Jobs and the Unemployed

Catherine McKinnell Excerpts

Wednesday 7th July 2010 Commons Chamber

[Chris Grayling]

Last week, the right hon. Lady was criticising us for theoretically planning job reductions in the public sector. She cannot have it both ways. We cannot have an increase in employment, a fall in unemployment and a fall in public sector employment without the private sector beginning to take people on again. This might be a point of difference between us, and I can accept that, but I believe that, over the next 10 years, we shall need a successful, flourishing private sector that can create sustainable jobs. I am sorry that the Labour party appears to be reverting to type in believing that the public sector can somehow carry it all. This is a point of difference between us, but I believe that we will not create opportunities for those young people unless we have proper, sustainable private sector employment.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Will the right hon. Gentleman give way?

[Chris Grayling]

If the hon. Lady will forgive me, I would like to make some progress.

We will introduce radical reform and follow policies that will encourage growth and development in the private sector. We will also radically reform welfare, with a real focus on helping people to find sustainable work. We will reform the benefits system so that work pays. We will tackle endemic worklessness and the intergenerational cycles of disadvantage that it creates. We will halt the tragic waste of human potential that exists when people are out of work. When I listen to Labour Members talking about unemployment, I simply remember their record over the past 10 years, and those 5 million people who have consistently been on benefits.

Next year, we will launch the Work programme to provide a coherent package of support for people who are out of work, regardless of the barriers that they face or the benefits that they claim. We will end the programme complexity that we have seen over the past decade, and replace all the paraphernalia of programmes with a single, integrated package of support. It will not be a one-size-fits-all scheme, however, because we have had too many such schemes from Whitehall. We will trust the professionals on the ground who deliver back-to-work support to find the right way of delivering that support to individuals. We will look to investors in the private, public and voluntary sectors to provide the support, and we will judge the organisations that participate on their success rate.

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[Gordon Banks]

I will address that in greater depth and detail in a few minutes, but the right solution is a joint public and private sector solution. The solution cannot be driven by one of those alone—it is not an either/or question.

The housing sector enjoyed some useful periods in recent years, prior to the recession. When it delivered large profits for many developers, it also delivered jobs in our economy. The sector was a driver for the economy, but the current situation in the private house building sector is absolutely desperate. There were 40,000 home loans in April 2010, which, if projected over a year, would be fewer than half a million. If that is the annual figure, it will be the lowest since 1974, yet the need for housing is ever growing, as the hon. Member for Beverley and Holderness (Mr Stuart) pointed out. Our desire to own our properties continues to grow, and we should encourage such aspirations.

To generate jobs in the housing construction sector, we need to increase the number of higher loan-to-value products, and reduce the 25%, 30% and 35% deposit demands from the mortgage industry. The mortgage products that were on offer before the recession were unsustainable, and we had the ridiculous situation of lenders lending 125% of the value of properties. Everybody has responsibility for that—the Government, lenders and borrowers—but I am concerned that the cuts in interest rates in the past few years have not been passed on to mortgage deals. That is stifling the market, and therefore costing jobs. Although interest rates are an issue, the loan-to-value ratio is the main problem.

[Catherine McKinnell]

Does my hon. Friend share the concern that a constituent of mine raised with me this weekend? He and other young people he knows who work in the public sector in Newcastle are all in fear of losing their jobs. They had planned to move house, but they have put that on hold because of that fear, and they know that many of their contemporaries are in the same situation. There is a real worry about great damage being caused to the housing market, particularly in my region.

[Gordon Banks]

That is very well put. It is a real problem and so, too, more broadly, is the effect of public sector cuts on the private sector. That will stop the private sector growing and providing the jobs and profits that the Conservatives expect it to create to get us out of the mess we are in.

