Budget (Coventry)

Jim Cunningham Excerpts

Monday 21st May 2012 Commons Chamber

[Mr Jim Cunningham (Coventry South) (Lab)]

Thank you, Mr Speaker, for granting this Adjournment debate, which I very much appreciate. I wish to speak about the impact of the Budget and the Government’s policies on Coventry, and I might touch on issues that affect the west midlands. My purpose in doing so is twofold.

First, many issues arising from the Budget will have a significant impact on the people of Coventry and should be debated properly. My constituents’ serious concerns regarding the effect of Government policies deserve to be raised. It is easy to discuss Budget policies in abstract terms, but we would do well to take the time to consider what they will mean for the regions and for people.

Secondly, there is a distinct pattern to the Government’s policies and rhetoric: they are far too London-centric, as some people would say. Therefore, it is vital that we hold debates that focus on the regions and cities across this country in order to draw attention to their concerns, which the Government frequently ignore. I am sure that much of what will be discussed tonight applies to other regions and cities hit by the Budget. The Government show not nearly enough understanding of regional issues or appreciation of just how much places such as Coventry are hit by their policies.

With that in mind, I want to outline why the Government’s optimism is misplaced, certainly as far as Coventry is concerned. We must not underplay the high level of unemployment currently being suffered. On Wednesday the Prime Minister assured us that overall unemployment was down and that the number of claimants of jobseeker’s allowance had decreased. Figures from the Office for National Statistics, which were published last week, reveal that there are 10,321 unemployed jobseekers in Coventry—three fewer than were counted in March.

The Prime Minister’s complacency about the employment crisis shows an unrealistic approach to the stagnation we are witnessing in Coventry, where 4.9% of 16 to 24-year-olds are out of work. That is similar to the figure for the west midlands overall but significantly higher than that for Great Britain, which is 4%. That is particularly clear when we look at the percentage of male jobseeker’s allowance claimants. Nationally, the figure is 5.3%, which is already shockingly high, but Coventry is suffering from having 6.7% of the male population claiming jobseeker’s allowance. It is clear that the slight improvements the Government are celebrating simply do not apply to Coventry.

Against the background of high unemployment, I wish to highlight the crucial role of the public sector in the growth of Coventry’s economy. Since the millennium, Coventry has benefited from significant redevelopment and regeneration, and the public sector has been crucial in that process. The concern now is that the Government’s public sector cuts will return Coventry to the hard times of the late ’70s, and certainly the ’80s, that many of us remember. It was a ruinous time in Coventry’s history and led to a whole generation struggling to reach their potential for decades after.

Every public sector employee who loses their job through the Government’s public policy cuts is simply one more person without an income to spend on the local economy—one more person who will stop spending on businesses that in places such as Coventry are essential for stimulating growth in the local and national economies. Our public sector workers are a crucial part of our society and economy, and they do essential work for communities. It is ludicrous and poorly substantiated to claim that their work can be swiftly replaced by the private sector. There is certainly little evidence of that in Coventry.

The Government have said that they intend to rebalance the economy, and they aim to do so by cutting the public sector and replacing it with the private sector. They have certainly achieved the former, but there is little evidence visible in Coventry of the necessary investment in the private sector. The Chancellor needs a clear and vigorous industrial strategy to encourage the private sector growth that he hopes will replace the public sector.

That should be combined with a full jobs strategy, working on aligning the money going into the city with the people out of work, and targeting it at getting people back into work. That is particularly true of Coventry’s young people. Coventry saw an 87% increase in long-term youth unemployment last year, but there was nothing in the Budget to encourage any hope that this would be reversed.

The Chancellor promised that the Budget would deliver a great deal for businesses such as those in Coventry, but the Coventry and Warwickshire chamber of commerce was greatly disappointed. The chamber’s chief executive, noting that the Budget’s rhetoric on the promise for business was not matched by any content, said:

“If we’re honest, it was quite London-centric in many regards and that obviously wasn’t particularly welcomed. There were lots of small announcements that picked away around the edges but many of the things that weren’t mentioned caused most angst, such as empty property rate relief and the fact that business rates are going up.”

People throughout the country were hopeful about the prospect of a Budget that would offer real support to local businesses to allow them to grow, but they were generally disappointed by the reality, which gave little practical encouragement to allow Coventry businesses to expand, and that is likely to get a lot worse as the year progresses.

