Oral Answers to Questions
Chris Philp Excerpts(8 years, 10 months ago)
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Damian Hinds
As the hon. Lady knows, the Budget contains a large number of measures to help hard-working families, including the rise in the personal allowance, allowing people to keep more of what they earn. Of course the big reform of universal credit is still to come, and it will further help on incentivising work. Throughout all this it is important to help to support people into work and to see them progressing through the hours, particularly through our increases in childcare support, which are worth thousands of pounds to some families.
Chris Philp (Croydon South) (Con)
Does my hon. Friend agree that working families will be enormously helped by the 30 hours per week of free childcare, which, speaking as a father of two-year-old twins, I particularly appreciate?
Damian Hinds
Indeed, families with twins will get double the benefit, but everybody with children aged three and four will get that particular benefit, which is part of a suite of increases in childcare support, including through universal credit and tax-free childcare.
Tax Credits (Working Families)
Chris Philp Excerpts(8 years, 10 months ago)
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Shabana Mahmood
My right hon. Friend is absolutely right, and this is where I disagree with the tenor of the comments from Government Members in the debates on the economy thus far in this Parliament. For them, a job is a job is a job, whereas we have a better, bolder vision for people moving into work, not just for their first job, which could be any job, but for progressing. We do not do that by punishing people and taking away the support they rely on when stuck in low-paid work. We have to chart a course towards a higher skilled, higher wage economy, but that is not going to happen before tomorrow’s Budget. The support for those on tax credits should not be removed before we have that high-wage economy.
Chris Philp (Croydon South) (Con)
Will the hon. Lady join me in welcoming the fact that the personal allowance rose to £10,600 in the last Parliament, putting £800 a year directly back into the pockets of the people on the lowest pay?
Shabana Mahmood
I gently say to the hon. Gentleman that 60% of those in receipt of tax credits do not pay income tax anyway. If someone is working 30 hours a week on the national minimum wage, they are below the £10,600 personal allowance threshold.
Shabana Mahmood
I will give way to the hon. Member for Bedford (Richard Fuller), but then I must make some progress.
Ian Blackford
That comment from a sedentary position is correct. We used to talk about the nasty party when Thatcher was in power; it seems to have returned.
SNP Members will reflect on the choices made by the previous Government and this one. Some £375 billion of new money has been created through the quantitative easing programme. We recognise that some of that was necessary, but it created circumstances in which those in the financial markets benefited massively. A 90% increase in the value of the FTSE 100 since 2009, a huge increase in the value of financial assets, and banker’s bonuses that continue to reach eye-watering figures are the impact of this Government’s political choices. They have created the circumstances that have delivered increased value in financial markets; they have not created the circumstances in which wages could rise and the country as a whole could benefit. “All in this together”? You’ve got to be kidding!
Chris Philp
Will the hon. Gentleman join me in welcoming the fact that inequality actually fell during the past five years?
Ian Blackford
I must tell the hon. Gentleman that according to the figures released two weeks ago, child poverty in Scotland is up by 20,000. That is the reality of what his Government have done to people in my country.
Chris Philp (Croydon South) (Con)
I warmly congratulate the hon. Member for Blackburn (Kate Hollern) on an excellent maiden speech. It is clear that she is deeply rooted in her community, and I have no doubt whatsoever that, when people talk about Members of Parliament for Blackburn, her name will trip off the tongue very naturally behind those of Barbara Castle and Jack Straw, and that she will be a distinguished successor to them.
This debate has been based on a great deal on speculation about what may be in tomorrow’s Budget. Before turning to the specific topic of tax credits, perhaps I should focus briefly on some facts. I am talking about the performance of the coalition Government over the past five years. If we examine the facts, rather than the speculation, we will see very clearly that the Conservatives in the coalition Government did a good job in standing up for working people and ensuring that work paid.
Let us spend a moment rehearsing those facts. During the previous Parliament, 2 million more jobs were created, of which 75% were full time. More jobs were created in this country than in all of the countries in the European Union put together. Indeed, more jobs were created in the county of Yorkshire, in which the constituency of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) is located, than in all of France put together. That is a record of which to be proud.
In my own constituency, in the borough of Croydon, the number of jobseeker’s allowance claimants halved over the previous Parliament.
Anna Turley (Redcar) (Lab/Co-op)
Can the hon. Gentleman tell me the number of food banks in Yorkshire that have emerged over the past five years? Perhaps that would also give us a helpful factual correction.
Chris Philp
Unfortunately, I do not have that figure at my fingertips. What I do know is that, thanks to the tax cut for people on low incomes, £800 a year was put directly into their pockets. One Opposition Member made the point that many people on tax credits do not pay income tax. Well, that is precisely because the coalition Government raised the income tax threshold so high.
