Amendment of the Law
Debbie Abrahams Excerpts(11 years, 6 months ago)
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Vince Cable
Let me deal with one of the points of righteous indignation that is made about welfare cuts—the point about the so-called bedroom tax. The problem with it is that the idea of relating housing benefit to the size of accommodation did not start under this Government; it was a long-standing policy in relation to people in private rented accommodation. Where we have disagreed with our Conservative colleagues—we have made this explicit—is in saying that the so-called bedroom tax should not apply retrospectively. If people are given an offer of accommodation in the council house sector and they turn it down, they should pay it, but if they do not receive a satisfactory offer, they should not. That is a point of difference. The sheer righteous indignation bears absolutely no relation to the history of this problem.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Secretary of State give way?
Vince Cable
I will take the hon. Lady’s intervention later.
Let me turn to the broader issue of living standards. It is blindingly obvious that in all the western countries that were hit by the financial crisis, there has been a fall in real wages. That has happened everywhere. Countries—including ours—were made poorer, production fell, productivity fell and, although we got more people back into work, real wages fell with it. I am putting this in terms of basic economics. Unless real wages had been kept “sticky”, as Keynes termed it, they were bound to fall, and they have fallen. The alternative was what has happened in France, Spain and Italy, where real wages were maintained, but where there has been mass unemployment as a result, particularly among younger workers. That has not happened here, which is a blessing.
The figure that the Chancellor produced yesterday is highly relevant, because what matters to households is not just wages but people’s take-home pay and disposable income. Disposable income involves not just wages but tax credits and taxation, and families are now better off then when we came to office. That is a result of several interventions, the most crucial of which was lifting the tax threshold. We made the radical, massive change of lifting the income tax threshold from £6,700 to £10,800, and that has brought a great deal of relief at a time of economic crisis to 27 million people. Three million people have been lifted out of tax altogether—mainly women on part-time earnings—and that has benefited workers by the equivalent of £800 a year. That has cushioned working people from the effects of the crisis, and there should be some acknowledgement of that from the Opposition Benches.
Debbie Abrahams
I must challenge the Business Secretary on what he has said about the impact of this Government, which includes the Liberal Democrats and their policies. The Institute for Fiscal Studies clearly states that as a result of tax and spending changes, low-income families, particularly those with children, are proportionately worse off, and incomes have reduced by £1,100. We cannot avoid those facts.
Vince Cable
As I said, the whole of society was hit by the economic crisis, but it is clear that the poorest in society have not been proportionately badly hit, and the people at the top have paid proportionately more. I remind the hon. Lady of what the IFS data said, which was that if we take into account inequality in all its aspects—that includes tax, tax credits and earnings—in income terms Britain is more equal, or as equal now as it was under a Labour Government. Labour Members may need to explain why the economy got into that position when they were in office, but that is what the independent sources tell us.
In addition to the tax allowance, the other key step has been protection of the minimum wage and the Low Pay Commission. I was alarmed by comments made yesterday by the Leader of the Opposition about the minimum wage. I am not one of the people who wants to trash everything that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) did when in office. There were some mistakes but also some good things, not least making the setting of interest rates independent through the central Bank—a very positive step. Supporting science was another positive step, as was the establishment of the Low Pay Commission as a mechanism for deciding what is in the national interest as far as the minimum wage is concerned, and how we balance the perfectly natural wish of working people to see their wages rise with the overall interests of the economy and employment.
What was alarming about the comments of the Leader of the Opposition yesterday was that he now wishes to turn that valuable inheritance into a political football. I think he originally said that he would determine politically that there should be an £8 minimum wage, regardless of the conditions of the economy. Yesterday it was “at least £8”, but why not £8.50, £9 or £10? We could all bid in a Dutch auction on the minimum wage, but it would be ruinous for the economy.
Mr Brian Binley (Northampton South) (Con)
As ever, I am most grateful to you, Mr Deputy Speaker. It has been an honour to serve under you. This will be my last speech in a major debate and I am delighted that you are in the Chair.
Let me continue to be nice by telling the Economic Secretary how much I welcome this Budget for growth. It is based on five years of careful management, the provision of affordable services and the gradual reduction of a massive budget deficit. I pay tribute to my hon. Friend and the Chancellor for creating this opportunity for growth, which I believe many businesses and taxpayers up and down the country will welcome enormously.
Some years ago, I said that my grandmother would have told this place, “You have only two options when you’re in financial difficulties: earn more or spend less.” Listening to the Opposition’s arguments, it seems to me that they believe that, while earning more has some merit, spending less has no merit at all. My grandmother would have said that they were foolish. I would not dare say that in this place, but I know that she would have been pleased with the Budget this Government have produced.
It does no harm to recognise the inheritance this Government were dealt by a Labour Government who had themselves inherited a golden legacy that they frittered away. [Interruption.] It certainly was a golden legacy and was said to be so by pretty much every economist in the country, except, of course, for those affiliated to the Labour party. The Labour Government engineered a growing structural deficit from 2002 onwards. That is totally irrefutable. The deficit they left was not, as has been said, £140 billion; in their last Budget, they left a deficit of £163 billion.
If we consider that 1 billion seconds is 32 and a half years, we may get an idea of what £1 billion looks like. What a massive, massive sum.
Debbie Abrahams
The hon. Gentleman is as charming as ever and I am grateful to him for giving way. I want to correct the record. I am sure he will acknowledge that there was a global economic crisis in 2007-08 and that we reduced the deficit from 47% to 37% of GDP.
Mr Binley
The deficit was reduced because you spent more money—of course that would reduce the deficit.
