The Economy and Living Standards

Debbie Abrahams Excerpts

Thursday 12th June 2014 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Before the Chancellor descends further into his self-congratulatory speech and quotes statistics about my constituency to me, will he confirm that the employment rate is still below pre-recession levels and that a third of the jobs in my constituency are below the living wage?

[Mr Osborne]

Well, yes, the employment rate is below what it was before the economy crashed and we had the deepest recession since the 1920s and ’30s, but the good news, as the hon. Lady will have noted, is that there has been a sharp rise in the employment rate in the last year—800,000 new jobs created. The employment rate now is very close to its pre-recession peak, so I would suggest that she should not make too many predictions on that front.

I am absolutely explicit that I want to get the employment rate up. I want to ensure that our schools are providing kids with the right skills, that we are creating more apprenticeships—one of the great success stories of this Government—and that we have more students coming out of our universities with the right graduate qualifications, so that we get our employment rate up even higher and achieve the goal of full employment in this country.

One of the risks that will face any economy—particularly one such as the United Kingdom’s, with a large number of financial services in it—is any risk from financial markets. As we begin to see the slow withdrawal of monetary stimulus here in the UK and in the United States, and with the eurozone heading in the other direction, we might expect to see an increase in market volatility. That is all the more reason why the financial markets in foreign currencies, commodities and fixed income should be fair and effective. Tonight at Mansion House and here in the House of Commons, I want to set out briefly the steps that the Governor of the Bank of England and I are taking.

We will bring forward enhanced criminal sanctions to punish and deter market abuse, but we will not opt into European rules, instead developing our own tough domestic powers. We will extend the senior managers regime proposed by the Parliamentary Commission on Banking Standards—so ably chaired by my hon. Friend the Member for Chichester (Mr Tyrie)—so that it covers the branches of foreign banks. We will also use the legislation we asked Parliament to pass in the wake of the LIBOR scandal to regulate further benchmarks in areas such as foreign exchange, fixed income and commodities. The new review that the Governor and I are establishing, chaired by the former deputy managing director of the International Monetary Fund, Minouche Shafik—now the deputy governor of the Bank of England—and involving the Treasury and the Financial Conduct Authority, will provide further recommendations.

Let me be absolutely clear: the integrity of the City matters to the economy of Britain. Markets here set the interest rates for people’s mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy. We are going to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them. We are not going to wait for more financial scandals to hit; instead we are going to act now and get ahead. We will take these steps to build resilience in our financial markets and our economy.

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[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I found the reference in the Queen’s Speech to the Government continuing

“to build a stronger economy and a fairer society”

absolutely incredible. It assumes that we already have a stronger economy and a fairer society, and we patently do not. We have had the worst economic recovery in 100 years. After three years where the economy flatlined, the recovery is still very fragile. We need 1.6% growth each quarter to catch up to the growth we had at the end of 2010.

What is growth based on? Once again, we are seeing the start of a housing bubble, driven by the Government’s policies, and an increase in household debt, which was up to £2.9 billion in March this year. The Tories’ 2010 manifesto stated:

“A sustainable recovery must be driven by growth in exports”.

Absolutely. Who would disagree with that? But the Government have not enabled that to happen. The trade figures remain in the red—by £22.4 billion in quarter 4 last year, which is equivalent to 5.4% of GDP. By their own measures, the Government are failing. Related to that, UK productivity is the second lowest in the G7 and 20% lower than the G7 average. That is the widest gap since 1992 and reflects a massive fall in non-financial investment.

Small businesses, which I have been campaigning for and championing since I entered the House three years ago and which employ nearly half the work force, are still feeling the pinch. The Federation of Small Businesses survey shows that access to finance and late payments are still the two biggest issues, with £30.2 billion owed to them in late payments. Although I recognise that the Government have finally responded to the issues that my inquiry into late payments identified last year and taken up some of my recommendations, it is likely that the measures will relate only to the public sector. That is not good enough and does not go far enough. We need to ensure that the Government are standing up to big businesses and doing the right thing. If they do not, we will.

Then, of course, we had the Government’s arrogance about what they would do about public borrowing. They claimed that they would clear the deficit by 2015, but we are not even halfway there yet, and they are still borrowing £190 billion more than they planned.