We have also heard a great deal about the cost of living, to which the hon. Member for Redcar (Anna Turley) alluded a moment ago. The fact is that wages in this country are now growing at around 3% a year, at a time when inflation is at zero. Yes, it did take time to get there, but that was because it took some time to fix the mess that had been left behind for us. The cost of living problem to which the hon. Lady referred is being alleviated with every month that passes, and that trend will continue.
I also welcome the planned increase in the minimum wage from £6.50 an hour to £6.70. That is the first real-term increase since 2008, and it will help. When we pause and consider the facts rather than the speculation, we will see that the record of the coalition Government was extremely strong in helping people on low incomes. Speaking of poverty, there are now 800,000 fewer people and 300,000 fewer children in relative poverty than there were five years ago, and that is fantastic progress. Those are the facts, so let us now consider the topic before us—[Interruption.] They are the facts.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Lady has just come into the Chamber and we know that Members cannot just come into the Chamber and intervene. It is better for all of us if they do not, and we certainly want to get to the next maiden speech, which will be from an SNP Member.
Chris Philp
I look forward to hearing the point after the debate, perhaps.
Let me turn now to the topic before us. When Gordon Brown introduced these measures in the early 2000s, he told us that tax credits would cost perhaps a couple of billion pounds a year. The truth is that today they cost £30 billion a year, an astronomic burden on the Exchequer.
Let us think for a moment about what tax credits mean. They are a subsidy paid to top up wages because employers are not paying their staff properly. I deplore the fact that some employers are not paying their staff properly and are effectively abusing the generosity of the Government by underpaying their staff. Any reforms in tomorrow’s Budget that end that abuse will be extremely welcome.
Tax credits provide disincentives to work, as some of my colleagues have pointed out already. They are withdrawn at the same time as income tax and national insurance kick in. Effectively we have marginal tax rates at around the 75% to 80% mark, so it is no surprise that employees in the companies run by my hon. Friend the Member for South Suffolk (James Cartlidge) were reluctant to take pay rises when marginal tax rates were so high. One Member mentioned the 16-hour-a-week limit, now raised to 24 hours a week. I know people who have employed part-time staff who refused, understandably given the system, to work extra hours for fear of losing those extra tax credits. That is all wrong. The fundamental fact is that people are helped out of poverty not through Government handouts but through hard work and earning more money.
Ian Blackford
The hon. Gentleman was asked about food banks in Yorkshire and we have heard a lot about facts, so perhaps I can give him a fact. Between the end of 2012 and September 2014, nearly 150,000 sanctions were applied in Scotland, affecting 85,000 individuals. That is what is driving people towards food banks. Does he think that that is right?
Chris Philp
It is right that wages are now rising, that people on low incomes have been helped with tax cuts and that the Government are directing assistance to people on low incomes. That is what is right. Over time, as the cost of living issues that have been mentioned are eroded by rising wages combined with zero inflation, the problem that the hon. Gentleman has referred to will without a doubt be alleviated.
There are other issues with tax credits. Employers who abuse tax credits by underpaying their staff have no incentive to invest in education, training and technology and, unfortunately, that contributes to our productivity problems. I believe that tax credits, introduced by the previous Labour Government, are a symptom of failure. They encourage companies to underpay their staff and place the burden of that underpayment on the general taxpayer. Any move in tomorrow’s Budget to reduce the burden of tax credits on the Exchequer while improving the earnings power of people on low pay will be very welcome. I join many colleagues on the Government and Opposition Benches in supporting moves towards a higher minimum wage. I have publicly called for that in London and I think that it would be a good move for the country as a whole.
We have heard about another cost of living issue: housing. There will be a housing Bill in the autumn that will promote house building and therefore affordability, but I point out to Opposition Members that the number of housing starts last year was about 50% higher than the number of starts in 2009-10. The Government have already made fantastic progress.
The foundations of prosperity and the way out of poverty lie in work, not benefits, and I endorse the Government’s approach.
Greece
Chris Philp Excerpts(8 years, 11 months ago)
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Mr Osborne
I have always felt that good politics flows from good economics. Ultimately, what we all want to see are more jobs and investment in Greece and an economic policy that allows that to happen.
Chris Philp (Croydon South) (Con)
The Chancellor has already assured the House that, thanks to the Government’s actions, UK banks are strong enough to withstand any Greek crisis. Are any European financial institutions of concern to the Chancellor, and do UK pension funds and insurance companies have any alarming exposures?
