Social Mobility and the Economy

Debate between Geraint Davies and Justine Greening

Wednesday 28th March 2018 Westminster Hall

[Geraint Davies (in the Chair)]

May I say at the outset that there are 11 speakers, so I will impose a time limit? I call Justine Greening to move the motion.

[Justine Greening (Putney) (Con)]

I beg to move,

That this House has considered social mobility and the economy.

Most of our debates in this place are about problems, but today, I want to have a debate about solutions. Improving our poor social mobility is this country’s biggest challenge, and our biggest opportunity. Britain will not truly succeed until it becomes a country where there is equality of opportunity for the first time.

Like other hon. Members present, I did not grow up with advantage or privilege. I grew up in Rotherham, south Yorkshire, where my father and grandfather worked in the steel industry. My father would probably have benefited from the national minimum wage being in place and he spent time unemployed, so I know what it is like to grow up in a family on benefits. I am sure that many young people who are starting out today feel the same as I did: I never wanted to have extra advantages over my peers; I just wanted to have the same opportunities as everyone else—a level playing field.

Most people in our county are not connected. They do not necessarily have someone who they can ask for advice on careers when they need it. They do not have someone to make the right introductions to get them work experience. When they apply for jobs, they do not have anyone who knows x, y or z in that company to put in a good word for them. They do not have the contacts to help them to get work experience in the kinds of companies that they might be interested in working for, so they tend not to get as much experience and do not do as well when they apply for jobs. Because of that, far too much of our nation’s talent goes to waste, which is totally unacceptable and has to change. There is still such a thing as a class ceiling for most people in Britain, and we have to get rid of it.

A year from now, Britain will be on the verge of Brexit. The debate has divided our country, but the time is rapidly approaching when we will need to come together behind some sort of common vision of what kind of country we want Britain to be post-Brexit. That common vision should be of finally creating a Britain that has equality of opportunity for the first time. Brexit must be a moment for change when we smash that class ceiling on opportunity once and for all. In a knowledge-based, global economy, it has never been more important to use all our nation’s talent to the max.

I will focus on social mobility and the economy, and the huge role that businesses can play in driving the economic benefits of social mobility. The social mobility dividend for our economy and our people is significant.

In July, the Sutton Trust published its modelling of the link between stronger social mobility and productivity. The research looked specifically at European countries and found that, if the UK simply improved its performance on social mobility to match the western European average, the benefit to our economy would be an improved annual GDP of between 2.1% and 9%. That is an annual benefit to our economy of between £39 billion to £179 billion, which is the equivalent of each household being £590 to £2,620 better off. We talk about minimising tariffs and barriers to have strong trade, but talent is no different. We know the benefits of free trade, and a free market in talent is just as, or perhaps even more, important.

Education has a huge role to play. The social mobility action plan that I launched before Christmas sets out a clear agenda for the Department for Education to strongly tilt its strategy to lift up the educational prospects of children being left behind. Business has a key role to play too.

Rail Investment

Debate between Geraint Davies and Justine Greening

Monday 16th July 2012 Commons Chamber

[Justine Greening]

I do not think I could put it better myself. My hon. Friend is absolutely right.

[Geraint Davies (Swansea West) (Lab/Co-op)]

In 2014, we celebrate the 100th anniversary of Dylan Thomas’s birth. May I thank the Secretary of State for ensuring that in that year we can herald a new beginning to electrification to Swansea bay city region, encouraging inward investment and growth? Will she assure me that a door will be opened for more investment in transport infrastructure, including ports and roads?

[Justine Greening]

I understand how important this investment is. I think that it was Admiral insurance that wrote to me saying what a difference the investment could make to jobs in the area. It was precisely those sorts of representations I reflected on, which is why I know that the investment will make a huge difference.

Budget Responsibility and National Audit Bill [Lords]

Debate between Geraint Davies and Justine Greening

Tuesday 22nd March 2011 Commons Chamber

[Justine Greening]

Clause 5(1) states:

“The Office has complete discretion in the performance of its duty under section 4”.

Does the hon. Gentleman think that that is somehow insufficient to provide the OBR with the absolute discretion it needs to do any analysis it wants to fulfil the main duty he mentioned?

[Geraint Davies]

Having complete discretion is useful, but the word discretion means that something remains a matter of discretion—these things do not have to be done. The OBR has the discretion to go around looking at whatever it likes, but the amendment is saying something different—that the centrepiece of our economic future is economic growth. That has belatedly been recognised by the Chancellor, as we will see in tomorrow’s Budget, when he will say, “I have done all the tax and spend, but, oh no, everything is going wrong because growth is going down the chute, so I had better belatedly do something about it.” The previous Government had sent us on a trajectory of positive growth, albeit that it was a fragile recovery after a financial crisis. The Chancellor has seen that we are going into negativity, so he has scratched his head and realised that growth has something to do with the public finances.

