Public Service Pensions Bill

Debbie Abrahams Excerpts

Monday 29th October 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

I shall try to keep within the 12 minutes: it is my intention to make only a short contribution.

First, I wish to establish some general principles for why reform is needed. They can be grouped into two areas. The first is the general societal changes that have taken place that necessitate reform and to which the Government must respond, such as the increase in life expectancy and the changes in employment practices over recent decades. The second is the changing balance over time between the sharing of the cost of public sector pensions between the taxpayers, through the Government acting as employer, and the employees who receive the pensions.

It is important to establish that the reforms in the Bill would be needed with or without the current cost pressures that the Government face. We hope to bring public sector borrowing under control by 2017, but these reforms are intended to last for a generation. They are not driven by the short-term need to recover costs: they are driven by a long-term desire to ensure that public sector pensions survive into the future in a sustainable way.

Any reform should be done fairly and, as far as I and my Liberal Democrat colleagues are concerned, protect those in the public sector on the lowest earnings. The overriding principle should be that the public sector should continue to act as an exemplar to other employers. There should not be a race to the bottom: the public sector should set the gold standard for affordable and attractive public sector pensions that attract the very best people into the public sector, who are paid in a fair way and guaranteed a secure and attractive income into retirement.

The first principle is that of life expectancy. We all know that we would hope for ourselves and people in our families to live longer. Indeed, people retiring now at age 60 can expect to spend 40% of their adult life in retirement—so only 60% of their adult life would have been spent in work. The state pension age has been changed relatively infrequently over the 103 years of its existence. If it had been uplifted in line with life expectancies, people would now be drawing their state pensions at age 75. Several other countries, in particular Scandinavian countries, have ongoing commissions that examine life expectancy and uplift pension ages according to that evidence. That might be a good approach in the future for this country.

The biggest societal change driving the need for reform is the difference that has arisen over time between private sector and public sector remuneration. It always used to be much quoted that pay in the private sector was more attractive than in the public sector and that part of the balancing factor to make public sector employment attractive was a good pension, and perhaps other good terms and conditions. In recent decades, that maxim does not hold. Indeed, the Institute for Fiscal Studies said that in 2011 people in the public sector doing a broadly similar job to people in the private sector were likely to be paid about 8.3% more. But pension provision in the public sector continues to be much more attractive and offered on a much wider scale than to people in the private sector.

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

Does the hon. Gentleman regret the way in which the Government have pitted public sector pensions against private sector pensions, when in fact the average local government pension for men is £4,000 a year and for women is £2,600? There is no doubt in my mind that this is an intentional attack on public service and the public sector as a whole.

[Stephen Williams]

The hon. Lady’s final sentence illustrates her prejudice against the Government’s intentions. This is not an attack on the public sector. The coalition Government are trying to ensure that public sector pensions remain across the board, so that every person in the public sector is able to access a pension, which is not the case in the private sector, as I am about to say; that they are affordable to the taxpayer; and that they are offered on very good terms. Without reform, those provisions would not be in place. I would not want to be associated in any way with an attack on public sector employees who perform services that are absolutely vital to all of our constituents. I would not want to be associated with any reform predicated on that basis, and I genuinely think that that is not the basis on which the reforms are being carried out—from the perspective of both parties in the coalition.

On coverage, 100% of public sector employees are in theory eligible to join a pension scheme, because it is offered to everyone, but only 35% of employees in the private sector are able to join a scheme, and only about a third have a contribution made to their scheme by their employer. There are many schemes in the private sector in which the employer simply does not make a contribution. There may be a scheme, but it is not funded by the employer. The biggest anomaly is in the type of scheme available to people in the different sectors, between those on defined benefit, final salary or career average schemes, and those who are on defined contribution schemes. Currently, just under 80% of people in the public sector are in defined benefit final salary schemes, but only 9% of people who work in the private sector are able to access such schemes. That percentage is falling year on year, and soon nobody will be joining a final salary scheme in the private sector. Many of them will be closed and no further contributions made by current members.

There is also the cost to the public purse of maintaining public sector pensions, which puts an onus on us to look at the case for reform. Those costs have to be shared between the Government as the employer, all of us as taxpayers, and the employees themselves, who will ultimately be the beneficiaries. Between 1999 to 2009, the cost of the NHS pension scheme rose by 47%, the cost of the civil service scheme by 23% and, as we heard from the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), who is not in his seat, the cost of the teachers’ pension scheme by 37%. That has necessitated a shift in the contribution rates of the employee, who is the beneficiary, and the employer, who is the Government and the taxpayer. For instance, there used to be rough parity in the teachers’ pension scheme—the employee put in 5% and the Government 5%—but employees now contribute 6.4% and the Government about 14%. That is unfair on the general mass of taxpayers who cannot access these types of schemes. So there is an imbalance between the public and private sectors, and the cost to the Exchequer of public sector pensions is now £32 billion. Those costs cannot be allowed to grow uncontrollably.