Associated with the fragile recovery are the effects of unemployment and employment. The unemployment rate is above pre-recession levels, and employment rates are below pre-recession levels. I still have major issues with how the figures are distorted by the inappropriate sanctioning that is a policy in the Department for Work and Pensions.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend share my concern—it was one of the points I wanted to raise with the Chancellor when I was attempting to intervene on him—that more than 1 million people who are unemployed do not appear on the claimant count of which he is so proud? They represent more than 47% of the total number of the unemployed. There appears to be no knowledge of what is happening with these individuals and why they are finding it so difficult to get jobs. It clearly cannot be benefits dependency, because they are not on benefits.

[Debbie Abrahams]

Absolutely. My hon. Friend highlights another issue with how information on claimants and people not receiving payments is being missed. We should be doing as much as we can to expose those issues.

I mentioned the employment rate still being below pre-recession levels. The jobs that have been created since 2010 tend to be insecure, part time, low paid and on zero-hours contracts. The number of people on short-term contracts has increased twentyfold since 2010 to 1.65 million, 655,000 of them involuntary. Increases in the number of temporary jobs account for more than half the rise in employment. Nearly one in five, or 1.46 million people, work part time because they cannot get full-time work. That is the highest underemployment since 1992. Four out of five new jobs, and one in three of those in Oldham, pay below the living wage.

Another issue is the geographical spread of the so-called recovery. Since 2010, 79% of new jobs have been created in London, with another 10% in nine urban centres outside London.

In the limited time available, I want to talk about the inequalities this Government are presiding over. All those employment and unemployment effects are happening at a time when the Government have made specific policy decisions on increasing the top rate of tax for people with incomes of more £150,000, but average wages are down £1,600 a year. The analysis by the Institute for Fiscal Studies shows that the net effect of tax and benefit changes for an average family is a loss of more than £900 since 2010, while bank bonuses have soared by 83% and top-to-bottom pay ratios in the FTSE 100 stand at 300:1.

We are already seeing the impact in access to food banks: this week’s Oxfam report, “Below the Breadline”, shows that 20,247,042 meals were given to people in food poverty in 2013-14 by the three main food aid providers—a 54% increase on 2012. Another recent Oxfam report, “A Tale of Two Britains”, highlighted the growing gap between rich and poor, with five of the richest families in the UK wealthier than the bottom 20%, or 12.6 million. That follows a raft of other reports—for example, from the Equality Trust.

The gap matters—it really does. It matters because, as overwhelming evidence shows, society as a whole benefits from being fairer and more equal in areas ranging from life expectancy and mental health to educational attainment, social cohesion and social mobility. It is worrying that we are seeing further increases in premature deaths in deprived areas compared with more affluent ones. According to a report published in May, people in Manchester are twice as likely to die early as people in Wokingham, yet as I mentioned in Prime Minister’s questions yesterday, last December the Government scrapped the health inequalities formula that Labour introduced in office to ensure that NHS resources were allocated according to need, and which the analysis proves has been effective.

A fairer, more equal society also benefits our economy. Again, there is overwhelming evidence from a range of sources that inequality causes financial instability, undermines productivity and retards growth.

[Several hon. Members]

rose—

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[Jack Dromey (Birmingham, Erdington) (Lab)]

“What planet does the Chancellor live on?”, said the Stockland Green mother. “Does he begin to understand people like me? My husband has been made redundant three times, and each time the new job is on a lower rate of pay. Do they know, up there, what life is like for us down here?”

That goes to the heart of what the shadow Chancellor said earlier about an era of discontent and disconnection. There is discontent because life is hard for most of my constituents. Living standards are squeezed and people are worried about their kids and concerned about vested interests—energy companies, for example—taking advantage of them. They say to me time and again, “Jack, it just ain’t fair.” The disconnection is because there is mistrust of politics and politicians, and incredulity when people are told that recovery is under way. Time and again I hear, “Recovery—what recovery?” My constituents say to me that this Government simply do not understand their lives, because for too many of them, life is hard and there is insecurity in the world of work. I meet constituents on zero-hours contracts and those in the building industry who complain about being undercut. One said, “Jack, they are exploiting the migrants and undercutting us.”

[Debbie Abrahams]

Is not the increase in the number of people on zero-hours contracts an absolute shame? The Chancellor was not even able to provide a figure for that number.