Budget Resolutions and Economic Situation

Debate between Chuka Umunna and Tulip Siddiq

Tuesday 14th July 2015 Commons Chamber

[Mr Umunna]

We are very clear that, in principle, we accept the benefit cap. In respect of the overall changes to tax credits, I have just made a comprehensive argument to illustrate the problem with those. This is not just about the overall tax changes. I will come on to talk about the withdrawal of support for students in poorer households, which the hon. Gentleman is going to vote for, and about other matters. It is for all those reasons that we cannot give our overall support to this Budget.

Ultimately, the best way to cut the deficit and the debt is to ensure that we have better-paid jobs, which will increase tax receipts and reduce people’s need for extra support from the state. We are among the countries with the highest incidence of low-paid work in the developed world. We come fifth in the rankings of the OECD economies in that respect. We have to change that by rebalancing and restructuring our economy through the active prosecution of industrial strategies—a term that the Business Secretary seems to have a problem with. Now is not the time to junk the approach that started under the last Labour Government and that his Liberal Democrat predecessor sought to continue. Now is the time to move up a gear on industrial strategy if we are to achieve the necessary rebalancing. I say this because, in fairness to the Government, they started with good intentions and sought to rebalance the economy, with their Liberal Democrat partners, from 2010.

I am happy to acknowledge—and have done so publicly—that rebalancing was something that the Major Government failed to do and that we failed sufficiently to address in office, in spite of our many achievements. Our economy was one with too few savings; it was also too concentrated in too few sectors and regions of the UK, and it was based too strongly on cheap credit. The problem is that the current recovery has those same weaknesses that have plagued British recoveries for decades: productivity growth has been absent, as the Business Secretary mentioned; our export performance remains lacklustre; output depends on private consumption; household debt is rising; regional imbalances persist; and investment in innovation and research and development lags behind that of our competitors. I am not at all convinced that the Budget will reverse those weaknesses.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Going back to the question of tax credits, does my hon. Friend agree that they gave a boost to employment, and especially to the employment of families with a single parent? Between 1997 and 2010, employment in that group increased by 28%.

[Mr Umunna]

My hon. Friend makes a very good point.

I want to comment on each element of the rebalancing that the Business Secretary mentioned. The first relates to productivity. We have the worst productivity in the G7, save for Japan. There was some fanfare around the Treasury-BIS co-sponsored productivity plan published on Friday—[Interruption.] Ministers might chunter, but having taken account of that amazing plan, the Office for Budget Responsibility has downgraded its forecast for productivity per hour for next year and the following three years. I am not surprised. Two key ways of increasing productivity are to sort out the skills system, which is simply not doing enough to resolve the chronic skills shortages in our economy, and to boost business investment.

After half a decade of Tory-led Government, the CBI warned in its annual skills survey this week of ongoing skills shortages acting as a drag on productivity. Its deputy director general could not have been clearer yesterday when she said that

“firms are facing a skills emergency now, threatening to starve economic growth. Worryingly, it’s those high-growth, high-value sectors with the most potential which are the ones under most pressure. That includes construction, manufacturing, science, engineering and technology.”

Of course we all want to see more apprenticeships, and we support the proposed apprenticeship levy, but we need to see far more action from the Government to ensure that all those apprenticeships are of sufficient quality to reduce the skills shortage. More than one in five apprentices are currently receiving no formal training whatsoever, and almost four in 10 employers do not regard the qualifications they are providing as apprenticeships, even though the Government deem them to be apprenticeship qualifications. Also, there are simply not enough people doing qualifications at level 3 and above.