Mr Osborne
Across the British financial system, there has been a very marked reduction in our exposure to the Greek economy and banking system over the past couple of years, so we are much less exposed to the direct consequences of financial problems in Greece than we would have been a few years ago. More broadly, that is also the case across the European economy. The biggest risk that we faced a few years ago was our exposure to economies and banking systems in other eurozone countries that had relationships with Greek banks, but they too have reduced their exposures.
Productivity
Chris Philp Excerpts(8 years, 11 months ago)
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Chris Leslie
I will make a little progress, if I may, and then give way.
The Office for Budget Responsibility’s recent forecasts have lamented the persistent weakness of our recent productivity. According to the OBR, if our productivity per worker was closer to 4%, our national debt would be £350 billion lower by the end of this Parliament. Those are big numbers, but that is £5,000 less debt for each person in this country. The productivity issue is therefore absolutely crucial, and it is linked to the health of our public finances. Translated into potential GDP, it would mean growth of 3.7% by 2019-20, which is the sort of growth that we need in this country. The OBR is right to warn that improvements in growth and living standards very much depend on our productivity performance and to say that it is the most important and uncertain part of its economic forecasts.
Quite simply, if sustainable productivity growth fails to materialise, the Chancellor will just continue to miss his deficit reduction targets, however hard he may try to distract us with his dreams about permanent surpluses. Although productivity traditionally drops off during a recession, seven years after the global banking crisis our productivity is still 1.7% below the pre-crisis peak, and a whopping 16% below the level implied by the pre-crisis trend. Last year, productivity growth was just 0.2%; in 2013, it was negative, at minus 0.3%; and in 2012, minus 1.2%. That is just not good enough.
Chris Philp (Croydon South) (Con)
The figure that the hon. Gentleman has not mentioned is, of course, the productivity figure for 2009—the last year in which Labour was in government—and in that year it dropped by a staggering 2.6%, the highest for the last 25 years.
Chris Leslie
This might be a shock to the hon. Gentleman, and I am not sure where he was at the time, but there was a global banking crisis—[Interruption.] I know it is a shock to Conservative Members, because in their script it has been expunged from the record, as if it never happened.
Michelle Thomson
I thank my hon. Friend for his comments. I absolutely agree with them, and I am going to cover that issue further in my remarks.
We must equip our people, who live in and give to Scotland, with the skills— supporting them with free university education—the health, the ambition and the engagement to contribute to making Scotland a great place.
I mentioned manufacturing, and the SNP supports measures to boost the sector, including targeted research and development tax credits and support provided through the Scottish business development bank. However, the lack of access to business funding remains the biggest critical factor affecting small business, which is the lifeblood of our economy. I still await any evidence of that being recognised and acted on by the Government.
The plan promotes innovation, creating a culture of ambition and drive where we reward the risk-taking entrepreneurs—those who drive real change and live by creative and adaptive thinking. Our plan also supports our excellent universities in commercialising the work they do. Finally, it promotes inclusivity, in the form of building a labour market that can contribute equitably, by promoting fair work and sustainable jobs and by taking positive steps to ensure that families can contribute and lead the way in supported childcare. With further devolution of employment law and the minimum wage, the Scottish Parliament could boost pay and standards, and raise employee satisfaction still further. We want to see more sustainable and high-quality employment opportunities, with a partnership approach to employment conditions. We have also proposed a £2 rise in the minimum wage to £8.70 by 2020 and have actively promoted the living wage.
The Scottish Government are doing what they can with the devolved powers they currently have. Given Scotland’s impressive relative performance since 2007, they have been successful. The truth is that the UK operates a failed and outdated business model, one that delivers for the few but not for the many. With its focus on the City of London and its neglect of key manufacturing and other high value added sectors, it has failed to deliver for the people of Scotland, as well as for many across many other parts of the UK.
Chris Philp
Does the hon. Lady not welcome the fact that the UK has the highest growth in the G7, the highest level of employment on record and the lowest unemployment since 1975? Does she not welcome those things?
Michelle Thomson
Of course I welcome those things. What I am suggesting is that we can do much better and that we have the ambition in Scotland. I hear a lot of talk, but not enough about substantive ambition. We need to do a lot more and we in Scotland are ready for that.
Delivering more meaningful economic powers to the Scottish Parliament, not the extremely limited ones included in the Scotland Bill, would allow a much more holistic and comprehensive economic strategy. With full tax, investment and employment powers, the Scottish Government could implement policies to boost economic growth and raise productivity levels in Scotland. We have the ambition.