The pension reforms must be done fairly, however, so I am pleased that there will be no change to the terms and conditions and contributions of employees who earn up to £15,000—about 15% of the public sector work force. Some 750,000 people will see no change in their pension contributions and will still be able to draw the pension they expect at the moment. Those on salaries of up to £21,000 will have their increases capped at 1.5%, so a typical employee on £21,000, after 20% tax relief—everyone gets tax relief on their pension contributions—will pay just £8 extra a month to remain in a defined benefit scheme. And, of course, employees within 10 years of retirement this April will see no change in their terms and conditions and expected pensions.

It is also entirely fair that over time we move to a career average scheme. That will benefit the broad mass of people in the public sector, who have annual salary increments but whose starting salary after inflation is not drastically different from what they start with. A final salary pension scheme, on the other hand, disproportionately benefits those in the public sector who someone described as the star performers—the people on huge incomes, the senior managers, head teachers and directors. It is fair, then, that we move to a career average scheme.

Our own arrangements, which no one has mentioned thus far, are now entirely a matter for the Independent Parliamentary Standards Authority. If, however, the public sector moves to a career average scheme, Members should expect IPSA, which now sets our terms and conditions, to move us on to a career average scheme, rather than a final salary scheme, as well.

There is no doubt that reform is needed—that is shown by demographics and the change in employment practices—and it is right that the Government are doing it in a way that is fair to public sector employees as well as to taxpayers. That will ensure that public sector pension schemes are not only the best on offer in the country but are offered on terms that are sustainable.

Jobs and Growth

Debbie Abrahams Excerpts

Thursday 17th May 2012 Commons Chamber

[Ian Swales (Redcar) (LD)]

The key to jobs and growth is wealth creation. We create wealth by digging it up, growing it or making things. Everything else is just moving it around. That is why I welcome the Government’s focus on real wealth creation, especially manufacturing.

Labour has been highly critical of almost everything done by the Government, but it is hard to discern what its programme or vision would be. I suppose we can tell a lot about its vision from what it did when it had its hands on the levers for 13 years. It had 13 long years in which to create the society it wanted, so what did it look like in the end? It loosened bank regulation, and further to help its friends in the City it scrapped the public interest test on takeovers in 2002, meaning that many of our cash-generative businesses are now foreign owned, especially in utilities and infrastructure.

Labour decimated manufacturing, taking it from 22% to 11% of the economy, which had knock-on effects for many other sectors, such as logistics. It left Hartlepool, Middlesbrough and Redcar and Cleveland in the weakest 10 of the 324 local economic areas. It widened the gap between the north and the south and the rich and the poor, and widened health inequalities. It created a benefits culture in which work did not pay for many people and having children became almost a career option in towns such as Redcar.

What about the tax system? Today, we again heard from the Opposition the mantra, “Tax cuts for millionaires.” I do not think that friends or even enemies of the right hon. Member for Wokingham (Mr Redwood) would describe him as left-wing, yet in his alternative Queen’s Speech the other day he called for a return to the former Prime Minister’s favoured tax levels—a top rate of income tax of 40% and capital gains tax at 18%. So how did millionaires fare under Labour? They had a 40% top tax rate until the last month of its 13 years. After the recent cut, it stands at 45%. It levied an 18% rate on capital gains—a lower rate than their cleaners and drivers would pay on their income. This Government have lifted that to 28%.

Under Labour, millionaires could put £250,000 a year into a pension scheme and get tax relief. The cut to £50,000 by this Government has raised £4 billion from the rich. They received child benefit and paid 2.5% less tax on their spending. They could get unlimited taxpayer support for gifts to charities, including family- controlled trusts, public schools such as Eton and, as in the case of Andrew Lloyd Webber, a huge art collection, some of which he rents back cheaply to his own house. Add to that numerous loopholes, and millionaires must want Labour back as fast as possible. Meanwhile, people on the minimum wage were paying £700 a year in tax.

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

Will the hon. Gentleman remind me who introduced the minimum wage?

[Ian Swales]

It was one of Labour’s great achievements and one I totally support, but I do not support a tax level of £700 a year on the minimum wage, which was in place when the previous Government left office.

