition Government is well known and the numbers that back it up are equally well known. The deficit was forecast last year to be £173 billion, but this year it is forecast to be £156 billion—still 11%-plus of gross domestic product. UK national debt is sitting at £1.2 trillion on the treaty calculation and is forecast to rise to £1.6 trillion, approaching 90% of GDP by 2014-15.

We know the last Labour Government’s response to this recession—to make real-terms cuts of £500 million for this year to the Scottish budget, before recovery was secured. Against everything that they professed in public, they began cutting the budgets early and weakening the ability of the Scottish Government and others to secure the recovery.

[Mrs McGuire]

Will the hon. Gentleman confirm that the current Administration’s budget in Scotland is double what Donald Dewar’s was when he became First Minister of the Scottish Parliament in 1999?

[Stewart Hosie]

I am delighted to confirm to the right hon. Lady that she seems again to fail to understand what real-terms increases and real-terms inflationary costs mean over the period of the Scottish Parliament. There have been real-terms cuts to the Scottish budget this year.

The Chancellor also confirmed that tackling the deficit and debt was the most urgent issue facing this Government, and they have started with £6 billion of in-year cuts. I am delighted that the Scottish Government have taken the opportunity to defer those cuts this year to avoid in-year cuts, which are extraordinarily damaging as they require budgets to be ripped up and jobs to be shed. What have worried me, however, are the comments and criticisms from Labour’s Scottish Parliament finance spokesman, who criticised the decision to postpone the cuts. Clearly, Labour will condemn the Tory Government here while its finance spokesman in the Scottish Parliament seems to want the Tory cuts this year in Scotland. That is wholly wrong.

The new coalition Government said in their programme that they would

“significantly accelerate the reduction of the structural deficit”

in this Parliament and that the main burden of deficit reduction will be borne by reduced spending rather than increased taxes. I question the logic of that whole approach. The previous Government promised cuts that were deeper and tougher than Margaret Thatcher’s. They promised to take £57 billion out of the economy in a single year—2013-14. They also promised £20 billion or so of tax rises and £40 billion or so of cuts. The accelerated attack on the structural deficit and the smaller contribution made by tax increases clearly indicate further public sector cuts—cuts well in excess of the £40 billion that the Labour Government planned to take out by the time we reached 2013-14.

Labour’s plans for taking £57 billion out of the economy represented approximately 3% of GDP, but this Government’s plans are likely to go very much further. I was concerned that reducing consumption in the economy in a single year to the tune of 3% of GDP would tip the economy back into recession, but I am more concerned that stripping yet more consumption out of the economy and doing it more quickly—before we have properly secured the recovery—would be even more damaging than Labour’s plans.

Remember that at the time of the last Budget, it was only Government consumption, up 2% on the year, that kept the economy afloat. Household consumption was down by 1.9%, business investment was down by 24% and gross fixed capital formation was down by 14%. Even now, following the statement today, we know that household consumption is down by only 0.5% on the year, but business investment is still down by 11% and gross fixed capital formation is down by half that, at 5.7%. This is not the time to cut Government consumption, given that it was up by 3% over the last 12 months and kept the economy afloat.

I do not want anyone to misunderstand me. I was a critic of the deficit and the debt before the recession. I am arguing about how we tackle it now and I believe that we should not go down the route of the Canadian model, which involved 20% cuts in public services over three years. We should look again at the New Zealand model, which gave the flexibility to tackle the deficit and the debt over the medium term. That way we could at least benefit from the huge £50 billion-plus medium-term savings from scrapping Trident and its replacement. I am delighted that Mr Speaker has allowed our amendment covering that matter to be put to a vote later today.

There were, of course, a number of other matters economic in the Gracious Speech—the financial services regulation Bill and the plan to introduce a bank levy, for example. Although it is self-evident that there must be depositor protection and that we must protect against systemic risk from bank failure, not least through the application of proper capital ratios, that is what pillar 1 of the Basel II accord was meant to do. Given that the banking crisis commenced in summer 2007 and that Basel II is not meant to be fully implemented until October-November 2012, I would have thought that it would have made more sense for the incoming Government to push for the early international implementation of Basel II rather than unilaterally implementing a domestic banking levy now. The consequences of such a levy are not at all clear.

The coalition’s programme also said that they would reform the regulatory system and give the Bank of England control over macro-prudential regulation. But that would leave the Financial Services Authority fundamentally in place, and I remember many criticisms from Conservative and Liberal Democrat Front Benchers about the FSA. Surely the Government will continue to recognise that failure of supervision by the FSA was as important as the weakness of the underlying regulation.

