Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)Department Debates - View all Chuka Umunna's debates with the HM Treasury
(12 years ago)
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Vince Cable
I agree with the hon. Gentleman that we want banks to lend to small businesses, and one of the sources of finance, as identified recently in the Breedon report, which my Department commissioned, is big companies at the top of supply chains financing their own suppliers. They should do more of that, and we have introduced a programme, with some Government funding, to enable that to happen on a much bigger scale.
Mr Chuka Umunna (Streatham) (Lab)
Project Merlin failed, and we were told that credit easing and the national loan guarantee scheme would resolve small businesses’ problems in accessing finance. What does it say about those schemes that, since they were introduced, Wonga has seen fit to enter the market for lending to small and medium-sized enterprises?
Vince Cable
Nobody ever argued that the credit easing scheme would solve the problem of small business lending. We argued that it would cheapen the cost, and that will happen. All the major banks are now engaged in arranging packages to enable those lower costs to be passed through. I think the hon. Gentleman will be pleasantly surprised by the take-up within a few months.
Mr Chuka Umunna (Streatham) (Lab)
Thank you, Mr Speaker. I shall try to achieve that aim.
In responding to Her Majesty’s Gracious Speech, let us first take stock of the state of our economy and British business. Following the 2008-09 financial crash, born in the banking sector, to which the Secretary of State has already referred, the economy went into recession, like many others around the world, but thanks to the action that Labour took in office, we prevented that recession from turning into a depression and got the economy growing again. In so doing, we ensured that the pain of recovery was shared fairly, so that those with the broadest shoulders bore the heaviest burden.
When the Conservatives and Liberal Democrats took office, unemployment was falling, the economy was growing and the recovery was settling in. Consequently, borrowing in the last year of the Labour Government was £20 billion lower than forecast, because our approach was working. Today, the UK economy has not grown since the Government’s spending review, unemployment has soared beyond 2.6 million and 50 businesses are going under every single day. As a result, we are now in a double-dip recession created by this Government, and what is more, they are borrowing £150 billion more than forecast to pay for their failures. And who is bearing the burden of their policies? While taking tax credits away from families who want to stay off benefit and in work, they have given a tax break of more than £40,000 to millionaires. So they are unfair and out of touch as well as incompetent.
At the ballot box a couple of weeks ago, the public made it clear what they thought of the policies of the two governing parties. This is what the Business Secretary said about that vote of no confidence a couple of days after his party’s drubbing:
“as a party we’ve got to maintain our identity, we’re going to work in the coalition but by the time we get to the election we’ll be an independent force with our own values competing independently and I think those are the elements that will form the basis of our recovery.”
For all the murmurings of discontent from the Secretary of State, for all the attempts at differentiation and threats to press the nuclear button, the simple fact is that he, the Chief Secretary to the Treasury, sitting next to him, and their Liberal Democrat colleagues have all facilitated and voted for the things that their Government are doing but which are holding back our businesses and economy. They have waved through—more often than not, enthusiastically—all those things that the public made it clear they disliked a couple of weeks ago. For the avoidance of doubt, then, the Conservative’s out-of-touch and unfair economic policies are the Liberal Democrats’ unfair and out-of-touch economic policies; and the Prime Minister and the Chancellor’s incompetence is the Liberal Democrats’ incompetence. No amount of differentiation or smoke and mirrors will change that now or by the general election.
Michael Fallon (Sevenoaks) (Con)
I thank the shadow Secretary of State for giving way so early in his speech. Does he not recall the Governor of the Bank of England describing the Government’s economic policy as a “perfectly sensible” “textbook response”? Why is the Governor wrong and he right?
Mr Umunna
In case the hon. Gentleman has not noticed, we are in a double-dip recession. That says something about his party’s policies, given that, as I have just said, it inherited an economy that was growing, unemployment that was falling and a recovery that was setting in.
Before the Queen’s Speech, there was, of course, the Budget. Let us remember what people said about it. The general secretary of the TUC said:
“We needed a Budget that looked to the future and made jobs - particularly for young people - the national priority… Instead we have got a Budget by the rich for the rich.”
The chief executive of the Forum of Private Business said:
“what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.”
People were looking in the Queen’s Speech for signs that Ministers understood what people were telling them—to change course and to put in place policies that will deliver an economy that works for working people and businesses, and the building blocks upon which a new economy can be built.