What do all these failures in Labour’s vision have in common? Apart from the takeover test, they are all being tackled by the Government. Of course we are doing a lot more than that to stimulate jobs and growth. We are dealing with Labour’s shocking education legacy, as a result of which employers, even in high unemployment areas such as mine, say they cannot find the people they need. We are starting from the bottom. The pupil premium is proving such a help to children in deprived areas. We are encouraging science study in school—it is already up 80%. The National Citizen Service is giving young people confidence in those all-important softer skills. We have made huge investments in apprenticeships, the number of which has more than doubled in my constituency.

We are dealing with Labour’s neglect of manufacturing. We have heard the good news today about Vauxhall and the Business Secretary’s involvement in it. He has also intervened recently in the bioethanol industry, and we will shortly see the restart of a plant in my constituency on which 2,000 jobs depend. We are also pushing green technology. I can look out my office window in Redcar and see 27 giant offshore wind turbines being constructed. Construction is about to start on a £500 million biomass power station at Teesport. The other day I met representatives of the Forewind company, which is starting a massive project on the Dogger bank and wishes to bring power ashore through my constituency. I thoroughly welcome the announcement in the Queen’s Speech of the green investment bank, which will bring more jobs and growth to this vital sector.

The Government are investing in technology and innovation centres, including a centre for process innovation in my constituency. They are investing to improve rail freight infrastructure from Teesport and have created enterprise zones, including three in my constituency at Wilton, Kirkleatham and South Bank. The regional growth fund has already given more help to manufacturing in the Tees valley than we ever saw under the north-east’s regional development agency, and I welcome the extra £1 billion that has been allocated. The work is being co-ordinated by the excellent new local enterprise partnership for the Tees valley.

The Government are beating the bushes to generate international trade, and we are beginning to see the fruits of that activity. Exports to non-EU countries are at record levels, and we now have the first net trade surplus on cars since 1976. The north-east region is already in trade surplus, and the figures will soon include the £20 million-worth of steel a week that is being exported to Thailand from the newly reopened Redcar steel works. The first ship left yesterday.

Private sector jobs are being created—there have been about 500,000 since the general election—but unemployment is still way too high, especially in the north- east and especially among the young and the long-term unemployed. My constituency still has the second highest unemployment level among those of Government Members, and that remains a high priority for me. I was therefore delighted to see a drop of another 85 in the figures yesterday.

As we watch the Olympics, the carbon fibre bikes, the Kevlar canoes, the space-age swimsuits, the polyurethane footballs and the Paralympian equipment will be a reminder of the vital role that chemistry and the process industries play, and will play in the recovery. There is optimism in the north-east’s process industries, and the position could be made even stronger by a Teesside carbon capture and storage network. I look forward to the result of the call for bids for that project. Large UK companies are ready to invest billions in it.

Times are tough for the economy as a whole, not least because of the debt burden. The eurozone is in chaos and there is still a lot more to do, but this Queen’s Speech contains more steps in the right direction and I commend it to the House.

--- Later in debate ---

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

Last week’s Queen’s Speech was my first as an MP. Although nobody does pomp and pageantry better than we do, I was deeply disappointed with its content: lots of style but no substance.

When this Government came into office two years ago, we were in economic recovery. Since then, we have been bumbling along the bottom with very little growth, and now we are back in recession again. This is not due to the worst global financial crisis since the 1930s; it is due to the mismanagement of the economy by the current Downing street incumbents. Yesterday, the Bank of England yet again had to downgrade forecasts for economic growth, from 1.2% to 0.8%, and the outlook for inflation is well above the 2% target.

Yet this not the experience of every other country. The US, which was at the centre of the global crash in 2008, started to recover, like us, in 2009-10, and it is continuing to recover. Similarly, the rest of the G7 is performing better than we are. Our economic performance is one of the worst in the G7, with Italy coming up just behind us. Brazil has now overtaken us as the sixth largest economy. The austerity measures that this Government have introduced are clearly not working.

The impact on unemployment in the public and private sectors is already being felt. Last year, the public sector lost 276,000 jobs. Some have estimated that the figure will be as high as 700,000 by 2015. In Oldham, £24 million has been cut from next year’s council budget, meaning 400 job losses. That is not the end of it. My local hospital trust, Pennine Acute Hospitals NHS Trust, recently announced a statutory consultation on a further 160 redundancies. It has to find savings of £45 million this year. That comes on top of 600 posts that have already been lost. In spite of the Government’s reassurances that jobs will be created in the private sector, large and small businesses alike are closing, including BAE Systems in Chadderton, Warburtons Bakery in Shaw, Long’s Plumbing and, of course, Remploy.

