Living Standards
Debbie Abrahams Excerpts(11 years, 10 months ago)
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Greg Clark
I will give way to the hon. Member for Islington South and Finsbury (Emily Thornberry) because she has been patient.
Mr Robinson
The hon. Gentleman represents Gloucester, which is quite a successful manufacturing base in that part of the world. Manufacturing got hit, and if we do not support it through our policies more directly than we have before, it will continue to be hit as is happening under this Government. Let us look at the 1.2 million jobs. That is something of an achievement, but 60% or 70% have low pay. There is no long-term future in having low pay in those jobs; we must start to move away from that.
I am pleased that apprenticeships are doing so well for those aged over 20, but among the crucial group of those aged 16 to 20, as the shadow Chief Secretary to the Treasury said, there has been a 13% fall in the number of apprenticeships. That is a terrible figure and we need more skills and more apprenticeships where it matters. Meanwhile, as we all know, unemployment among the young has risen. When we were in government we created 2 million new jobs and had the highest level of employment ever in the country. The trouble was, quite honestly, that too many went to immigrants, and nothing was done to bring up the skills, willingness and ability of our youngsters to take on a higher proportion of the jobs created.
Debbie Abrahams
I am grateful to my hon. Friend for giving way given that the Minister refused point blank to let me intervene, even after several attempts. Does my hon. Friend agree that the employment rate is still lower now than it was in 2008, for all that Government Members like to claim that we are on the road to recovery?
Mr Robinson
I entirely agree and my hon. Friend makes a very telling point. There has been one area where we can honestly say the Government appear to have done better than we might have expected. On every other economic front, including that raised by my hon. Friend, their record is worse.
Let us look to the future. What do we need to ensure we sustain this recovery? First, we need the Government to accept the role of real incomes rising—a vital element in sustaining the recovery—and higher productivity to accompany that. Although we have done well in some areas of employment, productivity has gone down. We need the Government to accept the £10 billion infrastructure recommendations by the International Monetary Fund, and we need a housing programme and for building to get under way. All those things remain to be done. We need direct action. We should get rid of Ofgem, bring in a new regulator, and have direct action on energy and transport prices. Such a programme could sustain the recovery and we would see a slow build-up of real wages, which have been so devastatingly hit by Government policies.
Finance Bill
Debbie Abrahams Excerpts(12 years ago)
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Catherine McKinnell
The purpose of the proposed review is to encourage the Government to become laser-focused on the impact of their spending review. My hon. Friend is certainly laser-focused—not just on the impact of the cuts on local authority budgets, but on their impact on jobs and economic growth up and down the country.
Common sense tells us—well, it tells everyone but the Government, it would appear—that boosting growth and living standards this year and next would bring in tax revenues and reduce the scale of the cuts that will be needed in 2015, but nothing in the spending review will boost the economy over the next two years. It seems incredibly complacent and counter-intuitive to come to the House and simply plan for the consequences of economic failure in 2015. We believe that the Chancellor should have used his spending review to concede that he has got it wrong and has failed to secure growth. He should be proposing genuine investment in infrastructure this year.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My hon. Friend is, again, making a powerful speech. Is it not the case that 1% growth since 2010 would have generated an additional £335 billion in the economy? As a result of this incompetent economic policy, however, the Government are having to come back and ask for more.
Catherine McKinnell
My hon. Friend has made a very good point. I should be interested to hear the Minister’s response to the figures that she has given, and to what she has said about the lost opportunities for growth. Those opportunities, moreover, have not just been lost over the last three years; the Government are planning on the basis of a further two years of lost economic growth, which simply defies common sense. According to the International Monetary Fund, they should be investing in infrastructure this year to boost economic growth and the housing market, and to encourage job creation and increased tax receipts. The Government seem to be ignoring not only what we are saying, but what the IMF is saying.
Catherine McKinnell
I acknowledge what the hon. Gentleman has said, but I do not think that it can be linked to the economic reality—the reality of what households and people are experiencing. Many people are in insecure work, many are on zero-hour contracts, and many are self-employed. People all over the country feel that their living standards are being squeezed to such an extent that they cannot afford to pay for what they need by the end of the week.