We have been lambasted by Conservative Members who say that the deficit is terrible and Labour left the cupboard bare. They conveniently forget that, as reported by all the economic forecasters, including the Institute for Fiscal Studies, two thirds of the £84 billion deficit came from the international financial crisis. That was not Labour’s fault. When Conservative Members suggest, “Oh, well, we should have had more regulation”, they seem to forget that when we created the Financial Services Authority to introduce more regulation, they said they wanted self-regulation and complained about red tape. In fact, it would have been much worse had it not been for the Labour Government. Furthermore, that regulatory hole in the armoury was commonplace across the globe. That is why Governments in Greece, America, Spain and elsewhere have had problems dealing with the financial deficits they inherited. Obviously, we were more vulnerable to sub-prime debt, as we know because the financial sector is larger in Britain.

Let us get away from the myths about why we have the deficit and deal with the challenge of how to get rid of it. We get rid of it by striking a proper balance between growth, making savings over time and ensuring that the bankers pay their fair share. It is convenient for the Conservatives to say that there is only one way of achieving the task. Instead of having a balanced approach to maximising growth, making the bankers pay their fair share and making credible savings that are realistic over time and would halve the deficit in four years, Conservative Members say, “No. We don’t want to halve the deficit in four years; we want to get rid of it in four years, and we do not want to use growth or involve the bankers. The bankers are our mates after all, so they can have some more money. What we will do is make the cuts twice as fast in just one way—through savaging public sector jobs and services.”

Then, remarkably, growth starts to recede so that the sums no longer add up, as there is obviously an interrelationship between private sector growth and public sector funding. Thus they suddenly realise that they have to do something about growth. The amendment is about recognising that the centrepiece of macro-economic planning and fiscal responsibility is growth. It is all very well for the Minister to say, “Oh well, the OBR will have absolute discretion; it can look at growth if it likes, but if it doesn’t want to, it doesn’t have to.” That is the problem; its eye is off the ball. We need to get the finances in proper balance without destroying communities, which is what Labour Members stand for.

[Geraint Davies]

I will try and speak more slowly. My point was that the international financial crisis affected all countries’ debt, not least that of Greece. Obviously, it has its own banking system, underneath the European Central Bank. There was a common cause for many of the deficit problems around the globe. It was not uniquely Labour’s fault, as the Government make out. The amendment seeks to clarify the factors that are generating the fiscal future, including growth.

[Justine Greening]

The hon. Gentleman keeps talking about the deficit as though it was something that descended upon us. The bottom line is that the UK had a structural deficit. That means that his Government were spending more money on public services than was being generated in taxation, even in the good years, so we were never going to be in a position to start paying off any of our debts, which is why the markets got so concerned about continuing to lend to us. That is a structural deficit, and it is a fact, even if the shadow Chancellor will not accept it, and that is why we have to have a deficit reduction plan in place.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. This is a fascinating debate, but not for today. If we could get back to the specifics of the amendments before us, perhaps we could make some progress.

[Geraint Davies]

I am grateful for your advice, Mr Deputy Speaker, and for the Minister’s intervention. In a way, her intervention makes the case for having growth at the centre of the OBR. I am sure that when she reads her words, which I appreciate were spoken with some emotion and anger, she will wish that she had picked them more carefully.

When we look at the facts and strip out the impact of the international financial crisis, which is about £84 billion in terms of our structural deficit, there was a residual deficit, to which the hon. Lady refers. There was an excess of expenditure over income, but that was taken into account in future planning. There was a savings plan from the previous Chancellor, as she knows, to cut the deficit in half in four years. That was not exclusively reliant on cutting public services and jobs. Rather, it relied on stimulating growth.

The OBR’s estimates of growth have been downgraded. Those higher levels—2.6%—would have provided more fuel to get the deficit down. I recall that the projected deficit in the pre-Budget report was £30 billion less than had been predicted previously. In other words, growth had been occurring faster than was thought. Now it is growing less fast—in fact, it is growing negatively.

[Justine Greening]

Just on the off-chance, I wonder whether the hon. Gentleman would be able to set out what the £14 billion of cuts were that his party was planning to start in April.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. We are going much wider than the amendments. Could we please confine our comments from now on to the amendments before us?

--- Later in debate ---

[Justine Greening]

I am pleased to have the opportunity finally to respond to some of the points that have been made and to the amendments that have been tabled. It is important to say first that I very much welcome the contribution that Members not only in this House but in the other place have made to get the Bill to its current stage. Despite the debate we have had on growth, which of course is important, I think that there is broad support across the Chamber, as there was in the other place, for what the OBR is intended to do and for setting up such an office that can work effectively.