Although I welcome yesterday’s unemployment figures that show a reduction in the previous quarter, I am afraid that the trend in long-term unemployment is upwards, as we have heard. In Oldham, more than 8,000 people are out of work across the borough, with 11 people chasing every job. The number of women out of work is the highest since 1995. There has been a 25% increase in long-term unemployment among the over-50s. In my constituency, the number of jobseeker’s allowance claimants has increased by 20% since June and doubled since 2006. Young people in my constituency have been particularly badly hit, with a 288% increase in long-term unemployment since last year. Worryingly, young black and Asian men are disproportionately affected, with 56% and 23% respectively being unemployed. Those figures have doubled since 2008, so we should be very worried about that problem.

What was there in the Queen’s Speech for those people? Absolutely nothing. At the Select Committee on Work and Pensions yesterday, I was profoundly disappointed by the apathy and complacency about what is going on and about how it can be addressed. The youth contract is not geared towards focusing on these problems and only quick fixes have been introduced. There are inequalities not only between different population groups, but on a geographical basis. The urban heartlands of Greater Manchester, Liverpool, Newcastle, Glasgow, Cardiff and parts of London are most affected. The Government’s talk about fairness is just that—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I call Mr Mark Spencer.

Amendment of the Law

Debbie Abrahams Excerpts

Monday 26th March 2012 Commons Chamber

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

Last week’s Budget did little to address the current issues of a flatlining economy and rising unemployment. In my constituency long-term youth unemployment has increased by 137% in the past six months, with 13 people chasing every job, and there is the highest unemployment rate for women in 17 years. Housing repossessions have increased by 10%, with more than 300 mortgage and landlord repossession claims this year. Those are the tragic consequences of that devastating economic policy and ideologically driven cuts.

The Chancellor put a positive spin on a worsening economic and fiscal forecast, when in reality he is meeting his borrowing forecast this year only because the £5 billion lost in tax receipts has been offset by a more than £6 billion under-spend in Government. He failed to disclose last week that, at a time when nursing posts are being cut, waiting times are increasing and there is an unprecedented top-down reorganisation costing billions of pounds, that figure includes £500 million being clawed back from the NHS.

According to independent analysis, the Budget includes £900 million less for the NHS than the 2010-11 comprehensive spending review, with £500 million being used on the deficit reduction programme. With increases in debt interest, rising public sector pension costs and social security payments, it is estimated that annual management expenditure will grow by 1.8% a year in real terms, leaving the total pot for public services falling by 3.8% a year in real terms in 2015-16 and 2016-17.

The Chancellor appears to be storing up further pain for an already beleaguered public sector while failing to address the real issues of the financial sector, and he has also failed small businesses. Instead of cutting corporation tax, which benefits the largest companies, in the hope—and it is just a hope—that that will lead to business investment, why did he not delay the rise in business rates? His latest scheme to boost credit to small businesses whereby banks pay a fee to the Treasury to access £20 billion-worth of funding at a low rate, in turn passing it on to SMEs for cheaper loans, suffers from serious design flaws. First, the £20 billion is to be released over two years. Secondly, the scheme has no targets. The previous attempt to boost lending to small business, Project Merlin, under which the UK’s five biggest banks agreed to make £76 billion of credit available, did not achieve the Government’s goals, even though it had targets attached, and the new plan is not compulsory. HSBC has already said that it will not be taking part. The scheme’s biggest flaw is that it does not address the real problems facing businesses. It will not be available to SMEs that have already been refused finance.

I want to record my dismay at the Chancellor’s priority of cutting from 50% to 45% the highest income tax rate for those on incomes of over £150,000. His explanation for doing so was that, because people were so successful in avoiding paying this tax, HMRC had recouped less than anticipated. In other words, he was saying, “Let’s not bother with collecting the tax at this level; let’s reward these people’s behaviour by cutting the rate by 5% and just hope that they see the light.” The Chancellor may say in response that he is clamping down on stamp duty avoidance. However, his commitment to address what he refers to as “morally repugnant” tax avoidance rings hollow given that on the day before the Budget he did a deal with Switzerland to block the EU savings tax directive, which is specifically designed to help to deal with tax evasion. Through that bilateral deal, the Chancellor has, in effect, set up a tax loophole that any dodgy accountant would be proud of in allowing people to carry on evading paying their tax.

Amendment of the Law

Debbie Abrahams Excerpts

Wednesday 21st March 2012 Commons Chamber

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Several speeches have reminded me of Herbert Asquith speaking on the Licensing Bill in 1907, when he gave an eloquent speech for about an hour and a quarter and was then asked for a summary of his notes, which consisted of one page with the words, “Not so many pubs.” In other words, we have had an enormous amount of words but not much content; a lot of

“sound and fury,

Signifying nothing.”