Debbie Abrahams
The fact is that the employment rate is lower now than it was in 2008. Absolute numbers mean nothing. The rate is lower now than it was before the recession.
Madam Deputy Speaker (Dawn Primarolo)
Order. The debate is, to put it politely, starting to go a little wide of the new clause. Perhaps we could focus—in a laser fashion!—on new clause 10.
Nic Dakin
If we move away from the rhetoric and look at the facts, we will see that in their first three years this Government have spent £5.6 billion less in capital investment compared with the plans they inherited from Labour. That amounts to a £5.6 billion cut to spending that would have taken place had this Government continued with the plans they inherited from the previous Government. What has happened illustrates the importance to the health of the economy of continuity in large infrastructure projects. It is difficult to get that right between the parties, but we must recognise that there are plans for infrastructure spending so that the tap cannot be turned off easily, as the Government did with the Building Schools for the Future programme. If that programme had been carried forward, it would have assisted economic development, as well as continuing to revolutionise the learning environment of children up and down the land.
In the three months to April 2013, output in the construction industry was 4.7% lower than in the same period a year earlier. Construction output is down by 11.2% since the 2010 spending review. Construction—that energetic sector that drives the economy—continues to struggle. That is why we need to check, three months down the line, the effect on the economy of the decisions that are being made today to ensure that we are moving in the right direction.
The volume of new construction orders fell by 10% between quarter 4 of 2012 and quarter 1 of 2013. That is a massive dip. The number of new orders for infrastructure fell by 49.8% over the same period—the largest fall since 1987. The value of public sector infrastructure orders fell by £2 billion between quarter 4 of 2012 and quarter 1 of 2013. Those are significant contractions of demand in the economy.
That clearly has an impact on jobs. At the end of the day, jobs are what transform people’s lives. There is unanimity about that across the Chamber. The construction sector has lost 84,000 jobs since the Government came to power. That has an impact on the well-being and quality of life of individuals, as well as on the economy and the livelihoods of people beyond the construction industry.
There is much more that I could say, but I will return to the essence of this simple, helpful, concise new clause. I can see no argument for the Government not accepting it. It would help us all if they accepted it gracefully so that we can move forward together in harmony.
Debbie Abrahams
It is always a pleasure to follow my hon. Friend the Member for Scunthorpe (Nic Dakin). I agree with him totally and will speak in support of new clause 10.
The points made by the Institute for Fiscal Studies last week when the comprehensive spending review was published support what we are trying to do with the new clause:
“The documentation and explanation accompanying yesterday’s spending review announcements was woeful”.
It went on to say:
“Publishing such a small amount of information with little explanation is not an exercise in open government.”
That warning says it all. It reflects the Government’s total incompetence on the economy.
Last week’s spending review was further evidence that the Government’s economic policies are failing. They were warned by my right hon. Friend the Member for Morley and Outwood (Ed Balls) that cutting too far and too fast would smother growth, and that is just what has happened. The Chancellor promised that he would deal with the deficit by 2015. That will not happen. He promised that his emergency Budget and his first comprehensive spending review in 2010 would deal with the nation’s finances and put the country on the road to recovery. Again, that has not happened.
Mr Brooks Newmark (Braintree) (Con)
It is interesting to hear the hon. Lady refer to the right hon. Member for Morley and Outwood (Ed Balls). She is critical of our Government’s policy, but does she support increasing the debt? She criticises not bringing down the deficit faster, but if she followed her right hon. Friend’s policy, I am afraid the deficit would be going up, as would the debt.
Debbie Abrahams
I am afraid I totally disagree with the hon. Gentleman, but I thank him for his intervention. Perhaps I could mention that his right hon. Friend the Chancellor said:
“We have already asked the British people for what’s needed.”
He promised that he would not come back asking for more, yet last week we were here again. I hate to draw parallels with Oliver Twist, but it is a little like him coming back for more. In three years, the Chancellor has managed to hollow out the economy. He has not sorted out the City, and he is passing it off as everybody else’s fault, rather than his own.