I thank the hon. Lady for her intervention, because it leads me on to the next part of my speech. You failed to mend the roof while the sun was shining. You failed to recognise the fact that there was a global storm approaching. You massively increased borrowing when every business in the land was doing just the opposite—I can tell you that as a business man. Indeed, you almost broke the country.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I will deal with the closing remarks of the hon. Member for Daventry (Chris Heaton-Harris) later in my speech.
The rhetoric from both parties in the Government has been breathtaking. It certainly has not matched the reality for my constituents in Oldham East and Saddleworth and for constituents across the country. For them, all is not rosy. As we have already heard, most working people on average earnings are £1,600 a year worse off than they were in 2010. According to the Institute for Fiscal Studies, families are on average £1,100 worse off if we take into account tax and benefit changes. That is important to consider. We know that our NHS is at breaking point, with A and E targets and cancer targets all being missed on this Government’s watch. Trying to get access to a GP is a challenge, and frail older people have to fend for themselves after being isolated and left alone because of the £2.7 billion cuts to social care.
The sick and disabled are vilified for needing support from the state, and are made to go through dehumanising assessments and told to take up their bed and walk, as this Government will have cut £24 billion in support for them by 2018. Food banks provide subsistence to people left poverty-stricken through benefits sanctions and from just being in a low-paid job. Young people feel as though they have been thrown on the scrapheap even before their working lives have started. This is just as I remember it in the 1980s, when my first job was with community groups and I worked specifically with unemployed young people. Small businesses struggling with late payments from contractors and cash-flow issues are being driven to the brink, with the Government doing little to help them. This is Britain in the 21st century, the sixth wealthiest country in the world, under this Tory and Liberal Democrat Government.
After what has been said by Government Members crowing about their economic performance, let me take them back to an economy that was growing at the end of 2010. It then flatlined for three years, and, yes, we have seen a little bit of growth, and every bit is welcome, but we know from the International Monetary Fund that it is all going downhill from now, despite what the Government have said. We have had the worst recovery in 100 years, and they have squandered the growth that was given to them at the end of 2010. We have the second lowest level of productivity in the G7 and we are 19th lowest in terms of average productivity—the worst figure since 1992. The total annual value of UK exports decreased by 3.9% in the year ending 2014. As we have heard, the Government are borrowing £219 billion more than they estimated in 2010. How about that for economic incompetence? Just this year, they will be borrowing £91 billion as opposed to the £37 billion they said they would be borrowing.
On unemployment, the jobseeker’s allowance figures look positive, but evidence from eminent academics has shown the effects of benefit sanctions on JSA claimants. One in five JSA claimants will be sanctioned, and 43% of them will leave JSA, 80% without getting a job. What is being reported in official statistics is not reflected in what is really going on. We have had the biggest rise in self-employment in 40 years—an increase of 15%. For many, that is a positive thing and a good way of working, but the average income of self-employed people is £10,000. We have already heard about zero-hours contracts and the levels of under-employment. The picture is not all rosy.
On the inequalities that this Tory and Liberal Democrat Government have presided over, according to the IFS, families on low incomes, particularly families with children, have lost proportionately more of their income than any other group as a result of tax and benefit changes. There is clear evidence that parental income affects a child’s cognitive and social development as well as their health. This Government are condemning another generation before they have even got started. House of Commons Library figures show that after housing costs have been taken into account, 4.1 million children are living in absolute poverty—half a million more than in 2010, a figure that will increase to about 1.1 million by 2020, according to the Institute for Fiscal Studies.
The net effect of the Government’s fiscal policies has been to favour the rich at the expense of the poor. It does not stop at family incomes. Shockingly, as many hon. Members have said, the evidence shows that the link between public spending and life expectancy is not being recognised, and the Government have decided to cut resources allocated to the public sector in the most deprived areas. One can only draw the conclusion that the Chancellor is on some kind of evangelical mission. The Secretary of State for Work and Pensions wants to restrict child benefit to the first two children in a family to instigate what he calls behaviour change, which is code for wanting poor families to have just two children, and perhaps the Chancellor is of a similar mind.
We are already seeing the effects of these cuts in the dire circumstances that people are finding themselves in. We have seen a surge in the number of food banks, with nearly 1 million food parcels delivered last year. In my home town of Oldham, we never had a food bank until 2012. Last year, it delivered meals to 5,000 people, including 1,500 children. We have a level of malnutrition that we have not seen since the ’30s, as well as increases in rickets and scurvy—and this is 2015. After decades of decline, suicide rates are going up, with more than 4,500 male suicides in the UK in 2012—three and half times the figure for women. Again, this is exactly what happened in the 1980s.
At the same time, we have more billionaires per capita than anywhere else in the world. The wealth of five families is equivalent to that of the poorest 20%—in other words, 13 million people—and boardroom pay has rocketed. According to the High Pay Commission, FTSE 100 chief executive officers earn 185 times the salary of their average employee, and that does not reflect performance. As I have said, incomes have fallen by £1,600. In my own town, one in three people are paid below the living wage.
The Government have done nothing about those damaging inequalities. I am sure that some Government Members still believe the discredited theory that inequalities are good for motivation, but that and the theory of trickle-down economics have been disproved. Overwhelming evidence now shows how bad inequality is for the economy and for society as a whole. The IMF has come out in support of Joseph Stiglitz’s analysis that inequality is a drag on growth and can also make growth more volatile. The OECD has also rejected trickle-down economics and said that the resulting inequality has slowed growth, not increased it, through negative effects on human capital. The Equality Trust estimates that the UK loses £39 billion a year as a result of inequalities, and the work of Richard Wilkinson and Kate Pickett has described how reducing the gap between rich and poor can increase not only life expectancy, but social mobility, educational attainment and happiness, while reducing crime.