Did the Queen’s Speech deliver the change that people and businesses signalled they wanted to see? There are things that we welcome, subject to the small print being worked through. I have given the Business Secretary credit for ensuring that the Government established the Independent Commission on Banking. We are playing our part, in a cross-party spirit as far as possible, to implement its recommendations, and will look at the detail when it is published. The Government, by their own admission, said that they were bequeathed one of the best competition regimes in the world by this party. The Business Secretary will need to demonstrate that the creation of the single competition and markets authority—which he has just spoken about—will improve on that legacy, not squander it.
Our 2010 manifesto included plans to create a supermarkets ombudsman to protect farmers and food suppliers from unfair and uncompetitive practices by major retailers. The Government are taking that forward through the grocery adjudicator, which the Secretary of State has mentioned. We will work to ensure that the grocery adjudicator is given powers to ensure fair access across the supply chain. In office we set up the primary authority scheme—which he also mentioned—to help reduce the local regulatory burden on firms. The enterprise Bill will extend that to include more businesses, which is welcome. The Secretary of State also referred to the changes to parental leave. Again, we will look at the details, but on the whole, that does not sound like a bad measure.
We were told that the enterprise Bill would contain measures on executive remuneration—something the Secretary of State has just repeated. In order to build a more productive and responsible capitalism, it is important to ensure that we bring an end to rewards for failure and the excessive pay we have seen, which is bad for our economy and our businesses. On both sides of the House we agree that change and reform must be led by shareholders and investors with Government support. In office, we were the ones who introduced the advisory shareholder votes on remuneration reports, which have been causing a lot of news recently.
Mr Redwood
What approach would the shadow Minister recommend to the remuneration of senior executives and directors in banks with state shareholdings?
Mr Umunna
I would say that their pay should be linked to performance against criteria and specified objectives. Our argument in relation to RBS is that the Government are the biggest shareholder. They have lectured others about the need for greater shareholder activism, but it would be good to see it from those on the Government Front Bench.
However, despite all the things I have welcomed, in sum, it is business as usual for this Government. This Queen’s Speech signals little change in approach. For the person looking for work, this Queen’s Speech offered no hope; for individuals, families and firms faced with increasing energy and water bills, and rising transport costs, it offered no hope; and for sound and successful small businesses struggling to get by in this recession of the Government’s making, it offered no hope. However, listening to the Business Secretary, one would think that the Queen’s Speech had been positively received. I do not know who he has been listening to, but this is what our business leaders have said about his Government’s Queen’s Speech. On Friday, Justin King, the CEO of Sainsbury’s and a member of the Prime Minister’s business advisory group, which is meeting as I speak, said:
“Consistency is what gives confidence. Unfortunately, what we have seen over the past couple of years is something that could not be described as a consistent pursuit of a clear policy”.
In other words, uncertainty—created by the Business Secretary’s Department and all across Whitehall—is reducing businesses’ confidence to invest for the long term. On Saturday, the director general of the British Chambers of Commerce said:
“there is a big black hole when it comes to aiding businesses to create enterprise, generate wealth and grow”.
Business people are clear: what they want is a Government who will step up and work in partnership with them to create the conditions for private sector growth. What they have got is a Government who step aside and leave business to struggle on alone.
What was the Government’s response to those comments by business people? Step forward the Foreign Secretary. Yesterday—in what the Business Secretary described as “commercial diplomacy”—he said:
“I think they should be getting on with the task of creating more of those jobs and more of those exports, rather than complaining about it. There’s only one growth strategy: work hard”.
What on earth does the Foreign Secretary think this country’s business owners do all day? His message is clear. He is saying that the fact the economy is not growing has nothing to do with the Government’s failed economic policies. He is saying that it is not growing because the people in all our businesses out there are not working hard enough. How out of touch can the Foreign Secretary be?
Mr Evennett
Does not the shadow Minister feel guilty that, under the last Labour Government, of whom he was a big supporter, there was high taxation, a great deal of regulation and red tape and a lack of a trained work force? The Labour Government never helped small and medium-sized businesses; nor did they allow reward for success.
Mr Umunna
I say to the hon. Gentleman that I am proud to be a shadow Minister for a party that saw 1.1 million new businesses created during its time in government. I am proud to be the shadow Business Secretary for a party under whose Government Britain was rated the best place for doing business in Europe and fourth best in the world. I must also remind him that the UK has fallen from fourth to seventh place on his watch.