Mr Newmark
There is a thing called “chutzpah”. Is the hon. Lady saying that her party bears no responsibility whatsoever for the enormous debt legacy and deficit the country was left with? The Government are making progress. More men and women are in work than ever before and the deficit is down by a third. Yes, the debt is not going down as fast as possible—
Madam Deputy Speaker (Dawn Primarolo)
Order. Mr Newmark, this is not an opportunity for you to make a speech; it was an intervention on new clause 10, and we would like it to be relevant.
Debbie Abrahams
On the hon. Gentleman’s final point, there is more to come in my speech: “And there’s more”, I promise—I never did a good impersonation of Frank Carson. On employment, however, the hon. Gentleman is wrong. Employment is lower than in 2008 and I will come on to that—those are official statistics, so he cannot refute them. At the end of 2010, our economy was growing, yet we have been bumbling along the bottom for three years. We had a double-dip recession and barely escaped a triple-dip recession. Growth has been downgraded at every turn.
Debbie Abrahams
No, I will not give way now, as I want to carry on with my argument. There may be an opportunity later.
Amazingly, just a few months after the Chancellor delivered his autumn statement, he had to halve his estimates for growth this year. We will be borrowing £245 billion more than planned since 2010, and as we have heard, the deficit will not be eradicated as the Government promised in 2010. In spite of being told how important austerity was for economic confidence and low interest rates, the triple A rating has been downgraded by not one but two credit rating agencies. The Government tried to blame everybody except themselves and said that austerity was the only way, only to receive an embarrassing rebuke from the chairman of the Office for Budget Responsibility who said that public spending cuts wiped 1.4% off growth last year. The International Monetary Fund followed suit shortly afterwards.
Should anyone wish to know how we relate to the rest of the world, we come 18th in the G20, due to our appalling economic performance. Even after the IMF revised its multiplier, the Chancellor remains steadfast. I could go on—[Interruption.] I am tempted. Our rate of inflation is way above the Bank of England’s 2% target. Employment is lower now than in 2008 and one in 10 people are underemployed. Whatever economic indicator we use, the Government are failing. By all accounts, the public are now starting to see that. Earnings are falling in real terms by 2%, and a recent poll showed that four out of five people feel that austerity is not working. As we have heard, the Chancellor is resolute and sticking fast. The Chancellor and the Prime Minister have also tried to pass this off as everybody else’s fault, but we need to examine the arguments put forward to explain why we are in this mess.
The previous Labour Government have been blamed, but that ignores the fact that this was a global financial crisis. We should remember that at the time the Chancellor and the Prime Minister failed to suggest that our financial institutions required more regulation. The Chancellor has tried to suggest that it is a public spending issue, but public spending as a percentage of GDP was 36.5% in 2007, compared to 42.5% in 1997. In other words, the Labour Government did repair the roof when the sun was shining. We brought down the deficit when we were in power, and it is outrageous to suggest anything else. After injecting funds into our banks, public spending rose to 60% of GDP, but the City’s debt was 245% of GDP. For this Government to pass the crisis off as a sovereign debt problem is absolutely outrageous. This was a problem in our financial institutions that they said nothing about when they were in opposition. They are still failing to grapple with this major issue. They have not managed to improve it.
The Government are trying to distract attention away from our financial institutions and blame what they refer to as shirkers and scroungers. Their attack on the social security budget is outrageous. We must not forget that 43% of social security is paid to older people through old age pensions. This attack is on our pensioners, and that is disgraceful. Growth of just 1% a year since 2010 would have generated £335 billion more. If growth had been 2% a year, that figure would have been £551 billion. Many economists have said that the lack of growth as a result of the failure of economic policy may not be recoverable.
On the areas taking the biggest hits in the spending review—I have just alluded to the Department for Work and Pensions—we must not forget local government. What will the cuts hit? They will hit our social care budget—the budget for the most vulnerable in our society. That is outrageous. Although the NHS budget has been protected, the Institute for Fiscal Studies predicts that job losses are likely to continue. We have already seen 300,000 people lose their jobs in the public sector. It is estimated that another 300,000 will lose their jobs in the next two years. The indirect effect of cuts to work and pensions, local government and the NHS will be to hit our pensioners and increase the number of children growing up in poverty, which will affect the rest of their lives, to more than 1.1 million. We are also seeing, for the first time in decades, life expectancy coming down in certain areas. I could go on, but I will finish there.