I welcome the Budget on three grounds. First, I welcome it for my county of Herefordshire. Many of its provisions are extremely good. We have 100% council tax relief for servicemen and women, which will make a great difference to many of my constituents. We have a commitment to infrastructure, which we need in our rural areas. We have support for smaller cities and broadband, of which we hope to take advantage, and we have tax simplification for small businesses. All that is extremely welcome.

I also welcome the Budget from the standpoint of the nation as a whole. It has so many things to recommend it. I think of the expansion of support for exports; the northern hub, which will start to fill the gap created by the amazing lack of infrastructure linking northern cities; the integration of the tax and national insurance systems; and the new tax statement, for which my hon. Friend the Member for Ipswich (Ben Gummer) is greatly to be thanked. I also think of the Treasury’s work on its new review of employee ownership. That would be an important repopulation of our system and a move away from the crony capitalism of the past decade.

[Debbie Abrahams]

Does the hon. Gentleman agree with the Chancellor that “aggressive tax avoidance” is “morally repugnant”? If he does, why does he believe the Chancellor failed to mention how he will address the tax avoidance of private health care companies—the same companies that have been lobbying in favour of the Health and Social Care Bill?

[Jesse Norman]

The answer is that a general anti-avoidance rule is what it is. If there is avoidance by health care companies, I hope they will be captured by the rule, in just the same way that I hope the rule extends to include the tax affairs of Ken Livingstone as he runs for the London mayoralty.

Finally, I welcome the lower corporate tax rise, and most of all the rise in the income tax threshold. This is an extraordinarily important moment in British history, in which we begin to roll back the ever-pervasive state created under the previous Government, and in which people are given freedom and control over their economic affairs. I greatly welcome that.

The Budget continues a path of renewal that was begun two years ago. We must never forget that this country lost ground during the so-called boom years of the late 1990s and 2000s. When we adjust the gross domestic product per capita numbers, we see that, in fact, they overstate the country’s success, which relied on immigration, a boom in house prices and a boom in personal indebtedness. When those booms collapsed, so too did our economy.

We lived under the illusion of growth. We thought we were doing better than other European countries, but in fact we were not. We were having our breakfast, lunch and dinner eaten in front of us by Brazil, Russia, India and China and other emerging countries. That was also a time in which a culture of crony capitalism took over this nation. The effect of uniquely targeting inflation gave support to those asset bubbles, which in turn created an economy that was reliant on revenues from the financial sector and fed into the lack of balance, which the Government and this Budget are doing much to address.

On local grounds, speaking for Herefordshire, on national grounds, speaking for the country as a whole, and on historical grounds, as this country continues a transition from cleaning up the mess to rebuilding and renewal, I welcome this Budget.

Living Standards

Debbie Abrahams Excerpts

Monday 5th March 2012 Commons Chamber

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

I have been a Member of Parliament for just over a year now, during which time I have seen the significant impact of this Government’s devastating and detrimental economic policies in my constituency. The flatlining economy has led to a 15-year high in unemployment in Oldham with over 8,000 people out of work across the borough and 12 people chasing every job. The number of women out of work is the highest since 1995, and youth unemployment is well above the regional and national averages.

Young people at Oldham sixth-form college, which I visited on Friday, are devastated about their future. The cut in education maintenance allowance is preventing many of them from taking college courses, and because of the trebling of tuition fees, they do not know whether they can go on to university. Given the lack of available jobs, things are looking dire for them.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Lady on her first year in Parliament. In my view, the unemployment figure is the key statistic. Today the British Chambers of Commerce announced that it was likely to reach 3 million by the end of the year. Will that not have a hugely detrimental effect on living standards?

[Debbie Abrahams]

It will indeed. I thank the hon. Gentleman for his comments.

It is not just our young people who are suffering as a result of the Government’s economic mismanagement. Last month, Oldham’s first borough-wide food bank was set up to help struggling residents who are finding themselves in desperate economic conditions—not just homeless people, but people in work.

My constituents are being squeezed every which way, experiencing increases in outgoings as a result of higher energy costs and food prices while the incomes of most people—unless they are bankers—remain the same. As we have heard, the Halifax and Royal Bank of Scotland are raising their standard variable mortgage rates, which will mean increasing problems with repossessions. We have already discussed the working tax credit changes that will affect 650 families and 1,500 children in my constituency.

These are ideologically driven cuts that reflect the Government’s desire for a United States-style welfare system. Health care is not the only welfare pillar under threat. The Government’s skilful media machine hoped that using the language of the blitz—a time when people were literally “all in it together”, accepting rationing of food and fuel regardless of where they were on the social spectrum—would whip up nostalgia and reassure people that the protective safety net in which we all invest through our taxes and national insurance, and to which we all have access if we need it, would keep them safe. Well, it is not doing so.