We need to get to a sustainable level of 90% loan-to-value mortgages to generate jobs in the sector, but it does not stop there. If someone buys a new car they put fuel in it, and because of efficiencies it is probably a lot less than they had to put in their old car. However, people who buy a home spend additional money. Ask any retailer and they will say that they need a buoyant housing market, both new and second-hand, for the high street to be a busy place. Home buyers purchase carpets, furniture, white goods, televisions, curtains and more. This is therefore the one industry that directly feeds the spending of considerable sums of money into other sectors.

In 2007 there were 357,800 first-time buyer mortgages, and the Halifax produced data that suggested that the cost of furnishing and equipping a new property is about £6,000, so that equates to about £2.14 billion of high street spend from first-time buyers alone. If we multiply the original figure by the number of people in each property purchase chain, we see that the true amount of high street spend might be double or three times more. In short, support for jobs in the housing sector is delivered by the availability of appropriately priced mortgages, but that is lacking today.

Turning from housing to construction, I supported the last Government’s commitment to bring forward capital spending projects, and I should pay tribute to the councils in my constituency and the last Labour Scottish Executive, who delivered six new secondary schools in recent years, and the health board, which has delivered a new community hospital. I am also grateful for the introduction of rail services to Alloa and the new Clackmannanshire bridge.

All those projects were started under Labour. They are now finished, and because of the failure of the Scottish National party’s Scottish Futures Trust there is nothing coming along behind them to match the brick-for-brick commitment we have been given. We heard in the House just this week about the Government’s plans for the Building Schools for the Future programme, damaging our infrastructure, not giving children the best possible start and throwing people on to the scrap heap in what might be called the triple whammy. We need to invest in our infrastructure. Doing so improves the infrastructure, improves lives and creates jobs.

We also need an active home improvement market, but I fear that the recent announcement of the 20% VAT rate will decapitate what was beginning to look like a possible lifeline to the industry. The loss of 1.3 million jobs will not help either, but let me first deal with the VAT effect. Many Conservative Members derided the effectiveness of the last Government’s reduction of the VAT rate to 15%. They said it would be ineffective, but we all know that that was not the case.

There are real worries in the building industry about the new VAT rise. It will harm in many ways. First, it will chase people away from embarking on improvements, and in doing so it will cost revenue and jobs—and if it costs jobs, it will cost even more revenue. It will encourage a black market as people turn to cash-in-hand jobs to save that 20%, and what will that do? It will lead to a loss of revenue. Cash-strapped home owners will become increasingly vulnerable, and the £170 million that was estimated to be taken on the housing sector black market this year looks set to grow.

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[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I am delighted to follow the interesting speech of the hon. Member for South West Norfolk (Elizabeth Truss) on the need for an economic benefit analysis of every decision that is taken by Government. That is one of the factors that led to the devastation of many of the regions, because some things cannot be measured in pure economic benefit alone. There is also the social value of projects. That is why I want to address the House today on the disproportionate and unfair impact of Government spending cuts on the north-east of England—and, I am sure, on many other regions, but I speak for my own today.

In Newcastle upon Tyne North, we have many public sector workers, but we also have several major private employers, including Sage, Nestlé and Sanofi Aventis. Projects in recent years, such as Newcastle airport industrial estate, Newcastle Great Park developments and the development of many retail outlets, have diversified the local jobs market in Newcastle. None the less, many of my constituents are long-serving and dedicated public servants who stand to be directly and swiftly hit by the Lib-Con austerity drive.

In Newcastle upon Tyne North, the current situation has come as no surprise, because during the election campaign the now Prime Minister publicly identified the north-east as a region where spending was unsustainable and where public sector employment was simply too high. The first wave of public cuts were announced on 24 May, and now we have the ideologically motivated cuts laid down in the Budget.

[Jim Shannon]

It was not only Newcastle that was mentioned; it was also Northern Ireland. The Prime Minister was quick off the mark there. However, the level of public sector economic activity in Northern Ireland is almost 27%—5.2% above the UK average—and the dependence on public sector jobs is perhaps greater there than in other parts of the UK. I say to Government Members that it is important that the private sector is increased before anything happens to the public sector. I want everyone to be aware that the impact will be great, as the hon. Lady has said.