Mr Gauke
New clause 10 asks for a review of the impact on tax revenues of the measures set out in the 2013 spending review. I note that the Labour party again seems to be interested in discussing matters that are not in the Bill as such. Rather than discussing the Bill, Labour Members want to discuss the spending review—although given how the spending review went for the Opposition, they might have done better to spend last week debating the Finance Bill.
Let me explain briefly why new clause 10 is unnecessary. The House will be aware that in 2010 this Government created the Office for Budget Responsibility in order to ensure that the impact of Government policies is independently scrutinised. The OBR routinely publishes economic and fiscal outlooks, which provide a transparent and independent assessment of the impact of Government policy on the public finances, including receipts, and the economy. The impact of the policies announced in the 2013 spending round will be reflected in the OBR’s autumn forecast, which will be published alongside the autumn statement, so there is no need for a parallel review, which is what new clause 10 would involve.
We have had an interesting debate about the measures in the spending review. At times I have been somewhat confused about the Opposition’s position. I had understood that they accepted the spending review envelope, although it certainly did not sound like it from what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) said. She described local government spending cuts as “devastating”, so we assume that she opposes that measure. She was not quite clear about where further cuts would be made to compensate for that, but no doubt she will enlighten us in future.
We also heard the Opposition make the argument that we should take steps to boost growth now, rather than focusing on 2015-16. That was not an endorsement of changes such as planning deregulation, which can help growth, or a more competitive tax system. Indeed, we have tried to work out exactly what Labour believes in this area, but it was not clear. We have consistently heard about a five-point plan from the Opposition, including a cut in VAT, which was the flagship of that plan. On three occasions the hon. Lady was asked whether Labour still favoured a temporary cut in VAT under the current circumstances; on three occasions that question was evaded. I will happily give her the opportunity to intervene now if she wants to provide an answer. Do the Opposition believe in cutting VAT now? [Interruption.] She is not going to answer that question. I think we have seen the abandonment of the five-point plan—
Finance Bill
Debbie Abrahams Excerpts(12 years ago)
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Cathy Jamieson
Once again, my hon. Friend is absolutely correct. When we heard the spending review announcements last week, many members of the public recognised that this was a spending review brought forward not because it was part of some grand plan by the Government or something that they were always going to do, but because of the Government’s own failures on the economy—their failure to get the deficit down as promised; their failure to deal with borrowing; and, indeed, their failure to get growth back into the economy.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I congratulate my hon. Friend on her excellent speech. Further to confirm her point so that everybody gets it, did not the Chancellor promise not to introduce another spending review before the next election, and is not the failure of his economic policies the reason why we needed to have that spending review?
Cathy Jamieson
My hon. Friend is absolutely correct. Many members of the public will not look at the Chancellor’s spending review as a success—it is not—and they will recognise that this Government have, as we said at the outset, cut too far and too fast, so that we have had all the pain and none of the gain that the Government promised. [Interruption.] Conservative Members can sit and sigh, make all sorts of side interventions, look at the ceiling, look to their feet or whatever else, but the harsh reality is that the constituents we all meet on a day-to-day basis know that their living standards are dropping. They know that the money in their purse does not go as far at the end of the week, because prices are rising at a time when wages have stagnated at best, and are dropping at worst.
To return to the new clause, the bankers earning £1 million or more a year will benefit from the combined tax cut at a cost of at least £34.6 million. As I said earlier, we can understand why the public are angry and why they do not feel that this Government are acting fairly. Given some of today’s comments, I suspect that many of the people watching this debate will gain the impression that the Government are not listening to them, that they have no understanding of the issues they face and that, sadly, in many instances, if not all, they do not actually care.
Our new clause is a relatively mild-mannered amendment—one of the sort that we proposed regularly in the Finance Bill Committee, asking the Government to look at the impact of the policies that they are introducing. In this particular instance, the new clause asks the Chancellor to consider the effect that his tax cut will have on the level of bonuses in the financial sector. There 30 million taxpayers in the UK—30 million people who go out to work every day and have to pay their way—yet they realise that the Chancellor has decided to cut taxes for the richest among them. There is no getting away from that. That tells you everything you need to know, Mr Speaker, about this Tory-led coalition. Never mind the rhetoric of “We’re all in it together”, and never mind the risible attempts to paint themselves as the party of fairness as they tried to do in the spending review, because when it comes down to it, the Tories and the Liberal Democrats are effectively topping up bank bonuses with a further tax cut. That is the reality of what is happening.