Banking (Responsibility and Reform)

Debbie Abrahams Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Umunna]

I presume that my hon. Friend is referring to the Joint Committee that considered the Financial Services and Markets Act 2000. The consensus at the time was shown in the approach instilled in the Act, and we are now revisiting the regulation of the sector.

The crash was global in nature, and the causes cited by the Independent Commission on Banking include declining underwriting standards, the mispricing of risk, a vast expansion of banks’ balance sheets and rapid growth in securitised assets—in short, gross irresponsibility. The commission also stated in its report that one problem was that some bank employees were remunerated

“on the basis of reported profits that were neither time-adjusted nor risk-adjusted, and led to employee incentives that were not always aligned with the long-term interests of the bank.”

The US financial crisis inquiry commission established by President Obama, which reported last year, went further, stating:

“Compensation systems—designed in an environment of cheap money, intense competition, and light regulation—too often rewarded the quick deal, the short-term gain—without proper consideration of long-term consequences. Often, those systems encouraged the big bet—where the payoff on the upside could be huge and the downside limited.”

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

Does my hon. Friend agree that we should not demonise one group in society, whether they be bankers or benefit claimants? This is about fairness. We know from recent evidence that fairer societies are better for everybody, improving life expectancy and increasing social mobility. We should use that evidence to inform policy that is principally about fairness.

[Mr Umunna]

I completely agree with my hon. Friend.

Youth Unemployment and Bank Bonuses

Debbie Abrahams Excerpts

Monday 23rd January 2012 Commons Chamber

[John Glen (Salisbury) (Con)]

I am grateful for the opportunity to participate in the debate. I would like to make three points, but before I do I wish to put on record my grave concern about the issue of youth unemployment. It is most regrettable that when we have debates such as this, Opposition Members seek to label Government Members as being glib and unconcerned about the plight of their constituents who are in real difficulty.

I was put here by the people of Salisbury, and in my constituency 340 young people between the ages of 16 and 24 are unemployed. I readily concede that that number is significantly higher than it was in the previous year, but I do not accept the comments of the hon. Member for Walsall North (Mr Winnick), who is no longer in his place, that somehow my colleagues and I do not care. I am not complacent about the matter or unwilling to acknowledge the grave seriousness of the problem of youth unemployment, nor am I unwilling to listen to suggestions from Members of all parties of how to tackle it effectively.

I do not see the point of belabouring the fact that the trend from 2004 was in the wrong direction, or that there were 279,000 more unemployed young people when we came to power than there were in 1997. As the right hon. Member for South Shields (David Miliband) said, that trend started in 2004, well before any global banking crisis. Let us therefore be honest in the debate about the nature of the problem and how long we have faced it.

However, we must realise that we owe it to those young people to find a lasting and effective solution. The Opposition suggest that the Government’s cuts and tax increases have choked the economy, that our welfare-to-work programmes are failing and that borrowing has increased, so that the solution, very simply, is to tax bankers’ bonuses and introduce a permanent bank levy. That is supposed to sort everything out overnight.

I have three concerns about that. Fundamentally, I am worried about the economic literacy of such a proposal. One cannot just buy jobs. That logic led to the current ruinous situation. It is misguided on several levels. The Government are doing things to address the points that the right hon. Member for Oldham West and Royton (Mr Meacher) legitimately highlighted: the grave frustration and anger about bankers’ bonuses. However, the banking levy that the Government introduced, which was effective from January 2011, will yield more than the one-off policy on bankers’ bonuses in the last year of the previous Government. That is factually correct.

The Government will take on board the Vickers commission’s conclusions, and reforms to the banking sector will be adopted. However, when the right hon. Member for Wolverhampton South East (Mr McFadden), who is no longer in his place, worked alongside former Prime Minister Tony Blair in No. 10 Downing street, I wonder where the desire to reform the culture and the system of banking bonuses was then. We have all failed to address the creeping callus of immorality in our society.

However, the notion that the Government can somehow just kick-start things and buy a few jobs here and there does not do justice to the macro-economic realities. The financial systems—the markets—will not see more spending as a signal that the Government are serious about tackling the underlying problem of the debt in this country. Interest rates would rise. That would lead to mortgage payments rising and businesses losing confidence in making investments.

