Budget Resolutions and Economic Situation
Debate between Geraint Davies and Chuka Umunna(9 years, 4 months ago)
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Geraint Davies
Does my hon. Friend agree that in the 10 years up to the 2008 banking crisis the economy grew by 40% under Labour, which is how we afforded to double spending on the health service, and that since 2010—when, incidentally, the economy was growing under Labour—the share of the economy that is debt has risen from 55% to 80% because of the Conservatives’ failure to grow the economy and their focus on cuts instead of growth to get the deficit down?
Mr Umunna
I will come on to that right now.
The Prime Minister said in a speech to the CBI in 2010:
“In five years’ time, we will have balanced the books.”
The Government have failed to do that. It is worth revisiting the promises made then before giving the Chancellor the congratulations he seeks now for this 2015 Budget. In June 2010 they set a forward-looking fiscal mandate to achieve a cyclically adjusted current balance by this financial year. It was a rolling target, but no one took the rolling nature of it very seriously, so let us put that to one side. In short, they were saying they would eliminate the deficit by this financial year. In 2010, by their own measure, we were told they would do this, achieving a surplus of 0.3% last year and 0.8% this year. That is what we were told would happen. In the event, the Chancellor completely failed to meet that goal. The deficit came in at 2.4% last year, is forecast to be 1.7% of GDP this year and does not move into a surplus until 2017-18, some three years later than planned on their own measures.
There was also a supplementary target for public sector net debt as a proportion of GDP to be falling by 2015-16. The Chancellor managed to achieve that through some jiggery-pokery with the numbers, namely rapid asset sales in the last Parliament to pay down enough of the debt for his supplementary target to be met. But rushed asset sales mean poor value for the taxpayer, as the disastrous sale of Royal Mail illustrated in technicolour.
It is also worth reflecting on what we were told the debt-to-GDP ratio would be in 2010. It was supposed to fall from 61.9% of GDP in 2010 to 69.4% and 67.4% last year and this year, but debt as a proportion of GDP was 80.8% last year and is forecast to be 80.3% this year.
Mr Umunna
Oh dear; I think I will move on.
Why does all this matter? It matters because reducing the deficit is a progressive endeavour. We seek to balance the books because it is the right thing to do. We will not stand by while the state spends more paying interest every year to City speculators and investors holding Government debt than on people’s housing, skills or transport. It follows that aiming to reduce the national debt in the long term, and running surpluses when the economic circumstances allow and the economy is robust, is the right approach. It means we can free resources to invest in people to help them succeed in an era of globalisation. I would much rather invest in people than spend the £36 billion the Red Book tells us we will be spending on debt interest this financial year.
By the way, I say to Conservative Members that this is in keeping with the history of our party. In our 1964 election-winning manifesto we criticised, as we did in the lead-in to the last general election, “an ever-increasing burden” of debt payment on the country. I note that the Chancellor wants to legislate to make surpluses a legal requirement in “normal times”. In 2010, when the then Chancellor Alistair Darling sought to enshrine in law, in the Fiscal Responsibility Act 2010, a deficit reduction target, the Chancellor said that it was “vacuous and irrelevant.” to enshrine such things in law. The Conservatives now need to explain what has brought about this change of mind.
This recognition that we need to reduce the national debt is why we said before the last general election that there would be efficiency savings and cuts under a future Labour Government. However, we were clear we would achieve this in a fair way—not by balancing the books of the nation off the backs of the poor and the vulnerable. The centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support which helps—[Interruption.] I ask the Minister for Skills to wait for me to finish my paragraph, and then perhaps he can comment on the national living wage.
As I was saying, the centrepiece of this Budget was to proceed with further fiscal consolidation, principally by slashing the support that, for lower and middle income earners, helps to make work pay, and then by supposedly compensating them with an increase in the national minimum wage, which people such as the Skills Minister have sought to re-badge as a living wage, even though it is anything but. Let me say a few things about that. No one will ever forget how the Conservatives opposed the very establishment of the national minimum wage in the first place. They can say what they like about it now, but no one will ever forget that.
In the lead-up to the election, I received sustained criticism from the Conservatives’ supporters in business about our plans to increase the national minimum wage in this Parliament. People say that imitation is the sincerest form of flattery, and in some senses that is what this is, but there are important differences between what we were proposing to do and what the Government are now doing. First, our national minimum wage increase would have applied to all adults on the main rate. This Government, however, do not believe that anyone aged between 21 and 24 deserves an increase. Having abolished their education maintenance allowance and trebled their tuition fees, they are now saying that when those young people get into work, they do not deserve to earn what everyone else does when they reach adulthood.