Andrea Leadsom
I apologise if I misunderstood the right hon. Gentleman’s comment. Nevertheless, Help to Buy will provide support for young people in his constituency looking to get on the housing ladder.
My right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) gave an interesting insight into her experience as an economics teacher, particularly in respect of the terrible time of our exit from the ERM. I was working in a dealing room then, and like her I have always thought that financial stability is key to our security, our jobs and our future. As she knows, I agree totally with her about the vital importance of interventions to support the mental health of children, mums and babies in the perinatal period, and I thoroughly congratulate her on her work in that area.
On the hon. Member for Easington (Grahame M. Morris), the best I can say is that I agree with my hon. Friend the Member for Daventry (Chris Heaton-Harris). Although I disagree with what the hon. Gentleman said, he is too courteous for me to pick a fight with him about it. I agree with my hon. Friend the Member for Daventry on two other points—first, that Northampton Saints are an excellent rugby team, and secondly, that it is people and businesses across the UK that, through their hard work and aspiration, deserve the credit for our economic recovery.
Finally, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) talked about the biggest increase in self-employment in 40 years, and then somehow suggested it was a bad thing. I hope her aspiring new business owners were listening. In truth, under this Government, the richest 20% of households are contributing in cash terms over four times more than the poorest 20%.
Debbie Abrahams
For clarity, I said that although some people might want to adopt the lifestyle, it had to be recognised that the average salary of people who are self-employed is about £10,000.
Andrea Leadsom
I am glad that the hon. Lady has clarified what she meant.
I would like to tackle head-on the lazy idea held by many Labour Members that when a country grows, it is the Government who do the running. It is not the Government; it is businesses and hard-working individuals.
In this Budget, as in all previous fiscal statements, this Government have demonstrated our pro-business, pro-growth credentials. That means more tax credits for key sectors, whether they be energy-intensive heavy industries or creative industries maintaining Britain’s status as a cultural centre of the world. It means further action to stimulate investment in the North sea through investments and tax cuts, and a long-term strategy for superfast broadband, enabling the next step in the technological revolution.
Yesterday, my right hon. Friend the Chancellor announced that next April we will abolish national insurance altogether for employing a young apprentice. We will be holding a major review of business rates, reflecting the fact that the old system needs to be reviewed so that it works better to support aspiring business owners in our country. He announced the abolition of class 2 national insurance contributions for the self- employed, and the abolition of the annual tax return altogether. I can tell you, Madam Deputy Speaker, that I had phone calls to my office from two constituents, one of whom said that the Government’s Help to Buy ISA will persuade them to vote for me, while the other said that the abolition of the annual tax return will encourage them to do the same. On the basis of my own small opinion poll, this is already making a difference.
Future Government Spending
Debbie Abrahams Excerpts(11 years, 6 months ago)
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Mr Anderson
I rarely disagree with my hon. Friend, but I could never bring myself to watch the Tory party conference. However, I heard what they said, and it is quite clear what they would do: they would have to take £7 billion from somewhere, and it will be the public sector. They are committed to going back to the level that things were at in the 1930s, when people in this country were, quite frankly, living like slaves, working in conditions that were abhorrent and going home to houses that were a disgrace. That is why when my party came into government in 1945 we had a massive house building project. That is why we nationalised the coal industry, the rail industry and the steel industry—the Conservatives had let them run into disrepair for decades and did not care a toss about the people who worked in them and lived in conditions that were worse than we could ever imagine.
The Government have not only failed on those levels—they have also failed to collect money because they have made people go out of wealthier jobs into low-paid jobs where they are not paying income tax or national insurance contributions. They have collected £68 billion less in income tax than they projected and lost £27 billion in national insurance contributions. You couldn’t make it up, Mr Deputy Speaker. We can see where they want to be. They want to take us back to the 1930s, when we had a low-paid, low-skill work force who were frightened to stand up to the boss, made to go to work when they did not want to, and made to work for poverty wages. That is exactly what they want to us to go back to—unless, of course, you are one of their friends who happens to be the chairman of a FTSE 100 company, and who last year, on average, had a £4.27 million salary. That is a lot of money, even for the Conservatives. Perhaps it is not as much as some of them earn, but it is a lot of money. The directors in those firms got a 21% pay rise, on average, while at the same time the Government are denying a pay rise of even a meagre 1% to nurses, firefighters and care workers—the people who keep this country running day in, day out, and contribute more in a day than some of these leeches will do in a lifetime.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend is making a very powerful speech. Is it not also a disgrace that young people are being hammered in so many different directions by this Government and have seen an average 7.8% drop in their income over the past five years?
Mr Anderson
It is an absolute disgrace. One of the saddest things of my life is that I might go out of it—I hope a long time from now—and leave behind a generation who are worse off than I was, for the first time ever. We should hang our heads in shame if that is where we end up with the young people of this country, because it is clearly where we are going. During the past week, I have been approached by a young man who was an apprentice, and who became ill and had to come off work. He was not even allowed to get statutory sick pay. That is how disgraceful things are in this day and age.
Bankers’ Bonuses and the Banking Industry
Debbie Abrahams Excerpts(11 years, 7 months ago)
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Andrea Leadsom
That is just another typical Opposition ploy. At that point, the Conservative party was in opposition and the Labour party was in government. It is absolutely unconscionable for the Labour party to suggest that the Opposition of the day should have saved the Labour Government from their own excesses.