Nicholas Soames (Mid Sussex) (Con)
Would the hon. Gentleman accept that the Foreign Secretary was saying that we have to do better with our exports? We have done much better this year, as the Secretary of State pointed out, through our commercial diplomacy, and the hon. Gentleman is wrong to sneer at that. It is a fact that we do not export nearly enough from this country, or nearly as much as we could.
Mr Umunna
If only the Foreign Secretary’s comments had been limited to those that I have just cited. There was more, however. Asked whether they amounted to a modern-day call to our people to get on their bikes, echoing the call from the noble Lord Tebbit back in the 1980s, the Foreign Secretary said:
“Well no, it’s more than that. It’s ‘get on a plane, go and sell things overseas’…It’s much more than getting on the bike. The bike didn’t go that far. ‘Get on the jet.’”
I know that senior members of this Government have a penchant for hanging out with people who own yachts and jets, but most business people in this country do not have those things or mix in such company. Chris Romer-Lee, the director and co-founder of an award-winning architecture practice here in London, said to me yesterday that his firm is working flat out and has been doing so through these bad economic times. He said that
“to suggest we could work harder is insulting.”
That is what a business person said to me yesterday.
Julian Smith
The legislation that we are discussing today deals with deregulation. Will the shadow Business Secretary tell us about his proposals to lift the burdens on British business?
Mr Sheerman
Before my hon. Friend leaves the pronouncements of the Foreign Secretary, I want to ask him whether he heard Lord Digby Jones speaking on Radio 4 this morning of the Government’s decision to “decimate” and “cut” UK Trade & Investment—the trade and investment arm of the Foreign Office. Is not that a reflection on the Foreign Secretary, who is not working very well or very hard himself?
Mr Umunna
I think that UKTI needs to do a hell of a lot better, as my hon. Friend suggests. Actually, I think that this Government need to work a hell of a lot harder before they start lecturing others. It is not that we disagree about the need to increase our exports, but let us take a step back. The Government’s economic policy is one of expansionary fiscal contraction. Their idea is to hack off parts of the public sector and take away things that the Government do, and they expect the private sector automatically to step in and fill the gap. I do not think that telling business people that they are whingeing and not working hard enough is a way to inspire them to do what the Government expect of them.
Ian Paisley (North Antrim) (DUP)
Was the hon. Gentleman as perturbed as I was, two weeks before the Gracious Speech, to hear another Cabinet Minister suggest that he wanted to put a certain industry out of business? That industry raises £12.5 billion a year for the Exchequer in customs and excise duty payments. Will the hon. Gentleman defend the tobacco industry, which employs 6,000 people in this country and generates millions of pounds in PAYE and revenue for the Government?
Mr Umunna
We want all those sectors that have a competitive edge to have a comparative advantage for this country, providing jobs and opportunities when more than 2.6 million people are out of work. We want to see those sectors thrive.
Given the recent omnishambles, one would have thought that Ministers might stop and think before attacking those to whom they look to grow our economy. Far from it, however, as so far we have mentioned only the Foreign Secretary. The Secretary of State for Communities and Local Government also waded in to the row, in typical diplomatic fashion, saying that he agreed with what the Foreign Secretary had said, while the Defence Secretary—it is a shame that he did not stay in his place after his statement—then accused businesses of being whingers. The problem is that Ministers seem to inhabit a different planet from the rest of us. It is not that our businesses are not working hard enough; it is that there is a lack of demand and weak confidence flowing from the Government’s mismanagement of the economy, which has helped to tip us into a double-dip recession.
Joseph Johnson (Orpington) (Con)
Does the hon. Gentleman recognise that UK gilt yields are at an historic low, and that we would be taking a tremendous risk with them if we moved away from an economic policy that no less a person than the Governor of the Bank of England has described as the “textbook response” to the situation this country faces?
Mr Umunna
That quote has already been used. I would say two things to that. The hon. Gentleman, who studies these matters keenly as a writer for The Financial Times, will know that Christine Lagarde, the head of the International Monetary Fund, has said that to have a credible fiscal policy, we need growth. The problem is that there has been no growth since the comprehensive spending review. Secondly, we have had historically low interest rates on our sovereign debt and, of course, we control our own monetary policy, which has helped matters.
Mr Umunna
I am not saying that the Governor of the Bank of England was wrong. What I am saying is that we need growth for a credible fiscal policy. Many, including Government Members, would not necessarily argue that the Governor has always been right, particularly during the 2008-09 crisis.