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

I am listening carefully to the hon. Gentleman, and I do not want to impugn him or any of his colleagues who are genuinely concerned about, for example, the plight of young people in my constituency. I meet college students who are devastated because of the impact of withdrawing education maintenance allowance and trebling tuition fees, and the fact that 10 people are chasing every job. However, all the evidence shows that some of the measures, such as enterprise zones, that the Government have introduced have no effect. Would the hon. Gentleman like to comment on that?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Can we have short interventions?

Working Tax Credits

Debbie Abrahams Excerpts

Wednesday 30th November 2011 Westminster Hall

[Miss Smith]

I am unsure from his comments whether the right hon. Gentleman accepts the premise that we are in difficult economic times. I do not know which parallel universe he is living in, but if he is in the same one as I am, he will know that, yes, of course we must do what we do as fairly as possible. He will also know that our bank levy is raising more every year than his party raised in one year, and with that I shall, I hope, lay that topic to rest, unless the hon. Lady would like to take it further.

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

Would the Minister confirm that 100,000 extra children will be pushed into poverty as a result of the reduction in working tax credit that was announced yesterday? Will she confirm that that was what the OBR says the additional number of children in poverty will be?

[Miss Smith]

I can confirm that that figure relates to the measures of child poverty as set out by the Child Poverty Act 2010 and by the current debate. No doubt, the hon. Member for Stockport (Ann Coffey) is already rubbing her fingers with glee about that. I will come on to that in my comments as well. I wish to introduce the idea that we need to move on to tackling the causes of poverty rather than the statistical method of counting poverty.

--- Later in debate ---

[Miss Smith]

I thank the hon. Lady very much for her consideration in the sequencing of interventions and I will come on to exactly that point.

I will continue to speak briefly about the high level need for action which drove yesterday’s announcements. As hon. Members will know, the UK economy is recovering from the biggest financial crisis in generations. June 2010’s Budget set out the Government’s plans to reduce the deficit and rebuild the economy. However, since then—and this is the crucial point from yesterday’s analysis which accompanied the OBR’s figures, and both must be taken together in my view—the UK economy has been hit by a number of shocks. The OBR names three: first, higher than expected inflation, which the OBR calls an “external shock”; secondly, ongoing instability from the euro area crisis; and; thirdly, the full and permanent damage done by the 2008-09 financial crisis.

It is unwise not to recognise those three major factors. It is absolutely vital that we tackle our debts. It is absolutely vital that we react appropriately and wisely to the economic situation presented to us, and I think that households know that. No household would thank a Government who, instead of dealing responsibly with that situation, carried on spending, carried on borrowing and carried on racking up the debt to do so.

[Debbie Abrahams]

That still does not explain—to pick up a point one of my hon. Friends made—why the Government are choosing to punish honest, hard-working families instead of taxing bankers. It is about a four-times greater punishment in terms of taking away money from these families, compared to what the Government are taking away from bankers.

[Miss Smith]

Let me reiterate, first, the incontrovertible point that we are taking more from bankers every year than the Labour party did in one year of operation. Furthermore, I must point this out and, I hope, lay the matter to rest: the distributional allowances published alongside the autumn statement yesterday clearly indicated that it is the top 10% of the income band that is contributing.

Let me turn briefly to a summary of what was announced yesterday and previously. The Chancellor said that we will uprate the disability elements of tax credits in line with prices, and increase the child element of the child tax credit by £135 in line with inflation too. We will not, however, uprate the other elements of the working tax credit this coming year. Hon. Members have highlighted the fact that, given the size of the uprating this year, we will no longer go ahead with the planned additional £110 rise in the child element over and above inflation.

I must make a further comment, which is that of course the Government believe that the welfare system must remain fair and affordable while protecting the most vulnerable. We must also note within the figures I have just given that by April 2012 the child tax credit will have increased by £390 since last May, and that is of course per child.

A number of reforms to tax credits were announced in the June Budget and the spending review. The point is that the previous Government spent more than £150 billion on tax credits since 2003. This was unsustainable in many ways, and I will give an example before moving on. Under the previous system tax credits were available to families earning up to £58,000. If households had an increase in income of up to £25,000 in the year then they could have earned up to £83,000 and still benefited from tax credits. Taking on board the principles raised by hon. Members, that means to me that we had to act in a situation that appeared to be very unfair, in that people in the top income decile were eligible for tax credits. That is unjustifiable, unfair and very unsustainable in the current economic climate.

Jobs and Growth

Debbie Abrahams Excerpts

Wednesday 12th October 2011 Commons Chamber

[David T. C. Davies (Monmouth) (Con)]

I confess that as I listened to the shadow Chancellor this afternoon, I almost felt a growing sense of admiration for the sheer effrontery of the man. This man who came to deliver a lesson to the Chancellor was personally responsible for much of the economic mess that the country now finds itself in. He, of course, is no longer in his place, but I wonder whether I might give a quick economic history lesson to those Members on the Opposition Front Bench who have hung around to listen to the debate.