Andrea Leadsom
My hon. Friend is quite right. It is extraordinary that Labour Members have the cheek to come to the House and suggest that Conservative Members are somehow responsible.
I want to draw to the House’s attention the very prescient quote from the former Prime Minister when, representing the previous Government, he addressed the City in his Mansion House speech in 2002:
“What you as the City of London have done for financial services, we as a Government aim to do for the economy as a whole.”
And didn’t they just? It is absolutely extraordinary that under the “intensely relaxed” Labour Administration, bankers were rewarded for taking excessive risk, and if they failed, were allowed to get away with it—heads they win, tails the taxpayer loses.
Andrea Leadsom
My hon. Friend is exactly right that the Opposition are simply trying to recycle something as a distraction. I am truly delighted that the motion gives me the opportunity to set out the wide-ranging measures that this Government have taken to sort out the appalling legacy of the Labour party on banks and remuneration. We have taken an extraordinarily wide-ranging set of measures to sort out a mess left, once again, by a Labour Government.
Debbie Abrahams
I am grateful to the hon. Lady for ultimately giving way. Will she remind the House how much more the Government are borrowing now compared with 2010?
Andrea Leadsom
The hon. Lady will know that the Government have taken steps to bring down significantly the amount we are borrowing each year to get our economy on the road to recovery after the disaster caused by the Labour party.
To return to the point of this debate, the real fact is that the public are absolutely right to be furious about the behaviour and misconduct of banks. It still feels as though there are fresh examples every day of the shameful practices that went on in the bad old days. The public will want to know what this Government have done to sort out the mess left by the previous Government.
I can tell the House that, under this Government, we have the toughest remuneration regime of any major financial centre in the world; we are making banks raise their standards, rebuild their reputation and get back to the job they used to do prudently and respectably for centuries; and we are making sure that we never go back to the bad old days of banking.
Autumn Statement
Debbie Abrahams Excerpts(11 years, 9 months ago)
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Mr Osborne
I thank my hon. Friend for what he has said. I should have been extremely disappointed if my announcement of a big improvement in our support for postgraduate students had not been welcomed by the Member of Parliament for Cambridge. He is absolutely right: the lack of financial support available to people doing post-grads is indeed a barrier, which falls particularly on those from low-income backgrounds, and which has been identified as a real problem in a number of reports on social mobility. I am glad that we have been able to work together to bring about this change.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The OBR’s analysis clearly states that borrowing over the forecast period will increase above and beyond what was forecast back in March, predominantly as a result of the reduction in tax receipts. Far from rebalancing the economy, and failing to meet his own deficit reduction targets, the Chancellor is presiding over a low-pay, zero-hours-contract economy in which one in five people—one in three in my constituency—are paid below the living wage. Is it not an insult to the 3 million people on the lowest incomes, and an insult to the value of British fair play, that the Government will be hammering them yet again with a potential cut in tax credits?
Mr Osborne
Today we have increased the personal allowance, which increases the number of low-paid people taken out of income tax to 3.5 million.
It is interesting to look at the caricature of what is happening in this country that Labour Members have tried to present. They said that all the jobs were part-time; it turns out that 85% of them are full-time. They talked about the gender pay gap; of course that remains a challenge, but it is at its lowest level in British history, and has fallen since the period of the last Labour Government. They complained about the abuse of zero-hours contracts; I had to sit there for 13 years listening to Labour Chancellors, and never once did they introduce a reform of zero-hours contracts. That reform is now taking place, and we are ending the abuse that comes with the exclusive contracts.
Ultimately, the people who suffer most when the economy fails—when economic stability is destroyed and unemployment rises—are the poorest people in the country. That, sadly, was their experience under a Labour Government, but under this Government, employment is growing and economic security is returning.
The Economy
Debbie Abrahams Excerpts(11 years, 10 months ago)
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Chris Leslie
I was about to give way to my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams).
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend is making a powerful argument about the appalling economic context that the country faces. Does he agree that the reduction in full-time jobs—there are 670,000 fewer full-time jobs in the economy since 2008—is an indictment of the poor health of the economy under this Government?
Chris Leslie
My hon. Friend is right: the labour market is changing, and not always for the better. The instability, short-term assignments and zero-hours culture that are now much more prevalent add to the insecurity experienced by so many of our constituents.
Priti Patel
The Labour party created even more red tape, regulatory burden and excessive regulation on business, and I commend my hon. Friend and the businesses in her constituency on everything they are doing on job creation.
Britain tumbled down the international league tables under the Labour Government: from 11th to 23rd in the world in terms of our corporate tax regime; out of the top 10 in the global competitiveness league; and out of the top 10 in terms of the ease of starting a business and doing business—we were level pegging with Mongolia on that. Levels of Government spending under Labour were catastrophically higher than we could afford. We had the most over-indebted banks and households, and we were on course for having the biggest budget deficit of any major economy in the world.
The British public are still experiencing the impacts of the Labour Government’s economic policies but, rather than coming to the House to apologise for the economic carnage that they created, Labour Members have the audacity to come here today and ask us why we are not clearing up their mess quickly enough. I think we all know that the past four years have been hard, and we cannot magic up a better standard of living from the economic carnage that we inherited. The only way to deliver for people up and down the country is to put in place a lasting, sustainable and healthy recovery.
Debbie Abrahams
Does the Minister count among the Government’s successes the waste of £2.8 billion on welfare reforms that was identified in a National Audit Office report this afternoon?