Mr Iain Wright (Hartlepool) (Lab)
It is a pleasure to follow the right hon. Member for Wokingham (John Redwood). I seem to recall reading in the Financial Times three or four weeks ago an extremely perceptive article by him on productivity, so it is a real pleasure to follow him. He has given these issues careful thought.
I am pleased that we are discussing productivity so early in this Parliament. UK output per hour is about a fifth below that of the rest of the G7. It is the largest gap since 1991. In France, output per hour has increased by 2%. In the US, it has increased by 9%. Ours has not shifted. It has been said time and again that if we want rising living standards and a historically decent long-term economic growth trend of 2.5% or 3%, productivity needs to improve.
Chris Philp
In France, productivity figures may well have been achieved at the expense of extremely high unemployment. Is the hon. Gentleman suggesting that he would like to see very high unemployment here in exchange for fractionally better productivity?
Mr Wright
I represent a constituency in the north-east that has suffered and still bears the scars of long-term unemployment. I do not want to see unemployment at all. We need to address that. But in order to remain competitive in the global economy, we must address productivity.
The Chief Secretary to the Treasury said that not all sectors of the economy had been affected by stagnating productivity. It is true. High-value manufacturing sectors such as aerospace and automotives have seen huge leaps in productivity in recent years. They have led to better, more innovative products that are more competitive than our rivals’ products, and which are sold in increasing numbers around the world. He mentioned Nissan in Sunderland, which produces a car every 61 seconds, to rival any other car plant on earth. This week we are seeing the Paris air show, where about £7.8 billion-worth of products from enterprises based in the UK have been sold around the world. We need to encourage this virtuous cycle, because that will lead to more well-paid jobs in these sectors. It is the model of the British economy that we should be encouraging.
To be fair, credit must be given to Vince Cable and David Willetts when they were in the Department for Business, Innovation and Skills for continuing the approach set out by the Labour Government. That long-term approach, a mature business policy transcending individual Parliaments and thinking about what is required for our economy for the next 20 or 30 years, gives business the confidence to invest for the long term. We have seen the dividends of such an approach in globally competitive sectors such as aerospace and automotives, but I worry that we have seen no endorsement of that approach from the new Business Secretary. It is concerning that in his interview in the Financial Times about two weeks ago, he seemed to draw a line under the industrial strategy that has helped competitive sectors succeed in Britain.
Great examples of business-Government collaboration, such as the Automotive Council, the Aerospace Growth Partnership and the Aerospace Technology Institute, which have brought billions of pounds of investment into Britain, no longer seem to have Ministers’ attention. Is the new Business Secretary going to adopt a new approach? Is that long-term business policy going to wither on the vine on his watch? That would be to the detriment of long-term, high-value economic success and improvements in productivity. I hope that when he responds, the Minister will provide clarity as to what the new Government’s industrial strategy will be.
A key way to improve our competitiveness and productivity is to invest in new technology and innovation. However, our long-term performance in that respect is woeful and has been for far too long. UK gross domestic research and development expenditure, as a percentage of our GDP, peaked in 1986 at 2.03%. In the past 15 years or so, R and D spend as a percentage of GDP has been in the range of 1.59% to 1.73%, well below the EU average and significantly below ambitiously innovative nations. South Korea spends five times as much on R and D—not as a percentage of its economy, but the actual amount—as the average European nation, and that relentless focus on innovation and moving up the value chain has reaped massive rewards. Half a century ago, South Korea was poorer than Bolivia and Mozambique; now, it is richer than Spain and New Zealand. That is the lesson we have to learn.
We are living in what could be the most significant era of challenge and innovation for humanity. Britain’s historic strengths in science and in areas such as pharmaceuticals, aerospace and motor vehicles should and could be harnessed much more and spread throughout the economy in a much more balanced way. We are complacent in the extreme if we think we can carry on as before and not provide more resources to R and D. So will the Government commit to prioritising science? What is the future of the catapult centres, which have seen Government and industry collaborate on a range of issues relating to technology and innovation? Will funding be secure in those areas?
A further way in which we will rise up the productivity chain and in competitiveness is by emphasising skills. The days 40 years ago when somebody in my constituency would leave school on a Friday at the age of 15, start work at the steelworks on the following Monday and stay there for 35 years have gone. That will never come back. The modern British workforce will need to adapt and retrain and, crucially, be given the opportunity to do so. Men and women in Hartlepool and elsewhere may be made redundant in their 30s and 40s, and will need the means to retrain for a new career—quite possibly several different careers. But BIS, supposedly the Department for growth, is cutting the adult skills budget by 11% in this financial year.