All the amendments relate to growth, so perhaps we have stared the debate that will no doubt continue tomorrow after the Budget. We believe that economic growth and job creation are absolutely vital, and Members will see tomorrow that that is a core part of the Budget. I agree with many of the comments that have been made about why we need to see growth as part of the Budget. I want to take the time to clarify some points that have been raised.

The debate so far has been about policy and strategy, but the OBR is not a policy-making body; it is there is look at the forecasting and produce the official forecast for the UK Government. It is precisely not intended to make policy. One of the things we have been very careful to do in setting out how the clauses and the charter work is ensure that the OBR’s independence, impartiality and transparency, which are also vital, are not compromised.

[Geraint Davies]

Having said that, will the hon. Lady accept that some of the OBR’s responsibility should be to forecast what it regards as the impact of policy changes from the Chancellor? For example, if he was to announce suddenly that he will let the private sector deliver public services so that entrepreneurial capacity will be taken out of export-driven growth and put into making easy money out of monopoly-provided public services, would it not be right for the OBR to say, “Hold on, that capacity has gone over there so our growth will go down”?

[Justine Greening]

I hope I can provide some clarification. The OBR has the freedom to consider the impact of policies on sustainable public finances, including employment policies. If the hon. Gentleman looks at some of the forecasts the OBR has already made, he will see forecasts for employment, average earnings, ILO unemployment, the percentage of the claimant count and, of course, growth. Hon. Members talked about the OBR’s assessment of growth and what it will show over the coming years. The OBR is already producing an awful lot of the analysis that hon. Members want to see, but it is fair to say that today’s debate will—I hope—be of interest to the OBR in understanding what information and analysis it might feel it needs to provide to convey what it wants to, which is some assessment of the economic growth forecast for this country.

Let us be clear that the duty of the OBR is very clear and is set out in clause 4. It should examine and report on the sustainability of public finances but, as hon. Members have said, Government policy clearly impacts on that. By definition, the OBR will consider how policy impacts on the sustainability of public finances.

--- Later in debate ---

[Geraint Davies]

In conversation with the Institute for Fiscal Studies, I asked various questions about growth and its calculations and it was pointed out to me that the IFS was in essence made up of micro-economists who were aggregating up to deliver predictions about Government fiscal outputs. I respect what the hon. Lady is saying, but it seems to me that she is basically saying that the OBR will be doing something very similar. It is very easy to make such predictions if we say, “Assuming that everybody is still employed, that we have taxed them this and that they spend that, this will happen.” What is more difficult is to model the impact of individual policies in a Budget on growth and hence on the public finances. The hon. Lady is giving us some reassurances, but I think the point of our amendment was to push her to say that this would become a priority for the OBR so that we could have a richer understanding of the growth scenarios in the future. I appreciate that some of that is done, but we want more.

[Justine Greening]

Ultimately, a key clause—I think clause 5—sets out that it is at the OBR’s discretion to decide how to carry out its duty. A fundamental building block of the OBR’s credibility is its independence. I assure the hon. Gentleman that the risks he mentions, such as the concern that the OBR might not carry out robust analysis, are mitigated by other safeguards in the Bill. For example, one duty of the OBR will be to produce a report on the accuracy and robustness of its forecasting. As he will be aware, there are also non-executive directors who will be there on a day-to-day basis to challenge how effectively the OBR works and every five years, at a minimum, there will have to be a completely external peer review of the OBR’s workings.

I think we have managed to strike a balance by setting up the OBR in the way I have described—on the one hand by giving it independence, so it has that key element of credibility, and on the other by including some safeguards, in terms of its structure, its management and the review, so that, if for some reason it does not produce the quality of forecast that we need, those safeguards will be in place to ensure that we tackle the issue. Let us not forget that the OBR is accountable not just to Parliament, but to the Chancellor, because it produces the official forecasts.

Finally, amendment 4 suggests another new related role for the OBR, which as we have heard would be to assess the Government’s growth mandate. As I said in response to amendment 1, the Government seek to achieve their economic policy objectives through a range of policy tools and frameworks, not just through fiscal policy, but the OBR has been established to increase the credibility of the Government’s economic and fiscal forecasts and to hold the Government to account for their economic and fiscal policies.

That highly valuable role is recognised by a wide range of domestic and international commentators. The hon. Member for Swansea West mentioned the Institute for Fiscal Studies, and it warmly welcomed the establishment of the OBR, which, through its role, has already provided forecasts of key economic variables. In its November report, the OBR set out forecasts for the next five years, covering a range of key macro-economic variables, such as GDP and its forecast growth, inflation, employment, average earnings, unemployment and the output gap. In addition, the OBR will have the freedom to consider the impact of Government policy on economic growth and employment within our regions and nations, and in line with its main duty. I therefore consider all the amendments to be unnecessary, and I hope I have addressed the issues that hon. Members have raised.