Labour Members believe that there is a better way. We have consistently said that we would use a tax on those massive bonuses to fund a jobs guarantee for every young person who has been out of work for a year or more. We would do that because the trends in long-term employment remain extremely worrying.
Spending Review
Debbie Abrahams Excerpts(12 years ago)
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Mr Osborne
Yes, absolutely. We received representations to include the state pension. We are not going to do so, but of course that will ultimately be decided at a general election.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Given the 5% cut in the grant to museums and the increase in operational freedoms the Chancellor has announced, when does he expect charges to be introduced and how much does he think the average cost will be?
Economic Growth
Debbie Abrahams Excerpts(12 years, 1 month ago)
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Mr Jenkin
I totally agree. The irony of this debate is that a lot of people in UKIP are saying things that are similar to what is felt by a lot of people who would like to vote Conservative at the next election. There is a majority in this country, and I think the Prime Minister was right to say that he wants a different relationship—a new relationship with our European partners.
This entire debate is conducted on the premise that membership of the single market is indispensable to our national interest, is it not? Those who say we must remain in the EU come what may believe that the single market is indispensable to our national interest, but here are the facts. I have already mentioned how little of our GDP that we export in goods would be subject to tariffs were we not to have a free trade arrangement with the EU—probably around 8.7% of GDP. The idea that 3 million jobs are dependent on exports to the EU and that we would lose them if we left is a myth. There is no substantial evidence that we would lose any jobs. On the contrary, if we had a freer and less regulated economy, we would probably create more jobs by trading more easily with the rest of the world.
The EU is in long-term structural decline and our non-EU markets are expanding. The UK enjoys a trading surplus with the rest of the world—with which we trade much more effectively—and we have a £70 billion trade deficit with the EU. The rest of the EU would therefore not want a trade war with the UK; it would not be in its interest. The idea that Ireland, or even Germany, would enter a trade war with the UK is absolutely ridiculous.
By the Commission’s own admission, EU red tape costs 4% of the EU’s GDP. The single market does not reduce the costs of doing business in the EU; it is a regulatory burden on trading in the EU.
Mr Jenkin
I am not going to give way.
The EU internal market has become an end in itself—it is a means of promoting political integration. We must accept that, in the minds of our European partners, the single market is indivisible from the treaties. Even if the UK were to leave the EU altogether and apply for article 50, the EU would be legally required to negotiate free and fair trade with non-EU countries, so we would continue to have access to EU markets. That different perspective, which voters and large parts of business are beginning to appreciate, is shifting the burden of the debate.
Are we doing the right thing in creating such long uncertainty by putting off a referendum until 2017? Should we not have the referendum much sooner to bring the debate to a head? Are we too scared of our own voters to face the truth?
Finance (No. 2) Bill
Debbie Abrahams Excerpts(12 years, 2 months ago)
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Catherine McKinnell
I suggest that the hon. Gentleman is quoting selectively in leaving out the fact that the greatest impact is on the bottom decile of earners. When you take the cuts and changes overall, those at the bottom bear the greatest proportional brunt.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I want to support what my hon. Friend has said. The Chancellor’s own distributional analysis shows that the cumulative impact of tax, tax credit and benefit measures mean net reductions in income for the poorest 4% of households. That is not selective analysis—your own Chancellor’s analysis shows that 40% of the poorest households will be affected.
Catherine McKinnell
It is the hon. Gentleman’s own Chancellor who is quoting selectively from the figures. I thank my hon. Friend for that intervention.
The facts are clear, and beyond the facts is the reality facing households up and down the country. We see people from those households coming into our constituency surgeries week in, week out. We hear stories every day from families who are clearly struggling to make ends meet.