The total budget from the Department for adult further education and skills funding will fall not just in real terms, but by 5% in absolute terms. When the BIS cuts took place during this Parliament, announced by the Chancellor in the Queen’s Speech debate a couple of weeks ago, £450 million was stripped out of further and higher education. That will not give us a modern, innovative workforce.
Should we not be prioritising adult skills? We should have flexibility areas to ensure that we can maintain Britain’s future prosperity. As Neil Carberry, CBI director for employment and skills, said today:
“If we are to deliver sustainable higher wage growth, we need to see a rise in productivity. That means businesses investing in skills, and the Government helping firms innovate by supporting investment in next month’s Budget.”
I hope that for the sake of future prosperity, productivity gains and our competitiveness as a nation, the Government will respond to those concerns and make sure that we can be a high-value, innovative nation that can compete with the rest of the world.
Chris Philp (Croydon South) (Con)
It is a pleasure to follow so many excellent maiden speeches, and such a passionate speech from the hon. Member for Bristol West (Thangam Debbonaire). It is a particular pleasure for me to speak in this debate. Over the past 15 years, I have set up and run businesses of my own, one of which I managed to float on the stock market.
It is interesting that Labour Members chose this topic. It is rather like the dog that did not bark. Let us think about all the topics that they might have chosen, but did not. They did not choose employment; that is no surprise, because it is at record levels. They did not choose unemployment; that is no surprise, because it is at its lowest levels since 1975. They did not choose the deficit; that is no surprise, because it has halved. They did not choose inflation; that is no surprise, because it is zero. They did not choose wage growth; again, that is no surprise, because it is now running at 2%. Instead, they chose to focus on this one economic indicator. What the shadow Chancellor forgot to mention when he reeled off the recent figures was the level of productivity during the last year of the Labour Government. In 2009, productivity fell by 2.6%, which was a far bigger drop than we saw in any year during the last Parliament.
It is fair to say, however, that international comparisons suggest that there are opportunities for improvement. It is also instructive to compare different sectors. As we heard earlier from my right hon. Friend the Member for Wokingham (John Redwood), both the oil and gas and the finance sectors have declined somewhat in the last few years—for reasons that he explained— and they were among the most productive sectors. Nevertheless, there are a number of industries from which we can learn, most conspicuously the automotive and aeronautical manufacturing industry, whose productivity has grown by a staggering 56% in the last six years. A British worker now manufactures, on average, 11.5 cars per year, up from just 9.3 five years ago. That is an impressive improvement.
Both the Institute for Fiscal Studies and the Bank of England have published interesting reports on this subject, which I sincerely commend to fellow Members. They cite as a general cause of declining productivity —not specific to the United Kingdom—a lack of accessibility to capital that could be invested in better plant and machinery, combined with cheap labour. Firms are tempted to be lazy and hire such labour, rather than investing in machinery or technology.
I am pleased that, in the last five years, the Government have taken action to deal with both those issues, most recently by raising the minimum wage by 3%—the largest increase since 2008—and by encouraging banks to lend more. I hope that in the next five years they will continue to increase the minimum wage and encourage banks to lend more to operating businesses, because I believe that both those measures will help to address the productivity issues that have been raised today.
The Government have taken extremely compelling action in a number of other areas, not least in reducing energy costs, in rolling out broadband, in reducing regulations—£10 billion in the last Parliament and the same again this year—and in reducing corporation tax to just 20%, the lowest level in the G7. In the light of all that, it is no wonder that we are growing so strongly and that wages are now growing by 2% a year. In my view, that is a leading indicator of productivity increases. I am delighted to be supporting the Government’s record and I look forward to it continuing for the next five years.
European Union Referendum Bill
Chris Philp Excerpts(8 years, 11 months ago)
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Alex Salmond
He was just stretching his legs, I suspect.
On the subject of respect for all nations of the United Kingdom, the amendment puts forward the view that a simple majority across the UK would not be enough to have the UK exit the European Union but that we would have to pay attention to the voting in the four constituent nations of the United Kingdom. It is not unusual, in international terms, even in federal and confederal states, for there to be a so-called double majority—in this case, a quad lock between Scotland, England, Northern Ireland and Wales. In America, 14 states can block a constitutional amendment, even if they could comprise only 5% of the population. My hon. Friend the Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) will go through some of the other international examples where even in federal and confederal states there is a double lock or a blocking minority with regard to the constitution, recognising the component parts of those states.
Chris Philp (Croydon South) (Con)
Does the right hon. Gentleman not accept that matters such as this are determined at the UK level, so the reason Scotland is voting with the rest of the UK as one is that the Scottish people themselves voted last year to remain part of the United Kingdom, and therefore, on matters of foreign affairs and the European Union, we speak as a nation with one voice?