Secondly, we would not have punished any adult benefiting from the increase we were proposing by subsequently withdrawing their tax credits. The Government have called this a new deal, but it is a gigantic con-trick. Thirteen million families will be affected by the changes, and the Institute for Fiscal Studies could not have been clearer when it said that it was “arithmetically impossible” for the increase in the minimum wage to make up for the withdrawal of the credits that help people to work.
Let us take as an example a couple, both aged over 25, with two children. Both adults work full time and earn the minimum wage. Yes, they will gain £1,560 from the increase in the minimum wage, but they will lose more than £2,200 next year as a result of the change to tax credits. [Interruption.] I say to the Conservative Members who are chuntering that I totally accept that it would be better for people to be in receipt of a salary that did not necessitate the payment of tax credits to make ends meet, but reforming our economy so that it delivers more highly paid jobs must come first; otherwise, it is the working poor who will suffer.
Let me remind Conservative Members that nearly half the people in poverty in this country are in work. The Government seem to forget that. That is why it is unsurprising that the IFS calls this a “regressive” budget and says that the tax and welfare changes between them will result in poorer households losing out quite significantly, and much more significantly than richer households.
Geraint Davies
Does my hon. Friend agree that the minimum wage increase cannot replace children’s tax credits? If a single man and a woman with two children both went for the same job, which paid the minimum wage, the woman would have greater needs due to her childcare responsibilities. Tax credits provide an incentive for people such as her to work, yet they are being withdrawn. We accept that increasing the minimum wage is a good idea, but this measure will not help business at all, because putting up the minimum wage while removing tax credits will clearly be a disincentive for families to work.
Mr Umunna
That is quite right. The problem with Conservative Members is that they just lump everyone into the same bracket. Anyone who is in receipt of support is told, “It’s your fault. You’re not working.” The thing about tax credits is that they help to make work pay, but that seems to be lost on Government Members—
Devolution and Growth across Britain
Debate between Geraint Davies and Chuka Umunna(9 years, 5 months ago)
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Mr Umunna
As has been discussed during the series of debates held since Her Majesty delivered the Queen’s Speech, we do not want two tiers of MPs to be created in the House of Commons.
We devolved power then and we support the principle of devolving more power now, in the Bills that I mentioned, for two principal reasons—one economic and one democratic. I turn first to the economic case. Decisions on how to grow our economy are often best made at a sub-regional and local level. Local actors, whether policy makers, business people or trade unions and others, best understand the unique combination of history, geography, demography and institutions that give their area a niche—a competitive edge, a comparative advantage—in the global marketplace.
The fact is crucial because in this era of globalisation, nations and regions need to concentrate their efforts on producing the services and goods that they are best at and then to trade them to generate the good, secure, well paid jobs of which we want more all over the UK. That matters because we have a higher incidence of low paid work than other developed nations. Despite the fact that our people work among the longest hours in Europe, output per worker in the UK lags behind that of our competitors.
To address the issue and raise productivity levels, areas need to harness their specific local skills and strengths and use them to become clusters of expertise and innovation. The simple fact is that one-size-fits-all policies devised in remote departmental silos are simply incapable of nurturing specific local strengths. It is the different players in our local areas and regions that are best placed to do that. We have to give them the tools to be the masters of their own destinies.
Geraint Davies (Swansea West) (Lab/Co-op)
I want to ask about devolution within Wales. Swansea Bay city region, the conglomerate of Neath, Port Talbot, Swansea and Carmarthenshire, is the biggest urban footprint in Wales. It projects the international brand name of Swansea, thanks to the city’s football success, on the back of two universities plus Tata Steel and a confederation of local government, industry and academia. Does my hon. Friend agree that that is the way forward in a global marketplace—perhaps along with regional banking, which we have not yet got from the Government?
Jobs and Work
Debate between Geraint Davies and Chuka Umunna(10 years, 5 months ago)
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Mr Umunna
I absolutely agree with the hon. Gentleman that we need to diversify our economy and grow our manufacturing base, but, as I have just said, these structural issues have grown up over a number of decades under Governments of different persuasions.
At the same time as we are dealing with these structural issues, we face more competition from emerging markets and others than we have ever experienced before, with technological advance and automation creating new jobs but destroying old ones too. That has left our economy failing to meet the material needs of too many families. The problems of these imbalances have resulted in our country having one of the highest incidences of low-paid work in the OECD.
I, of course, accept that any job is better than no job. I note that the Chancellor gave a speech earlier this year committing his party to full employment. They say imitation is the sincerest form of flattery. The only problem with what the Chancellor said is that it is almost 70 years late. It was, of course, the great reforming Attlee Government who first committed to full employment, in our manifesto “Let us Face the Future” in 1945. Unlike the Chancellor, however, we have long sought to build on that commitment. What we want is for everyone in this country to be able to access good work that affords them a level of dignity and respect, and, importantly, that is secure and pays a wage that they can live off. That is simply not the reality for far too many people in Britain in 2014.