The reality of the Chancellor’s failing plan is bearing out, not just in the statistics but in the reality of people’s day-to-day lives. The cuts to tax credits and child benefit, the granny tax, the mummy tax, the appalling bedroom tax and the huge hike in VAT, which disproportionately impacts on the poorest, hugely outweigh any small benefit from the rise in the personal allowance.
Debbie Abrahams
It is a pleasure to serve under your chairmanship, Mr Hood.
I came to this House just over two years ago, and the main reason I got into politics was my belief in making Britain a fairer society—a more equal society in which the gap between the haves and the have-nots is narrow and in which we protect and look after our most vulnerable people. I believe that to be intuitively right and just, and there is also significant evidence to show that a fairer society benefits everybody in respect not only of life expectancy improvements and mental health benefits, but of educational attainments, improvements in social mobility and in rates of offending. All of us benefit from having a fairer society. Unfortunately, the measures in this Bill contribute not one jot to such a society.
As I said in my speech on the Budget a week or so ago, this Government absolutely fail the anti-poverty test. My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) mentioned the analysis by the Institute for Fiscal Studies, but there are also those of the Joseph Rowntree Foundation, the Child Poverty Action Group, the Resolution Foundation, the New Economics Foundation—and the list goes on. They all reached the same conclusion: the poorer people are, the worse off they are.
Raising the personal allowance does little for the lowest-paid workers, many of whom do not pay tax anyway. Over 682,000 working families receiving child tax credit earn less than £6,420, so I am afraid that they will not benefit at all from the increase in the tax threshold. Taken in conjunction with the welfare cuts they are now facing, the lowest earning taxpayers will receive an income boost of 32p a week or £16.80 a year as compared with those not claiming housing benefit or council tax benefit of up to £112 a year. That does not take into account the impact of the 20% VAT hike back in 2011, the additional 26% rise in food prices since 2009 or the 20% increase in energy costs that households face on their household bills. Nearly 8,000 households in my Oldham East and Saddleworth constituency—nearly one in four—already live in fuel poverty. How are they meant to cope? As other Members have said, our constituency surgeries are crammed with families that are desperate about how they are going to cope in the coming weeks and months. My constituency now has a food bank—the first ever in modern Oldham—and the number of recipients of food bank support has trebled over the last quarter. I am deeply concerned about that.
Geraint Davies
I visited the food bank in my own constituency only last Monday, and the key issue put to me was that food banks were designed as places of crisis able to give two or three parcels to people in the moment of crisis—for instance, when benefits had been delayed or something had gone wrong. They were not designed to sustain life over time. I mentioned earlier a constituent whose money available for food had gone down from £21 to £11; he just cannot cope on an ongoing basis. If the food banks do not save him, he is on the way out.
Debbie Abrahams
My hon. Friend makes an excellent point. We are not talking only about people on out-of-work benefits either, as many of the families affected are working families that are struggling to survive.
As I have mentioned, the Chancellor’s own distributional analysis shows that the cumulative impact of tax, tax credit and benefit measures means net reductions in income for the poorest 40% of households in the country. Although there is strong evidence to show, as other countries have shown, that increasing the spending power of the poorest families helps to boost economies, the Chancellor has done nothing to help them or the economy.
In the short term, the Child Poverty Action Group has estimated that between 2010 and 2015 absolute child poverty will have increased by 600,000 as a result of the Government’s spending plans. Two wards in my constituency have child poverty levels affecting nearly one in two households. That is absolutely unacceptable in a society such as ours. It leads one to question what the Government mean when they say they are committed to child poverty, let alone how they are fulfilling their obligations under the Child Poverty Act 2010.
I also have deep concerns about the impact, particularly of the new benefit changes, on people with disabilities. One in four disabled people already live in poverty, and with the recent welfare changes that is set to increase. I fear that this could be enough to drive people over the edge.
Many of us have already said that these measures are ideologically driven. In tandem with the downgrading of equality and human rights in the Enterprise and Regulatory Reform Bill, which we debated on Tuesday, it is clear that this coalition Government have no commitment to a fairer society. As we have heard before, this is all about choices, and it is quite clear where this Government’s priorities lie. Their response to their failing economic policies is to give tax breaks to the wealthiest in society—£3 billion to more than 300,000 people earning over £150,000 a year, with an average gain of £10,000. What is there for people on low pay? Absolutely nothing. When we take the tax and tax credit benefits into account, we realise that it is not just the poor who are being hit. We know that the average loss to households for this coming financial year is £891.