Priti Patel
Our welfare reforms have been focused on ensuring that work pays. The Opposition were fully opposed to our reforms to the welfare system, and they still stand against welfare reform today—
Income Tax
Debbie Abrahams Excerpts(11 years, 10 months ago)
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Chris Leslie
There are plenty of the Chancellor’s friends, some of them standing opposite, who want that to happen. The Mayor of London, Boris Johnson, says:
“The Government should open up some more blue water, and cut the top rate back to 40p.”
The hon. Member for Altrincham and Sale West (Mr Brady) says that 40p would be his priority. The politics of the 45p cut
“was very straightforward and it really wouldn’t have made any difference to the popularity…of the measure if you went from 50p to 40p rather than 45p.”
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Does my hon. Friend agree that the important point is that, yes, a marginal income is raised through the top rate of tax, but it is also about the principle? We know that the UK has one of the highest levels of income inequality, with the impact that that has on matters such as life expectancy and health. If the Government do not recognise the divisions and hardship that this is creating, it is a sad day.
Taxation of Pensions Bill
Debbie Abrahams Excerpts(11 years, 10 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister explain why there has been a change in terminology from “advice”—which the Chancellor mentioned in his introduction of the proposed measures—to “guidance”, which, unlike advice, legal protections are not associated with?
Mr Gauke
We made it clear, in the documentation that was published at the time of the March Budget, that the legal status of the support we have provided is “guidance”. That means that there is not a recommendation of a specific product; none the less, that support will be hugely helpful for those who will face choices. It is right that the role that we play—or facilitate—is about providing support in the form of guidance, rather than making recommendations of particular products.
I would like to provide Members with an overview of the different parts of the Bill. At Budget 2014, the Chancellor announced that everyone with a defined contribution pension could take it as they wished from age 55, and would no longer be subject to drawdown limits or income tests before being able to take their money flexibly. The current system denies people flexibility at the point of taking their pension. For those with the smallest and largest pension savings, there is the option to take their pension as cash, but for everyone else there are considerable restrictions. They have two main options: purchase an annuity or enter capped drawdown. Capped drawdown limits how much someone can take out each year to an amount calculated by reference to the amount they might have received from an annuity purchased with their fund.
Flexible drawdown already lets those with very high levels of savings to take their money however they want, taxed at their marginal rate, if they can prove that they have a guaranteed pension income for the rest of their life of at least £12,000. The Government have already reduced that from £20,000 to give many more people flexibility, but the first main change provided for in the Bill goes much further, making unlimited drawdown available to anyone with a defined-contribution pension and removing the limits on what can be withdrawn from those funds.
The Bill also ensures that existing drawdown funds can, if the individual wants, be converted to flexi-access drawdown, so that those currently in capped drawdown will be able to benefit too. The aim of the changes is to give all the 320,000 people who retire every year with defined contribution savings greater choice about how to access those savings, regardless of how big their pension pot is. The changes will take effect from 6 April 2015.
Some people think that this change—allowing everyone access to their own hard-earned money—will cause people to spend recklessly what they made sacrifices to save. The Government do not agree. Those who have saved the money over a lifetime should be trusted to make their own decisions about how best to use it to provide themselves with an income in retirement. Through the guidance guarantee, we are making sure that customers have access to impartial guidance on how to make the most of their money.
Mr Gauke
I would like to make a little progress. That brings me to the second main change in the Bill, which is to make annuities more flexible. Current tax legislation caters for two broad categories of retirement income: lifetime annuities and drawdown. As I have set out, we are making drawdown much more flexible. Let me explain how we are doing the same for annuities.
We think annuities will still be the right product for many people, as they provide the valuable security of a guaranteed income for life. The current requirements for a lifetime annuity, however, lead to an inflexible and restrictive product, and there is a clear demand for more flexible ways of getting income from one’s pension pot. We want these reforms to stimulate competition and innovation in the retirement income market. We want providers to innovate and create new products that will more closely reflect the changing needs of their customers. We have consulted extensively with industry on the changes that it would like us to make to enable this kind of innovation. The Bill will deliver those changes by allowing annuities to decrease, and by removing the 10-year guarantee period for guaranteed annuities. That gives significantly more flexibility to providers to offer products that meet individuals’ needs more closely. Those changes will apply to annuities sold after 6 April 2015.
The third major change in the Bill is a new method by which people can access their pension. Currently, people who want to take their pension as cash have to take their whole tax-free lump sum—25% of their fund—and place the other 75% in a drawdown fund. Any money they then draw down is taxed at their marginal rate. The Bill will introduce a new option by giving individuals the flexibility to take one or more lump sums from their pension fund—with 25% of each payment tax-free and 75% taxed at their marginal rate—without having to enter into drawdown. This lump sum is known as an uncrystallised funds pension lump sum, or an UFPLS. [Interruption.] It is perhaps not the most elegant of names, but try doing better with “uncrystallised funds pension lump sum”. These payments can be taken from funds that are uncrystallised—that is, have not yet been accessed. It will be open to schemes to provide this option from 6 April 2015 onwards. This does not change the amount of tax people pay on their pension, but it does provide them with extra flexibility and further choice about when and how to access their savings in a way that suits them.
I want highlight changes that we are making through the Bill to ensure that these reforms, which are intended to give individuals more choices about their income in retirement, are not exploited for tax purposes. If the Government were to take no action, an individual over the age of 55 could divert their salary each year into their pension, take it out immediately and receive 25% of it tax-free, thus avoiding income tax and national insurance contributions on their employment income. That is not the intention of the reforms.