[Catherine McKinnell]

I thank the hon. Gentleman for his intervention. He is absolutely correct that those two regions were identified by the Prime Minister as specific targets for cuts. Recent announcements have made it clear that the future is particularly distressing for regions such as mine and that of the hon. Gentleman.

[Mr Timpson]

The hon. Lady suggests that the cuts announced in the Budget are ideologically driven, but does she accept that she stood on a manifesto promise at the last election to implement a 20% cut in departmental spending and a 50% cut in capital spending?

[Catherine McKinnell]

I thank the hon. Gentleman for highlighting the fact that the Labour Government stood on a manifesto accepting that cuts were necessary to reduce the deficit. That seems to be forgotten on many occasions when I and my hon. Friends are accused of not having announced any cuts.

[Gordon Banks]

Does my hon. Friend agree that we have seen a significant driver coming through—the 11% increase in the tax take this April-May compared with April-May last year—because of the growth in the economy? Does she also agree that growth is the best way to get the country out of recession and into growth, and to cut the deficit?

[Catherine McKinnell]

Absolutely, and I thank my hon. Friend for his intervention. It is notable that, since the emergency Budget that we debated yesterday was announced, the growth forecasts have reduced as a result of that Budget.

I return to the subject that I want to address today: the impact of the Budget on the north-east. Approximately 266,000 people in the north-east are employed as public servants—almost one in three workers—and many of those individuals, and the families they support, live in Newcastle and the surrounding areas. Large-scale redundancies in the public sector, which are now certain, will be disastrous for the city’s economy, which is, in turn, an engine for regional growth. The likely result will be lasting unemployment and an enforced exodus of talented professionals from what, during the past decade, has been a rapidly emerging region.

That is not the full picture, however. The public sector is so economically vital that it is not hard to imagine the impact of large-scale redundancies on private firms in the region. Simply throwing public sector workers out of their jobs will mean not only a loss of direct employment, but the devastation of private firms. More than in other areas of the country, such firms in my region depend upon revenue from public sector organisations.

That is directly linked to my next point, which is my deeply held opposition to the abolition of my region’s very popular and highly respected development agency, One NorthEast, which is located in my constituency on Newburn Riverside park. Owing to massive cuts in Government spending on regional development, combined with the Liberal-Conservative pledge to transfer RDAs’ functions to local authorities, the Government have announced, after damaging indecision and backtracking, that One NorthEast is to be abolished. Its closure will remove a vital local driver for recovery and eliminate a key means of building a stronger local private economy.

In March, the National Audit Office published its report on RDAs and concluded that £3.30 had been generated for every pound of Government funding given to them. A year ago, another investigation into RDA effectiveness, this time carried out by PricewaterhouseCoopers, showed that for every public pound invested there had been a return of £4.50 to the private sector. The ill-thought-out shunting and transfer of some of the RDAs’ roles—I presume not all of them—to under-resourced local authorities will be totally unworkable.

[Nadhim Zahawi]

The hon. Lady cites the PricewaterhouseCoopers report, but the Institute of Directors also produced a report on the RDAs, which showed that only 18% of directors thought that they made a contribution, and 60% thought that development would have taken place in the regions without the RDAs being in place. To cite selectively from PricewaterhouseCoopers is slightly misleading.

[Catherine McKinnell]

I thank the hon. Gentleman for his intervention, because it highlights my point that these issues cannot be examined as a whole across the UK. The situation in each region is incredibly different and unique, which is why the RDAs were so successful in particular parts of the country and why the removal of the north-east’s RDA, which is successful and which business leaders across the region accept as a major driving force in the private economy, is a travesty.

[Alison McGovern]

My hon. Friend makes a very important point. Does she agree that regions are different, and that the previous Government used the movement of public sector jobs to regions such as the north-east and the north-west partly to save costs to the public purse?