Geraint Davies (Swansea West) (Lab/Co-op)
There are now 1 million people on zero-hours contracts. Does my hon. Friend accept that their lives consist of moving in and out of benefits? When there is discontinuity in benefits, people have to go to food banks. That is not the way to build a strong economy. Surely, we need infrastructure in city regions and to move forward with export-driven growth, rather than having people living in poverty on zero-hours contracts.
Enterprise and Regulatory Reform Bill
Debate between Geraint Davies and Chuka Umunna
Mr Umunna
I think it is reasonable, when people have been treated in an appalling and unfair fashion by their employers, that they should be properly compensated.
The Bill contains a related measure to give the Secretary of State the power to vary compensatory awards for employers of different descriptions. The Employment Lawyers Association, of which I used to be a member, said last week that having different rules for micro-businesses, for example, would make people think twice about working for small businesses, knowing that they would have less employment protection than if they worked for a large employer.
We have no objection in principle to the proposal to introduce early conciliation by ACAS in advance of the full submission of a claim to the employment tribunal. I understand, however, that the Government intend to spell out more of the detail in secondary legislation. It is therefore essential that any future regulations be subject to the proper scrutiny of the House. Early conciliation will result in a claimant who is seeking redress having to go through two different processes, with different time limits and different forms to fill in, before instituting a claim. It will therefore be important to ensure, particularly in relation to unrepresented claimants or those with poor literacy and numeracy, that the new regime does not act as a barrier to justice for those seeking redress. Above all, it will be important to ensure that ACAS is properly resourced to carry out its proposed new expanded role. We know that its resources have already been reduced. The Secretary of State and his Ministers will need to give proper assurances and guarantees that it will be properly resourced to carry out this work.
The Bill also contains measures relating to the composition and workings of employment tribunals. As I have said before, we are not opposed to reforming the way in which employment tribunals work, given the frequent problems that employees and employers experience while navigating their way through the system. That is why we supported the establishment of the Underhill review. However, that is quite different from tampering with people’s fundamental rights at work, which we oppose.
Geraint Davies
Is my hon. Friend aware that, in Wales, 70% of procurement goes to small and medium-sized enterprises, half of which are based in Wales? In England, however, the figure is around 7%. Would it not be a better strategy for rejuvenating small businesses in England if we were to focus the power of procurement—green procurement in particular—on those businesses, rather than slashing the rights of the people who work in them?
Mr Umunna
I certainly agree that we should increase the procurement opportunities for our SMEs. When we were in government, we put in place a number of targets, which this Government have sought to build on. We should certainly ensure that those businesses have better access to those opportunities; I speak to many such businesses that tell me that they do not.
Finance (No.2) Bill
Debate between Geraint Davies and Chuka Umunna(14 years ago)
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Mr Umunna
I do not usually ask my friends and acquaintances whether they share financial information with their partners, but I hear the comments of the hon. Gentleman.
My second point is, how will it be possible to prove the connection between the mother and the higher rate taxpayer, bearing in mind the problems that we have been having at Her Majesty’s Revenue and Customs? Given that HMRC’s resources have been cut over the past few years, how will it be able to keep tabs on the situation between couples on a monthly basis? As some 1.2 million families will be affected by the new measure, will HMRC be given any more funding to enable it to enforce the new change and to keep tabs on what is happening out there in the nation?
Finally, John Whiting, joint interim head of the Office of Tax Simplification, has obviously commented on the problems of the new measure, but what is the point in setting up such an office when the people working within it and those heading it up have not been properly consulted or asked to advise on this measure? Surely, if the Government are not minded to accept this new clause, it would be a good idea to delay the introduction of this measure and ask the Office of Tax Simplification to do its job and advise on how it can be more efficiently introduced.
Geraint Davies (Swansea West) (Lab/Co-op)
My hon. Friend makes a powerful case to look again at the detail. Does he agree that if the objective was to be fair and to put the burden on to the broadest shoulders, surely it would have been better to raise the marginal rate of tax from 40% to 41% , so that the people who have more pay more, and not just clobber people with children, who now have to pay more for their children. Those are couples, only one of whom might be working, where the 40% does not signal the best-off households.
Mr Umunna
No doubt the Government will consider my hon. Friend’s interesting suggestion and comment accordingly.
One of the main problems with the new measure is that people fall off a cliff edge when they hit the higher rate. Have the Government considered introducing a taper mechanism to prevent that anomaly from occurring, because obviously that is where the unfairness shines through?