There were many other matters economic in the Queen’s Speech and the programme for government, and we will come back to them. I have one final question, and it is about the decision to scrap the child trust fund. Between 2004 and 2008, savings ratios were half those when Labour came to power in 1997. Why are this Government planning to scrap a savings scheme with a 71% voluntary take-up rate?

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[Mrs Anne McGuire (Stirling) (Lab)]

It is a pleasure to follow the hon. Member for St Austell and Newquay (Stephen Gilbert). My family has spent many holidays in his constituency, and I think VisitBritain could do worse than collect together all the maiden speeches of the past few days and use them to promote some of the most wonderful parts of our country—indeed, there are bits of our country I would not have recognised at all from the descriptions. I congratulate all Members who have delivered their maiden speeches. I was going to say that my contribution would be an older maiden speech, but one of those adjectives would not quite be appropriate. I shall now launch forward while leaving Members to work out the meaning of that remark.

First, I want to welcome the comments of the new Secretary of State for Work and Pensions about the principles that will underpin his approach to welfare reform. He said in a recent article:

“Tattooed across my heart is that I didn’t come here in any shape or form simply as a cheeseparer.”

That is a robust comment to make, certainly for a Conservative Secretary of State for Work and Pensions—and, frankly, it would not be at odds with many of the comments of previous Labour Secretaries of State.

I am also delighted that the new Secretary of State had his road-to-Damascus moment on the road to Easterhouse in Glasgow. I know the area well as I grew up there and my father represented it as a councillor during some of the worst periods of the Thatcher era, when a large community that was essentially made up of aspirational working-class people found itself in an economic desert. It was a period in which intergenerational unemployment and the poverty that the Secretary of State saw took root, and the aspirations of individuals and communities alike were crushed by the lack of jobs. There are similar examples to that in my constituency, where the mining industry was destroyed. Frankly, these communities started on the road to recovery only as a result of the massive investment in economic renewal by Labour Governments in both Westminster and Holyrood.

The absence of any detail in the Secretary of State’s programme so far—apart from the loss of the future jobs fund, which has already been dealt with by others—means that I could refer only to the coalition programme for government to see if any further light could be shed on the new approach. We should have some sort of cross-House consensus on how we move forward on welfare reform. Indeed, one of the new Ministers has strongly promoted a consensual approach, and I will be interested to learn whether he sees that consensus being continued now that he sits on the Government Benches.

The coalition wants to have a single work programme, and I think there is some room for rationalisation, subject to the demands, which have changed over a matter of years. I am not yet convinced, however, that a single work programme is necessarily the way forward. We have also heard much from the coalition about “decentralisation” of decisions and “individualisation” of provision. How will a leviathan single work programme respond to the specific needs of individual unemployed people? How will such a programme respond to someone who has a fluctuating mental health condition or a physical disability, or who is a carer or a recently unemployed bank worker? Some may require minimum support for a short time between jobs, but others will require a significant amount of longer-term help. There is no detail of how the initial assessment for support will be made. I assume that the programme will be cash-limited in spite of the Secretary of State’s ambitions, so how will the initial financial decisions about who needs more support and who needs less be made? Will Jobcentre Plus continue to have a significant role to play in this, or will people have to refer themselves to some other local or national organisation? If someone is disabled and needs additional help, will they have to compete with others on the programme?

Where does the access to work programme, which daily supports thousands of disabled workers in employment, fit into the new uniform approach? I know that the coalition has said it will reform access to work and I welcome that, but will the coalition Government commit themselves to doubling the access to work programme as the previous Government did, or will this just be rolled into a single approach that is not ring-fenced and that becomes a victim of cuts? On realigning contracts, will that be 100% output-based? In short, how is the whole thing going to work?

Perhaps the Secretary of State can provide answers to questions on his own sanctions policy. What will the level of sanctions be? Who will enforce them? What will happen to children if benefits are taken away from their parents? Where are the safeguards? Will people be forced to take any job, or will there be flexibility within the programme? Will the unemployed people in my constituency be taken off benefit if there are no jobs, or no valid opportunities?

May I briefly comment on the “work doesn’t pay” issue, which the Secretary of State repeatedly mentions? I understand and appreciate his sentiments. The coalition document says that it supports the national minimum wage, but I have to ask this question: in terms of the “work doesn’t pay” issue, is the Secretary of State proposing to increase individuals’ incomes through a mixture of benefits, credits and earnings or, as many of my hon. Friends and constituents fear, to go back to the old tried and tested Tory solution of salami-slicing benefits?

The two Ministers currently sitting on the Government Front Bench—the Exchequer Secretary and the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb)—can smile knowingly to each other if they want to. However, given the history of welfare reform, which causes a shudder through many communities, certainly in Scotland but also in many other parts of the country, these are serious questions and the coalition must answer them before its welfare reform programme will have any credibility among Opposition Members.