The Government spend a considerable amount a year on pensions tax relief and have a responsibility to ensure that the money is used for genuine pension saving. Under the current system, individuals in flexible drawdown have no annual allowance. They are not entitled to tax relief on anything that they contribute to their pension after they have accessed it flexibly. Extending this rule under the new system would be disproportionate and would disadvantage average savers. We are in an era of much more flexible retirement. An individual might access their pension flexibly and then decide to return to work, or access it while working. They might still want to save into a pension. They might be automatically enrolled into a pension and be subject to a tax charge on the amount contributed. If we kept the current system, there would be a strong incentive to opt out of auto-enrolment.
Instead of having no annual allowance, individuals who access their pensions flexibly will, under the new system, have a lower annual allowance of £10,000, which will apply to their defined contribution savings. This approach allows people the flexibility to contribute to their pension even when they have flexibly accessed their pension rights. At the same time, it ensures that individuals do not use the new flexibilities to avoid paying tax on their current earnings. It will prevent those with the means to divert large sums into pensions from doing so, while allowing the vast majority of individuals to continue to save. The Government have worked very closely with industry to develop this measure, and will continue to do so to ensure that it remains fair and proportionate.
Mr Gauke
The Office for Budget Responsibility will return to the issue of the forecast at the time of the autumn statement. Mr Greenwood’s evidence featured some eye-watering numbers, but they were based on extraordinary assumptions about behaviour. All the changes resulting from the reforms that we have announced since the Budget will be announced in the autumn statement in the usual way. We certainly do not recognise some of the numbers that have been floated in relation to cost, but the numbers have not yet been certified by the OBR, so I cannot give the hon. Gentleman the answer that he seeks at this stage. Of course we have been mindful of the impact on the Exchequer, but we believe that our proposals will not put it at risk of losing substantial sums. As I have said, we are not preventing people over 55 from drawing down part of their pensions while continuing to make contributions, or retaining the flexibility to do so. We might have closed off that option, but we decided not to.
Debbie Abrahams
The Minister is indeed being generous with his time. May I ask when the Treasury is likely to publish its assessment of the risks associated with the delivery of this project? It has obviously identified a number of such risks, and it would be helpful for everyone to see the assessment.
Mr Gauke
A number of elements are involved. We have already estimated the costs resulting from the Budget announcement, and, as is customary, we will update the House about the cost of further changes that we have made in the autumn statement. We need to take account of a number of policy announcements that have been made since the Budget. The information will be available once the numbers have been certified by the Office for Budget Responsibility—that is, at the time of the autumn statement.
The last change that I want to explain is the change that the Government are making to the tax charges on pensions when someone dies. We will table amendments in due course to enact those changes in detail, but the Bill currently provides for certain lump sums to be paid from pension schemes when someone dies under the age of 75. It ensures that when someone dies with money in a drawdown account before reaching the age of 75 and a lump sum is paid from it, that sum can be paid tax-free. It also ensures that if someone dies with a pension after reaching the age of 75, the tax charge on a lump sum paid from it is reduced from 55% to 45%, and it reduces the tax charge when someone over 75 receives a serious ill-health lump sum to 45%.
The Bill makes a number of other changes, which I will summarise briefly. They include the introduction of a permissive statutory override, which will allow schemes to make the types of payments set out in this Bill without the need to change their scheme rules; provisions to ensure that the new system is reflected in the rules governing overseas schemes involving UK tax-relieved funds; allowing payments from guaranteed annuities to be paid to beneficiaries as a lump sum if they are under £30,000; and measures to ensure that people cannot gain an unintended tax advantage by becoming temporarily non-resident.
Our pension reforms have been extensive and fundamental. We have taken steps to provide a solid foundation for private saving by reforming the state support that is on offer and introducing automatic enrolment. However, it is also vital to give people an informed choice, and the Bill introduces welcome changes to ensure that that happens. It makes the tax system fairer by ensuring that people have more choice in regard to how they access their savings, while also preventing people from exploiting the new flexibility in order to gain unintended tax advantages. At the heart of it are three key principles: responsibility, fairness, and individual choice. I commend it to the House.
Debbie Abrahams
Is my hon. Friend concerned about the question of the capacity to deliver the advice that the guidance guarantee is meant to supply? According to evidence that the Pension Schemes Bill Committee took last week, the figure is less than 25%. It is not just that poor advice might be given; there may be none at all.
Cathy Jamieson
My hon. Friend makes an important point, and I read with interest the transcript of the Committee’s evidence session. People need good-quality guidance to help them make the right choices. We must guard against mis-selling, for example—we cannot afford a repeat of the payment protection insurance scandal. We must prevent people from falling victim to exploitation and illegality. We know that pension liberation fraud has already endangered millions of pounds in savings, affecting many people. That is the reason why I am concerned about the way the Government have handled these reforms, which to some seem a bit rushed and haphazard.
Finance Bill
Debbie Abrahams Excerpts(12 years, 2 months ago)
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Madam Deputy Speaker
I am grateful to the hon. Gentleman—[Interruption.] Order. I am grateful to the hon. Gentleman. That is a point of order. He has put the record straight, and the House is grateful to him.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
On a point of order, Madam Deputy Speaker. Could you advise me, please, with reference to the inaccurate information that was given by the Prime Minister about waiting lists for A and E, and the fact that in 48 out of the past 52 weeks, A and E targets have been missed by this Government—
Madam Deputy Speaker
Order. I have already reminded the House that the content of Ministers’ speeches is not a matter for the Chair, and that is not a point of order.