The Chancellor said in last year’s autumn statement that we needed a welfare system that we could afford. Tax credits and benefits form part of the “automatic stabilisers” that help dampen economies in booms and boost them in recession. That is what we have seen. In spite of the disappointing employment figures yesterday, the effect on unemployment has been less during this recession and in the past because of these stabilisers.
The choices the Government make are underpinned by their ideology—to create an “us and them” culture with power and wealth retained by the wealthy and powerful. By attacking universal benefits such as child benefit, they hope people will start to see our welfare system as irrelevant—and then quietly dismantle it. I am proud of our model of social welfare, born out of the second world war when we literally were “all in it together”. I want to retain this model with its principles of inclusion, support and security for all, protecting any one of us, should we fall on hard times, assuring our dignity and the basics of life, and helping us all back on our feet.
It is often said that the mark of a civilised society is how we care for our most vulnerable. It is a mark of this Government, their ideological priorities and their economic incompetence that they are singularly failing to do that. Fortunately, as recent opinion polls have shown, the British public are seeing through this Government. They are exposing and seeing through the myths peddled by this Government. I shall leave it there to allow more hon. Members to participate in the debate.
amendment of the law
Debbie Abrahams Excerpts(12 years, 3 months ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Last Wednesday’s Budget was more of the same. In spite of failing every economic test they have set themselves, the Government have just carried on regardless. I want to recap their economic journey and absolute failure over the past three years.
After signs of a recovery at the end of 2010, the economy has been flatlining and we will be lucky if we escape a triple-dip recession. Growth has been downgraded at every turn. Amazingly, just over three months since the autumn statement, the Government have had to halve their growth forecast for this year to 0.6%. Borrowing is up £250 billion since 2010 and the deficit will not be eradicated by 2015 as promised. In spite of the Government telling us how important austerity was to economic confidence and low interest rates, they have lost the confidence of Moody’s credit rating agency, which downgraded our triple A status, and we have been put on notice by two other agencies.
The Government have tried, as has happened again this afternoon, to blame everybody except themselves. They told us that austerity was the only way, only to receive a very embarrassing rebuke from the chair of the Office for Budget Responsibility, who said that public spending cuts wiped 1.4% from growth last year. We only have to look at how we are doing on growth compared with the other G20 nations. We are 18th out of 20. What the Government have been saying is absolute rubbish.
I could go on. Inflation, whether using the consumer prices index or the retail prices index, is well above the Bank of England’s 2% target. The Government have tried to say that we have more employment than ever before, but the rate of employment is lower than in 2008. One in 10 people is underemployed. Whatever indicator we go by, the Chancellor and the coalition Government are clearly failing. The public are starting to see that as well, with earnings falling by 2% a year in real terms. A recent poll showed that four out of five people feel that austerity is not working.
The Government are carrying on regardless. Is that really just down to economic incompetence? In the words of the Cambridge economist, Ha-Joon Chang,
“the coalition government isn’t as stupid or stubborn as it appears. It is sticking to its plan A because spending cuts are not about deficits but about rolling back the welfare state.”
If we look at this Budget, as with the other Budgets and autumn statements, we can see exactly what is happening.
The IFS analysis of the Budget shows that the Chancellor is funding some of his give-aways with underspends from across Whitehall Departments, including £2.2 billion of NHS savings. However, the IFS and others have shown that even with an increase in revenue from national insurance contributions, from 2015 we will need to make further public spending cuts or increase taxes to meet a £9 billion shortfall.
The housing measures are too little, too late. They reflect the Chancellor’s inability to sort out lending for mortgages, as well as for small businesses. Many people, including property developers, will welcome the measures, but I wonder what the impact will be on demand and on house prices at a time when earnings are still constrained. They have the potential to take us back to the financial conditions of 2008.