Fuel Prices and the Cost of Living

Debate between Geraint Davies and Justine Greening

Wednesday 16th March 2011 Commons Chamber

[Justine Greening]

And a huge fiscal deficit and debt to boot, so we will take no lectures from the Labour party. Perhaps the hon. Gentleman can discuss with the shadow Chancellor how he thinks the huge deficit that his party left our country—it costs us £120 million a day to service our debt interest—should be addressed. The elephant in the room, which we have not talked about so far today because it is not in the Opposition’s motion, is how they would tackle the deficit. The answer is that they would not tackle it, which is why it is so lucky that Labour is not in government at the moment.

[Geraint Davies (Swansea West) (Lab/Co-op)]

rose—

Oral Answers to Questions

Debate between Geraint Davies and Justine Greening

Tuesday 8th February 2011 Commons Chamber

[Justine Greening]

What it shows is that we have the right plan to get our economy back on track. My hon. Friend mentions the purchasing managers index for January, which was at a record high since the series began in 1992. We recognise that our road to recovery will still be choppy, which is one reason why we will bring forward the first phase of the growth review in the Budget that is coming up. That will examine how we can ensure that we create the conditions for our companies to be successful.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the Economic Secretary agree with the Institute for Fiscal Studies that the new patent box tax, reducing the patent tax from 28% to 10%, does nothing for new jobs or research and development, and that in fact the Pfizer case, with the loss of 2,300 jobs in Sandwich, is a case in point? It shows that she is doing nothing for modern manufacturing and that choking growth and increasing inflation through VAT is increasing the deficit, not decreasing it.

[Justine Greening]

It is hard not to point out to the hon. Gentleman that his party supported the patent box when it was in government. It is not just that policy that will support high-tech manufacturing. Our policies of reducing corporation tax year on year rather than having it go up, and of reducing national insurance and getting rid of the worst impacts of the jobs tax that was making it harder for companies to keep people employed, will support growth in the economy. His party simply has no idea how to start making that happen.

Oral Answers to Questions

Debate between Geraint Davies and Justine Greening

Tuesday 16th November 2010 Commons Chamber

[Justine Greening]

My hon. Friend is right. In quarter two alone, private sector employment grew by 308,000. I believe that many people in the country want not just to take jobs, but to create them. I would encourage them to get on with it, and to pursue their dreams and aspirations. They will have a Government behind them who are giving them a national insurance holiday for the jobs that they will create, and who are determined to support them by keeping corporation tax rates low when they are successful.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Given that Government plans to cut half a million public sector jobs are expected to lead to the cutting of a further 1 million private sector jobs, does the Minister accept that it would be more effective to reduce the deficit in three ways—through progressive taxation, through economic growth and through savings—than simply to throw millions of people on to the dole and whole communities into poverty?

[Justine Greening]

The hon. Gentleman seems to have managed to get from a reduction of half a million in the public sector head count to millions on the dole. The number that he cited is in the independent report from the Office for Budget Responsibility, which was published after our emergency Budget. Although the report showed that there would be a reduction in the public sector head count of about 490,000, it also showed—and I assume that the hon. Gentleman accepts all of it—that there would be an increase in employment of 1.6 million, and that, year on year, there would be reductions in unemployment and increases in employment. If he accepts the figure of half a million, does he also accept those figures?

Finance Bill

Debate between Geraint Davies and Justine Greening

Thursday 15th July 2010 Commons Chamber

[Geraint Davies]

My hon. Friend is right. The status quo proposal of getting the £3.6 billion from the top 2% was based on standing back and considering whether there should be greater tax relief for those who are already the richest. The answer was no. At difficult times, those with the broadest shoulders should bear the greatest burden, but now, the burden is being taken from them and placed on much weaker consumers. That will undermine the attractiveness of pension schemes among larger numbers in middle income groups.

In essence, the proposal is to reduce the tax allowance from £255,000 a year to some £30,000 to £45,000. That creates an enormous difference in how many and which people are captured, and generates great anxiety in the industry—the providers that it represents and consumers whom it serves.

[Justine Greening]

May I confirm that I have understood what the hon. Gentleman prefers? Would he rather have tax relief at 20% for people who can afford to pay up to £250,000 into a pension fund in one year?

[Geraint Davies]

The Economic Secretary knows that the distributional impact of the proposals is, as I have said, to spread the £3.6 billion burden from the top 2% to 10%. It is as simple as that. She knows that that is the case, and there is no way that she can wriggle out of that political and economic fact. Before the election, there was a promise that million pound estates would avoid inheritance tax—the top 5,000 households. At the last moment, the Chancellor stepped back and said, “Oh no, at such difficult times, we won’t give billions of pounds to the top few thousand households. Don’t worry. Vote Tory.” However, their secret plan was to have a word behind the scenes with their rich mates, telling them, “Don’t worry, we’ll reverse the Labour party’s old plan to make sure that the top 2% pay most.”