New Clause 1
Oil contractor activities: ring-fence trade etc
‘Schedule (Oil contractors: ring-fence trade etc) contains provision about the corporation tax treatment of oil contractor activities.’—(Mr Gauke.)
Brought up, and read the First time.
Mr Gauke
Again, I am delighted to hear that. My hon. Friend lobbied us and made representations on behalf of his constituents for the inclusion of circuses. As a consequence of the consultation process and listening to the points raised by my hon. Friend and others, I am delighted that circuses will benefit from this tax relief.
Debbie Abrahams
It is important to support this area, but would the Exchequer Secretary like to comment on the National Audit Office and Public Accounts Committee’s recent reports criticising the Government and Her Majesty’s Revenue and Customs for not properly monitoring the tax reliefs in this area?
Mr Gauke
The Government will respond formally to that, but I believe that well-designed, well-focused and targeted tax relief, which is what we have, can help the economy grow and help particular sectors. Indeed, I am delighted that two examples have just been provided to us. This Government have successfully lowered rates, including corporation tax, which we have debated this afternoon, and, if particular sectors can be supported by a well-targeted tax relief, we should do that. We believe that, overall, our tax system is working to enhance the UK’s competitiveness. This Government have a good record in the creative sector in particular, and I am delighted that, through new clause 5 and new schedule 4, that will continue.
New clause 6 amends the list of excluded activities in the tax-advantaged venture capital schemes—the seed enterprise investment scheme, the enterprise investment scheme and venture capital trust schemes—so that a company whose trade consists substantially of the generation of electricity or heat that attracts renewable obligation certificates or payments under the renewable heat incentive will no longer qualify for investment under those schemes, with limited exceptions.
As in the case with the feed-in-tariff exclusion, community interest companies, community benefit societies, co-operative societies and Northern Irish industrial and provident societies will not be affected by the restrictions. The exceptions for co-ops will also apply to European co-operative societies, in line with the changes being introduced as part of the “taxation of co-operative societies” amendment, which aims to align and update all references to industrial and provident societies across the Taxes Acts. The restriction will also not apply where the electricity is generated by anaerobic digestion or by hydropower, nor where heat is generated, or gas or fuel produced, by anaerobic digestion. The measure will apply in respect of both UK ROC and RHI schemes and overseas equivalents. It will make the tax-advantaged venture capital scheme better targeted and effective in supporting small and growing, higher-risk businesses.
Amendments 5 and 6 make technical changes to clause 73, which will restore sense and fairness to air passenger duty by reforming the destination banding and introducing a simple to understand two-band system. As the House will know, we have devolved the power to set rates on direct long-haul flights from Northern Ireland to the Northern Ireland Assembly, which set the rates at £0 in the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012. As the structure of the tax, including the number and composition of the destination bands, remains a matter for the UK—the Northern Ireland legislation refers to the UK legislation—the Northern Ireland Executive have asked us to make the consequential amendments needed to their legislation so that it aligns with the UK legislation.
Office for Budget Responsibility (Manifesto Audits)
Debbie Abrahams Excerpts(12 years, 3 months ago)
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Nicky Morgan
It would be a little strange, but the shadow Chancellor and the Opposition have woken up to the need to rebuild their fiscal credibility as the election approaches. Of course they had 13 years to introduce an Office for Budget Responsibility, but no move was made.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister confirm how much more the Government are borrowing compared with what they planned?
Nicky Morgan
A lot less than the Labour party would have done had it been in government—[Interruption.] I thank the shadow Chancellor for the applause; that is very kind.
The creation of the OBR has meant that for the first time we have a truly independent assessment of the state of the nation’s finances. As the Chancellor noted in his Budget this March, it is to its credit that
“we now take it for granted that the figures presented at this Dispatch Box are not fiddled but fair and independent.”—[Official Report, 19 March 2014; Vol. 577, c. 781.]
By giving the OBR power to produce the official forecast, we have managed to remove many of the risks of the past and put the UK’s fiscal policy at the cutting edge of international best practice. The IMF said that
“strong fiscal institutions can enhance the credibility of consolidation plans”
and the shadow Chancellor wrote to Robert Chote affirming:
“Over the last three years, the Office for Budget Responsibility has become an established part of the framework of British economic policy with broad-based and cross-party support.”
I am sure that—it is not often I say this—we all agree wholeheartedly with the shadow Chancellor. It is also worth reminding right hon. and hon. Members that when the OBR was set up four years ago, it was deliberately designed to ensure that it would be independent and could steer clear of political wrangling. That independence and impartiality is crucial.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I agree with some bits in the speech the hon. Member for Hereford and South Herefordshire (Jesse Norman) has just made.
Debbie Abrahams
Certainly not the last bit. Last month’s elections were a wake-up call for all of us, and if we do not heed it, the future of politics will not look good. Far too many people feel completely disfranchised from politics and do not trust politicians. Too many people either stayed at home or cast their vote for a protest party. That is why I fully support the motion for the OBR to independently audit the spending and tax commitments of the main political parties in next year’s general election.
Undertaking that analysis would be a major step forward to help increase openness and transparency in politics. It would enable proper scrutiny and debate on the spending plans of all political parties, and enhance the democratic process. Ultimately, it would contribute to informed decision making, which is surely what we should all want. We are here as public servants to reflect issues in our constituencies and to develop policies that respond to those issues. Communicating our policies is part of our job. That is certainly the form of politics that Opposition Members want to develop.