[Catherine McKinnell]

Absolutely, and my hon. Friend rightly draws attention to some of the worrying consequences that will come out of the Budget. It will drive up unemployment and difficulties and increase public spending, particularly in the regions.

[Gavin Shuker]

Within the context of the debate about the evidence basis for RDAs and the benefit that they give, does my hon. Friend agree that financial information about the amount of money that goes in and comes out of the public purse is a much better guide than ideological points about how people feel about regional development agencies?

[Catherine McKinnell]

I absolutely agree, and my hon. Friend makes his point very well indeed.

A large number of my constituents lack any formal educational qualifications. Such individuals, should they be already unemployed or, as is likely to happen in my region, should they be made redundant, will be hugely affected by the cuts announced to the DWP’s job creation and training schemes, which have been widely debated today. They will no longer have the necessary help to prepare themselves to take advantage of new opportunities arising from the eventual recovery, and that is especially concerning in relation to youth unemployment. The future jobs fund has been abandoned, and the £1,000 incentive for businesses to employ a person who has been unemployed for six months or more has been scrapped. Extended periods of unemployment and a lack of appropriate training mean that those vulnerable groups will be dangerously ill equipped to enter the future jobs market. The decision to ask the Department for Education to make huge cuts is also disproportionately damaging. It is clear that, because only 10,000 of the promised 20,000 extra university places are now available, access to higher education for state school pupils will inevitably be restricted.

[Jo Swinson (East Dunbartonshire) (LD)]

I am listening to the hon. Lady with great interest. She is clearly making a passionate case, expressing her genuine concerns about the cuts, but she mentioned ideological cuts. Does she really have no ideological problem with the debt interest that this county pays out every year potentially rising to as much as £70 billion? That would mean £70 billion not spent on public services and a debt for the next generation in the north-east and elsewhere to repay.

[Catherine McKinnell]

I do not have an ideological concern about the debt that is the current deficit, although I share the concern of all Labour Members that the deficit needs to be reduced. Fundamentally, however, it needs to be reduced in a way that does not throw thousands or millions of people on to the scrap heap, in the way that they were left there in the 1980s. I know that this is not taken very seriously by Government Members, but generations of people were left on the scrap heap.

[Mr David Anderson (Blaydon) (Lab)]

Will my hon. Friend give way on that point?

[Catherine McKinnell]

I think I need to make progress.

Finally, some additional cuts have been announced and, although they have perhaps not been talked about today, I believe that they will fundamentally affect future jobs and the ability of people in the north-east to take them up. I refer to the cuts to child tax credits. Although the Liberal-Conservative Government have announced a £150 increase in the per-child element of child tax credits, that is nothing but a fig leaf for the abolition not only of the Sure Start maternity grant, worth £500, but of the baby addition to the child tax credit and the health in pregnancy grant, as well as for the decision to reject Labour’s proposals for a £4 a week supplement—a toddler tax—for each child.

For people on low incomes, tax credits are fundamental to empowering families to support their children and ensure that they get the best start in life, thereby breaking the cycles of deprivation that we see in so many parts of the country, particularly the north-east. As the mother of two small children, I know from experience how vital financial help can be. To be honest, I have been stunned by the callous manner in which that help has simply been abandoned by the Liberal-Conservative Government. Some £3 billion-worth of cuts have been made to support for families. Such decisions will be devastating for parents, preventing them from getting out to work or creating either a work environment or the capacity to work in their households, thereby breaking the cycle of deprivation that can so often take hold in workless households.

Joined to the unfair rise in VAT—a tax that punishes the poor—those cuts will have an impact on unemployment and child poverty in my region, thereby causing further unemployment in the long term. The national economy remains weak, especially in areas of the country such as Newcastle, where large numbers of children, unemployed people and low-income families are already struggling and will struggle more under this Budget. They are the people who must be protected and not punished by the Government’s policies during this difficult time.

[Several hon. Members]

rose—