Most alarmingly, the Budget completely fails the anti-poverty test. The IFS, the Joseph Rowntree Foundation, the Child Poverty Action Group, the Resolution Foundation, the New Economics Foundation and others have concluded that the poorer people are, the worse off they will be following the Budget. Raising the personal allowance does little for the million lowest-paid workers, many of whom do not pay tax in any case. Some 682,000 working families who receive child tax credit earn less than £6,420. If next week’s welfare cuts are also taken into account, the lowest-earning taxpayers will receive an income boost of just 32p a week. Of course, that does not take into account the impact of the 20% VAT hike, the 26% rise in food prices or the 20% rise in energy prices.
The Chancellor’s distributional analysis shows that the cumulative impact of the tax, tax credit and benefit measures means a net reduction in income for the poorest 40% of households in the country. Although there is strong evidence that increasing the spending power of the poorest families is a way to boost the economy, the Government have failed to do that. This is about the Government’s choices and they have clearly failed.
Tax Fairness
Debbie Abrahams Excerpts(12 years, 4 months ago)
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Mr Gauke
I will take that as a Budget representation. It is perhaps worth pointing out that there was a measure that the previous Labour Government had to reduce the deficit, which was substantial increases in fuel duty over the course of this Parliament. That is a measure that we have been able to stop, and quite right too.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Minister explain why four out of five people feel that austerity is not working? Is it related to the downgrading of the economy yet again for 2013? Is it the shrinking of the economy in the last quarter of last year by 0.9%? Or is it that the OBR had to call the Prime Minister to task and give him an economics lesson?
Mr Gauke
This is a difficult time for all major economies, and the UK is no exception, but matters would be much worse if we were to abandon our desire to bring some control to the public finances. We must ensure that there is the political will to deal with the public finances, and that is what this Government will continue to demonstrate. The approach of ignoring the deficit, believing that this is all an issue that can be addressed at some future time, is economically irresponsible and unfair on future generations who will face the bill that they will have to pick up because we failed to address those problems now.
Mr Gauke
This is starting to get interesting, because we have now learned that the Labour party has moved a motion trying to persuade Liberal Democrats to vote in support of a mansion tax, yet Labour will not confirm whether it thinks a mansion tax is a sensible policy for the next Parliament. The position of the Liberal Democrats is clear and the position of the Conservatives is clear; what is not clear is whether the Labour party, after all, supports a mansion tax. Will it be in its manifesto? That is a perfectly clear question.
Debbie Abrahams
The Minister is being very generous in giving way, but I want to ask him what his Government are doing. I tabled a written parliamentary question to his Department asking about the average tax rates for different groups of people, and he may be astounded to know—as I am sure many of my constituents in Oldham will be—that 6% of people on incomes over £10 million pay under 10% income tax. What is he doing to address that inequity?
Mr Gauke
That is exactly why in the last Budget this Government brought in a cap on reliefs preventing the wealthy from driving down their tax rate to such levels—something the Labour party never did in 13 years in government. I note, however, that I get no answers to my question.
Let us be clear: we hear lots of complaints about the 50p rate being reduced to 45p, but we get no indication as to whether the Labour party would or would not reverse that if it were to win the next election. I can only assume that that is because deep down it knows that campaigning on 50p might look good on a leaflet but is lousy for the economy; after all, that seemed to be Labour’s approach when it was in government. We have also learned this afternoon that the Labour party is not committed to a mansion tax in the next Parliament, after all. So what do we have? We have opportunism on the 50p rate and opportunism on the mansion tax.
Autumn Statement
Debbie Abrahams Excerpts(12 years, 7 months ago)
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Mr Osborne
My hon. Friend is right that we are on the right track. We are making progress. To turn back would be a complete disaster. I congratulate him on speaking on behalf of the businesses that he represents. He has asked me what we can do on capital allowances for plant and machinery and on business rates for small businesses. I hope he can see in the announcements that we made today that we have been listening to him and to the people in his constituency.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Can the Chancellor confirm not only that growth has been downgraded yet again and the welfare bill is rising, but that child poverty and the number of working families living in poverty is increasing? This is happening at the same time as millionaires are getting their tax cuts. Is this fair? Are we really all in it together?
Public Service Pensions Bill
Debbie Abrahams Excerpts(12 years, 8 months ago)
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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.