The people have spoken, our businesses have spoken, families up and down this country have spoken, but the Government do not want to listen, so they persist with the same failed economic strategy, the same failed approach, exemplified in their Finance Bill carried through from the last Session with its granny tax, caravan tax, pasty tax and tax break for millionaires.
What of measures to put in place the building blocks for our economy in the long term? Was any change signalled in this Queen’s Speech? The Business Secretary famously wrote to the Prime Minister and the Deputy Prime Minister about industrial policy, outlining his and their failures. He quite rightly argued in his letter for Government to adopt an industrial policy. He said he sensed that there was “something important missing” from what the Government were and are doing—and that was “a compelling vision” of where the country was headed beyond deficit reduction. He rightly said, too, that
“market forces are insufficient for creating the long term industrial capacities we need”
and that
“we should be willing to identify British success stories as identified through success in trade and explicitly get behind them at the highest political level.”
That is precisely what we did in government in respect of the automotive industry—and we are now reaping the rewards from that.
The problem for the Business Secretary is that the Chancellor and the Prime Minister do not buy into active government and industrial policy. To their names we can add that of the Foreign Secretary as another roadblock to the active Government and industrial policy that those who own and work in businesses want to see. What evidence is there in the Queen’s Speech that the Business Secretary has been able to exercise any influence over these roadblocks to bring about a change of approach? None whatsoever.
The Business Secretary’s letter identified our energy and low-carbon industries as an important sector. We are told—the Business Secretary mentioned it—that the enterprise and regulatory reform Bill will include provisions to set up the green investment bank, which is an essential component of an industrial policy for a low-carbon economy. According to conventional definitions, however, a bank is an entity that borrows and lends money. Given the absence of those capacities and capabilities, we are left not with a body that can be called a bank, but with a fund. That is the only proper name that we can give to this initiative. It is not planned to become a bank until 2016, and will do so then only if public sector net debt is falling as a percentage of GDP at that point, which is by no means certain.
Often cited by the Business Secretary as evidence of an industrial policy, or industrial strategy, is the regional growth fund, and that was exposed as a complete shambles by the independent National Audit Office on Friday. The Deputy Prime Minister and the Business Secretary have been going around the country boasting that the scheme will create half a million jobs. What did the National Audit Office tell us on Friday? Only 41,000 jobs will be created, and many of them would have been created in any event. The House will remember that the Government abolished the future jobs fund on the basis that it was too expensive. It was claimed that each job created from that fund cost £6,500. How much did the NAO tell us each of these jobs has cost us? Up to £200,000.
While I am at it, let me thank the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk)—who has been chuntering from a sedentary position—for the letter that we all received from him inviting us to encourage businesses in our constituencies to bid for RGF money last week. In that letter, he said
“my officials are ready to help”
and
“there will be plenty of opportunities for bidders to meet the appraisal team to discuss their ideas before the bidding deadline”.
There is, of course, a small snag. The NAO told us that the fund started off with 12 economists seconded from other Departments to process these matters. They all returned to their home Departments before due diligence on the first round of bids began, and the fund had no dedicated administration budget. Let us hope that there are some officials left for us to see.
Tristram Hunt
When it comes to industrial policy, is my hon. Friend as worried as I am by the lack of a strategy for intensive energy users in the Government’s plan? There is nothing in the Queen’s Speech, or in the Budget, to protect our steel and ceramics industries, which are vital to a low-carbon future.
Mr Umunna
My hon. Friend is right. I know that his constituency contains some of those industries.
The Government refuse to heed the call of businesses to get our economy going, and they refuse to adopt the active industrial strategy that we need. Instead, we have a Chancellor who is seeking to play the same old Tory tunes and watering down employee rights as a substitute for a proper growth strategy, along with a Business Secretary who is at best seemingly powerless to stop the Treasury juggernaut, and at worst going along with its nonsense on employee rights. We do not yet know what form the changes to employment law contained in the enterprise and regulatory reform Bill will take. All that we have been told to date by the Business Secretary’s Department is that the Bill will
“Overhaul the employment tribunal system, and transform the dispute resolution landscape.”
The Business Secretary alluded to that earlier. However, reforming the employment tribunal rules of procedure is one thing; making it easier for companies to hire and fire their workers, as the Government have spun it in the media, is quite another.
In March, the Business Secretary told the House that we already had the most flexible labour market in Europe, a claim that he repeated today. He also said that ours was the second most flexible labour market in the OECD. However, in an opinion piece which appeared in The Telegraph on 7 May and which was referred to by the hon. Member for Stone (Mr Cash), there was the Business Secretary parroting his Tory masters’ line.