This proposal is part of a process of addressing the major power imbalances and associated inequalities in our country, and we are absolutely determined to tackle it. We will continue to stand up to powerful vested interests, from media barons to the big energy companies. Information is power, and having information about how the Government or political parties intend to spend public money is very powerful.
Debbie Abrahams
I am sorry, but I do not have time.
To deny information to the public is absolutely shameful, and that is where the problem lies. Other parties do not want to change; they want the status quo. They want to preside over a country where there is growing inequality. The average person will have £1,600 a year less in their pocket next year compared with 2010, and the average family has lost £974 since 2010 because of the tax and benefit changes, but bank bonuses have soared and the top-to-bottom pay ratio for FTSE 100 companies stands at 300:1. The Government are presiding over such inequalities.
Sheila Gilmore
If we propose policies, as the Leader of the Opposition did last week on the provision of training opportunities for young people, it is clearly important for the public to understand that the policies will cost what we say they will cost, and surely this proposal would help.
Debbie Abrahams
Absolutely. That is my major argument. I cannot understand any party not wanting to provide information to enable people to make informed decisions.
Simon Kirby
Why does the hon. Lady suppose that we did not have an office for budget responsibility during the 13 years of the previous Government to provide the very transparency and credibility that she is now so keen on?
Debbie Abrahams
I am very grateful that we have an OBR now, but we should focus on how we use it.
To return to the current and growing inequalities under this Government, recent research on life expectancy has shown that people in Manchester are twice as likely as people in Wokingham to die early, and the figures are getting worse. My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) famously said:
“Inequality in health is the worst inequality of all. There is no more serious inequality than knowing that you’ll die sooner because you’re badly off”.
That is what is happening under this Government.
This Government are grossly unfair and unjust: they protect their own self-interest, they are out of touch and they are out of time. Should we be elected in 2015, we have said that we will not borrow more for day-to-day spending. In stark contrast to this Government, our decisions on how we spend resources will be based on fairness, justice and evidence.
We want our spending plans to be independently verified to make sure that they are robust. After all, that is what happens not just in the US, but in Canada, Australia and the Netherlands. I invite those who wish to enhance the democratic process and not to stifle it, as well as those who want a Britain for the many and not for the few, to join us in the Aye Lobby.
Chris Williamson (Derby North) (Lab)
Let me start with the hon. Member for North East Somerset (Jacob Rees-Mogg). He is a very clever man—he went to public school, I believe—but he was being deliberately obtuse. As my hon. Friend the Member for Edinburgh East (Sheila Gilmore) pointed out, he suggested that somehow the OBR would have to take account of every possible nuance and potential spending commitment that a shadow Minister might make at an obscure public meeting in a village hall in some obscure little village, perhaps in North East Somerset. Perhaps he has not had time—he is a very busy man—to read the motion tabled by the Labour party, but as my hon. Friend pointed out, we are asking the OBR to audit the manifesto, not inadvertent comments that may have been made off the cuff at an obscure meeting in a village hall in North East Somerset.
The Minister had the temerity—I will put it like that—to suggest that my right hon. Friend the shadow Chancellor was using this proposition as a fig leaf. How dare she! If anybody is responsible for indulging in trying to use a fig leaf, it is the Minister, the Chancellor of the Exchequer and the Government Front-Bench team. They suggested that somehow the OBR could not manage this proposal and that it would be unable to scrutinise things as an independent body. They said, “It is a new organisation, it is very young and it couldn’t quite manage it; let’s get the general election out of the way first.” However, members of the Treasury team know full well that our propositions are properly costed and would be doable. This is about the sort of country and society we want, and perhaps about the ideology and values that underpin Labour, compared with those that underpin the Government.
The truth—this is no coincidence—is that the Chancellor is not here because he is frightened. If I may quote the words of the late Margaret Thatcher, he is
“Afraid? Frightened? Frit? Could not take it? Cannot stand it?”—[Official Report, 19 April 1983; Vol. 41, c. 159.]
That would be especially so if the Labour proposition was actually subject to an independent audit by the OBR. That is the real reason why the Government are opposing the Labour motion.
Debbie Abrahams
Is this not also about wanting to maintain the status quo, and is it not revealing what that says about the Government and their political priorities?
Chris Williamson
Very much so. For all the great talk about a different approach to politics that the Prime Minister suggested he wanted to herald in, this is the very worst of the old politics.
The hon. Member for South West Devon (Mr Streeter) thought the proposal a bad idea in principle, but the British people deserve better than what they have had, and they certainly deserve better than what they get from the Conservatives. Routinely, what we see from Conservative Members, with their friends in the right-wing media, is a hysterical outpouring of misrepresentation of Labour manifesto proposals.
I remember Labour’s “double whammy” of tax and spend that the Conservatives used in 1992, and the VAT bombshell and all that nonsense, when we had actually gone to some lengths to be straight and honest with the British public and produce a shadow Budget. Yes, it was clear there would have been some tax increases, but they would have been for the richest people in society; eight out of 10 people would have benefited from Labour’s shadow Budget, but that was not what the Conservatives said or what was portrayed by the right-wing media. Had we had the opportunity of an independent audit of that shadow Budget, it would have been clear that the Conservatives were misrepresenting—or not, as the case might be—Labour’s proposals.
I understand why the Government are trying to resist the motion, but I want to see our proposals audited. On housing, for example, instead of giving billions of pounds to private landlords, it would be better value to invest that money in building houses for people. Surely, that would be a better use of money. It would be good for the OBR to scrutinise and audit that.
The Economy and Living Standards
Debbie Abrahams Excerpts(12 years, 3 months ago)
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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.
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.
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.