Business and the Economy

Catherine McKinnell Excerpts

Monday 14th May 2012 Commons Chamber

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

It is a pleasure to follow the hon. Member for Newton Abbot (Anne Marie Morris), who made a thoughtful and considered speech. However, I must say that I disagreed with pretty much all of it.

The disappointment following Her Majesty’s Gracious Speech was tangible and widespread—“Is that it?” crossed most people’s minds. We are in a double-dip recession—the deepest since the 1930s—our living standards are declining with every day that passes, and there is little hope of growth and no confidence that things will get better any time soon, and the Government’s solution is to make it easier to sack people. It is quite astonishing, even from this Government. There was also a claim that the Government would

“strive to improve the lives of children and families.”

I consider that to be a worthy but dubious commitment, when we consider how out of touch this Government seem to be with the impact that their economic policies are having on households, and particularly on women and children up and down the country.

Let us put the Government’s proposals in context. There has been zero economic growth over the last year, and the economy is now smaller than it was in 2010. Living standards are being squeezed to breaking point. Families are being forced to choose between petrol and new school shoes, or between a pack of ham for their children’s sandwiches and making do, for another week, with cheese spread—and those are the fortunate ones. Mums—and, I appreciate, some dads, but let us be honest: it is mostly mums—who were just managing to juggle work and child care, with the help of much- needed child tax credits, are now having to give up work, as they are unable to secure an additional eight hours a week, at a time when most employers simply are not recruiting. Consumer spending is inevitably held back, with families deciding to forgo their summer holiday or make their child do with last year’s raincoat—no one will notice the three-quarter-length sleeves. All this is compounding the downward economic spiral. Young people reaching school leaving age are choosing not to go on to university, and that goes even for those with straight As. They see a lifetime of debt and a very uncertain job market. That is what some of the brightest young people in my constituency have been saying to me. We are facing an historic loss of confidence in Britain’s economic future, and young people are not living in a bubble. They fear for the future as much as we do.

Where are the solutions? I do not agree that making it easier to sack people will get our economy growing. Before being elected to this House I practised as an employment lawyer. I advised claimants and employers, individuals and businesses, and I assisted in the running of a small business with my husband. I am therefore in a better position than many to comment on the trials and tribulations of employment legislation. Yes, it can be complicated; and, yes, it is sometimes tricky to navigate. However, it is there to ensure fairness and protect against exploitation. I was horrified by the Government’s recent decision to increase the qualifying period for claiming unfair dismissal from 12 months to two years. Why would a Government support—or worse, encourage—employers to sack people unfairly? The clue is in the title. It is not difficult to terminate a person’s employment where the reason falls into one of the categories for a fair dismissal. Why should employers be encouraged to circumvent the basic principles of fairness? It is simply an excuse for poor management. Before the banking crisis we had one of the lowest rates of unemployment in decades. The 12-month qualifying period proved no obstacle to major economic growth in the last 13 years. How can it be used as an excuse for failing growth figures now?

I accept that managing a work force is one of the biggest challenges that any employer will face. I also know that the majority of businesses want to get it right and do the right thing. The success of any business is only as secure as the people employed in it. Economic growth cannot be built on greater uncertainty in the work force. Making it easier to sack people and harder to seek redress for unfair treatment will only make people feel more insecure. The answer has to be ensuring that businesses get the support they need to manage their work forces fairly and well. Employment legislation is focused on just that: ensuring that businesses and employees use procedures that are fair. Instead of focusing on making it easier to sack people, this Government should focus on enabling businesses to get the help, support and advice they need. Yet all we see are business advice support services disappearing from view.

There is, in any event, no economic justification for the assertion that employment protection rights form any barrier to growth. According to the World Bank’s “Doing business” ratings, the UK ranks seventh in the world for ease of operating out of 183 countries. The OECD’s employment protection index provides a measure of the procedures and costs involved in dismissing and hiring employees. On this index the UK ranks third out of the 21 major economies, behind only Canada and the US. To claim that our inability to sack people on a whim is holding our economy back is a poor excuse for this Government’s economic failure and an even poorer solution. Creating uncertainty and fear among an already financially stretched and insecure work force will only compound our economic problems by exacerbating the lack of consumer confidence.

Businesses are crying out for funding and investment. The Federation of Small Businesses cites the lack of consumer demand as the biggest barrier to growth, with access to finance just behind it. No business is going to say, “No thank you,” to an offer to make it easier to sack people, but it is not the priority that businesses are looking for. “Work hard and stop complaining,” the Government say. I say, “Start listening.”

--- Later in debate ---

[Danny Alexander]

Not only has a scheme from the port of Blyth been put forward, but the inclusion of several areas of land around the port in the enterprise zone was referred to at the time of the autumn statement. I gather that a discussion is going on within the north-east local enterprise partnership about the sites on which it would like to see the enhanced capital allowances deployed. I think the hon. Member for Wansbeck had a view about an additional site that he would like to be included in the enterprise zone. I encourage him to work with the LEP to make that case, as I said. I hope he will take the opportunity to present that argument to the Government in due course.

The hon. Member for Blyth Valley also expressed support for the green investment bank, whose establishment is one of the key measures in the Queen’s Speech that could play a part in boosting the economy. I do not know whether he did so in song, because I was not present for his speech. Given the potential importance of the renewables sector to his part of the world, I hope he agrees that the bank could contribute to the investment that it needs, and that the substantial £3 billion capitalisation that we provided for it in the spending review will enable it to invest in precisely the sectors that he mentioned. Those sectors were also mentioned by many Government Members who recognised that the green investment bank was an important initiative, as, indeed, is the regional growth fund.

Listening to the shadow Business Secretary talk about the regional growth fund, I concluded that he had picked up the wrong end of the stick, although I must add in fairness that his tone was not reflected in speeches on the subject from other Members on both sides of the House. The National Audit Office report made it clear that the fund had created or protected some 328,000 jobs, which is a good use of public funds. What is more, as the hon. Gentleman will see from the evidence that has been provided, for every pound that we are spending on the regional growth fund, some £6 of private investment is being unlocked. In many cases in which public money has not yet started to flow, private investment is already taking place because businesses know that they have access to the fund. I think that that is a great success story about support for investments throughout the country. Certainly we on the Government Benches are very proud of what the fund is achieving, which is why we chose to give it additional resources last year.

[Catherine McKinnell]

I thank the Chief Secretary for giving way, and also for his generosity in addressing some of the concerns expressed by Members representing constituencies in the north-east. The regional growth fund would also be useful in providing access to European regional development funding. Has the Chief Secretary an update for north-eastern Members on the £120 million that is yet to be drawn down?

[Danny Alexander]

The hon. Lady has made an important point about the use of European regional development funding, which we have been considering in connection with the regional growth fund. I am afraid that I cannot give her an update on funds for the north-east, but I will ensure that the Minister responsible for such matters writes to her with one.