“Britain is no longer a lone voice in the push”
for an even more “flexible labour market”, he told us. He then proceeded to round on the working time directive, which he condemned for being “'wasteful”. What has happened in the interim? Why the change of tone? I think that the Business Secretary has been got at.
Let us consider what the working time directive does through the working time regulations that give it effect in UK law. It ensures that workers have at least 11 hours’ rest in any 24-hour period. It ensures that workers have one day off in any seven days. It guarantees four weeks’ paid leave a year, and the right to a rest break of at least 20 minutes during a working day of six hours or more. I know that Ministers do not think we are all working hard enough, but I did not envisage that they would seek to tamper with those basic rights to a modicum of time off and a rest.
Vince Cable
Is the hon. Gentleman not aware that the individual opt-out of which I was speaking was defended for over a decade by the last Labour Government?
Vince Cable
If the hon. Gentleman is following this matter closely, he will know that there has been a series of judgments by the European Court of Justice that, unless repealed, will add very considerably to the burdens faced by companies, and that that was fully recognised by his party when it was in office.
Mr Umunna
So, in contrast to what seems to be in the Secretary of State’s Telegraph piece—I have a copy of it to hand—he has no problem with the working time regulations; instead, he simply has a problem with ECJ cases. [Interruption.] For the benefit of the record, the Secretary of State is saying he does not have a problem with the working time regulations. So why on earth is he publishing an article in The Telegraph saying
“the tide is turning against EU bureaucracy”
and
“Britain is no longer a lone voice in the push for deregulation”?
Who is that designed to please?
The reason we are in recession is not our employment law regime; it is this Government’s policies. [Interruption.] The Chief Secretary chunters from a sedentary position about the Labour Government. He has been in power for two years now. When he became Chief Secretary to the Treasury, he inherited a situation in which, as I said at the beginning of my speech, growth was rising, unemployment was falling and a recovery was setting in. Now, after two years at the Treasury, he is presiding over an economy that is in a double-dip recession. We will take no lectures from him.
The reason our economy has not grown is not our employment regime; it is this Government’s policies. The Secretary of State should be working to make it easier for firms to hire people—for example, by giving all micro-businesses who take on extra workers a national insurance break—not enabling firms to fire people as they want, with all the instability that that brings.
So there we have it: a Government who have tipped this country into a double-dip recession; a Government who will not listen, or take responsibility for the mess they have created; and a Government who tell our businesses and everyone else to work harder. Yet it is they who should change course and work a lot harder to provide the policies and leadership this country deserves and needs.
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.
Mr Umunna
The facts that I gave earlier about the regional growth fund came straight out of the National Audit Office report. Am I right in saying that the Chief Secretary has denied that the report said that only about 41,000 jobs could be created under the scheme? Was I also wrong in stating that the report was very clear about the fact that, in some cases, the cost of each job would be up to £200,000?
Danny Alexander
If the hon. Gentleman will stop heckling from a sedentary position and listen to the answer for once, I will do my best to deal with his question.
In the individual case in which the £200,000 figure was given, it was given before the due diligence phase, as a Member whom I could not identify has just pointed out from a sedentary position. If the project reaches its final stages, it will involve a cost per job much closer to the average. The 41,000 figure was a mechanical estimate for which a model was used, whereas the 328,000 figure that I gave is based precisely on information provided by successful applicants on the number of jobs that will be created and safeguarded by the regional growth fund. I think that, rather than sneering at the fund, the hon. Gentleman should recognise the important contribution that it is making, and the important contribution to economic recovery that is being made by the private sector businesses that it is supporting.
Danny Alexander
I will give way once more, but then I must make some progress.
Danny Alexander
I do not have that information to hand. However, the point I made earlier, which he ignores, is that in many cases where the regional growth fund has been awarded, the private investment takes place well in advance of the public funds being needed. The measure he seeks to use of who has received public funds is therefore not necessarily the best measure of the investment that has taken place, quickly stimulated by the award of regional growth funds. If he looks around the country, he will see many examples of private sector businesses that have been awarded moneys from the regional growth fund and have started their investments well in advance of public funding arriving, because that is how their projects have been planned. If he were doing his job properly, he would understand that that is the way in which many businesses operate.
We have also heard a number of comments about the banking Bill. Indeed, strong support for that Bill was expressed on both sides of the House, and there was support, too, for the strong recommendations of the Independent Commission on Banking.