In 1997 this country had a national debt of £350 billion and was basically spending what it earned. By May 2008, well before the collapse of Lehman Brothers and the banking problems, the national debt had already increased to £629 billion and the Government, during the boom times, had run a deficit of around £30 billion a year. I am yet to hear any Opposition Member explain why, when the country was booming, they spent £30 billion a year more than the country was taking in taxes. Once we hit the banking problems, which the previous Government successfully blamed all the economic problems on, the debt skyrocketed to £1 trillion.

Of course, even that is not the full story, because many sensible economists claim that the national debt is at least twice as large, as the figures used do not take into account the PFI contracts used for all the schools and hospitals that the previous Government built but never paid for. It does not take account of the liabilities for organisations such as Railtrack and Metronet, and of course it takes no account of public sector pensions. The reality is that we must now deal with a debt of at least £1 trillion and the deficit of £160 billion that we inherited.

Opposition Members like to blame it all on the banks. “It was all the fault of the wicked bankers”, they say. I have done a little checking with the House of Commons Library, and as far as I can ascertain the banks received £100 billion. That money was given out not simply in cash, but in shares and the rest of it, so a lot of it might come back to us. If we take the best-case scenario for the national debt, which is £1 trillion, rather than the £2 trillion suggested by many economists, and the worst-case scenario for the £100 billion that was given to the banks, which is that nothing will come back, even then that money accounts for only 10% of the national debt. What about the other £900 billion? When will the Opposition start accounting for that?

One trillion pounds is a lot of money. I was thinking about it earlier and trying to put it in perspective. If we were to create a graph and used 1 cm to show £1 million, it would have to stretch all the way from here to Highgate cemetery to show the scale of the wanton spending for which Opposition Members are responsible—I do not know whether it is relevant, but that is the burial place of Karl Marx.

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

I wonder whether the hon. Gentleman knows what the public sector debt was in 1997 and in 2007 before the recession.

[David T. C. Davies]

Yes, in 1997—

[Debbie Abrahams]

Does he know what it was as a percentage of GDP?

[David T. C. Davies]

Has the hon. Lady finished now, and may I continue? I am always fascinated by the fact that comparisons are made between levels of debt as a percentage of GDP. I will certainly give way again if someone can explain why we compare national debt with GDP. Why do we not do what any company would do and compare it with revenue? If we look at a comparison with 2010, when this Government took over and when the national debt was £1 trillion, we will see that the revenue coming in was £520 billion. The country had a national debt that was almost twice the revenue it was taking. Anyone who has run a company—most Opposition Members have not, but I have—will know that any company that found itself in such a situation would be declared bankrupt immediately.

Oral Answers to Questions

Debbie Abrahams Excerpts

Tuesday 21st June 2011 Commons Chamber

[Huw Irranca-Davies (Ogmore) (Lab)]

2. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010.

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

13. What assessment he has made of the likelihood that the growth outturn will meet or exceed the forecast for 2011 made by the Office for Budget Responsibility in June 2010.

[The Chancellor of the Exchequer (Mr George Osborne)]

The Office for Budget Responsibility’s latest economic forecasts were published in March. The whole purpose of creating the OBR was to have forecasts that were independent of the Chancellor, so for me to give a running forecast would completely undermine the institution. To strengthen its independence, I am today announcing the appointment of Lord Burns and Kate Barker as the new non-executive members of the OBR. They were posts that the Treasury Select Committee recommended that we create. I am also announcing today the new appointment of Michael Cohrs as a non-executive director of the Court of the Bank of England, along with the re-appointment of Sir Roger Carr, Lady Susan Rice and Harrison Young—

--- Later in debate ---

[Mr Osborne]

The OBR is a new institution that I think we all agreed should be established and put on a statutory footing. It is independent, and it makes independent forecasts. If the Chancellor of the day started giving a running commentary on those forecasts or making his own forecasts, that would completely undermine the OBR. The institution was introduced in order to give more credible independent information to Parliament. It is interesting that, in the acceptance speech that the former Foreign Secretary would have given if he had become the Labour leader, one of his central points was that Labour should embrace the OBR as an idea that it should have had while in office and that it should support in opposition.

[Debbie Abrahams]

Over the past six months, we have seen the economy flatlining, whereas in the previous six months we saw growth of 1.8%. Can the Chancellor explain to the House exactly what has changed?

[Chris Ruane (Vale of Clwyd) (Lab)]

The Government.