Coventry is famous for car making, but public sector workers drive much of the local economy. As we know, Becta and the Qualifications and Curriculum Development Agency are being abolished. It might seem an easy option to get rid of those education quangos, which employ a combined total of almost 800 people, many of whom are former teachers, but the relocation of the QCDA cost the Government more than £44million and came at a personal cost to many staff who relocated from London.

We cannot, furthermore, ignore the strain that these cuts put on the private sector. Friends Life, previously Friends Provident, announced that it plans to close its offices in Coventry by the end of the first half of 2012, and 428 staff are employed there. Owing to those cuts, Coventry city council will be forced by the Tory-led Government to cut more than 500 posts, possibly, over the next 18 months. The amount that the council spends in the local economy will also be reduced dramatically, and that will impact on council staff.

The front-loading of cuts means that staff losses will be required at an early stage of the spending cuts, and that will affect families throughout Coventry. This is the overall impact: Coventry city council is expected to lose about £45 million over the next two or three years; and all of that will have a significant knock-on impact on local businesses and employment in the region

We can see what is happening in other sectors as the cuts and reforms begin to bite. For example, there are cuts of more than 20% in West Midlands police, equating to 2,500 jobs, and there are two parts to the Department for Communities and Local Government’s cuts for Coventry city council: formula grant, losing over £19 million; and specific grants, losing over £17 million. The council will not be able to continue to provide services at the same level. There will be far fewer grants, with a lower overall value, and the great concern is that many grant streams will end.

In the light of these destructive cuts, many people are extremely concerned about the proposed cuts to regional pay in the public sector. I cannot condemn this policy strongly enough. We in Coventry accept that living costs are far higher in London than they are in Coventry, but that is the reason for the London allowance and London stipend made available to many employees working in London. This is far removed from the idea that public sector workers should earn less for the same work because they live in places such as Coventry.

The Treasury says that public sector pay is 18% higher than in the private sector in some parts of the UK, but that argument demonstrates a flawed approach by which the Office of National Statistics continues to compare private and public sector workers on a like-for-like basis. They are not directly comparable, and it is wilfully blind and evasive to pretend that they are. Two thirds of public sector workers are women, compared with about 40% of those in the private sector. Public sector workers tend to be older and more highly qualified. Professions such as nursing and teaching entail workers remaining in their profession for a long time, building up skills and salaries. None of those are characteristics that the public sector should be ashamed of. The private sector, by comparison, includes workers at the other end of the economy such as those in retail, catering and leisure. Industries in the private sector often pay their workers very low wages, and that skews any fair comparison of the sectors.

The public sector makes up roughly 20% of the work force, while the financial sector makes up 20% of the economy. More meaningfully, public sector wages are far from high by comparison with those in the private sector. I have always believed in lifting people up rather than lowering them down. Public sector workers are already being hit very hard with frozen salaries, higher pension contributions, and higher living costs. We cannot overestimate the negative impact on Coventry’s economy that would result from local public sector workers earning lower salaries. That would take money out of the regional economy, and the stunting effect on growth would outweigh any benefits to the Treasury. I therefore call strongly on the Government to allay the fears of those in Coventry who are worried about the prospect of regional pay cuts.

Against those fears for the regional economy, let me touch on the impact of the Government’s policies on the vulnerable people of Coventry, who will be hit from many directions by their deficit reduction plan. Pensioners have been dealt a blow by the Government as the winter fuel payment has been slashed by up to £100. According to the BBC, family fuel costs have risen by about £1,250 over the past two years, and mortgage interest rates are starting to creep up, which will affect many families. Disabled and ill people are suffering from the removal of the mobility component of the disability living allowance. Coventry’s poorest residents are being undermined in the justice system by the removal of face-to-face legal advice in favour of a cheaper phone line. These are but a few of the policies that are having a huge negative impact on vulnerable individuals, who are now having opportunities to turn to public services taken away.

I am deeply concerned about the local provisions for our young people. In June, £335 million was taken from the council through the abolition of Building Schools for the Future, which has yet to be replaced despite many promises about announcements. The Government cannot simply remove this vital investment from Coventry without even suggesting an alternative, let alone funding one. The Budget bore no reference to allocations of funding for school buildings. Aside from the obvious implications for Coventry schools, the Government are missing a great opportunity to stimulate the construction industry. I understand that the Government’s private building scheme is expected to rebuild between 100 and 300 schools nationally, but they have been dragging their feet on this issue for 20 months. Coventry city council has made it clear that some schools are in dire straits and urgently in need of investment. Without details of the Government’s plans, the council is unable to make its own plans.

As of April, the Connexions careers service has been operating on a budget more than 70% smaller than in April 2010. That service gives young people the skills and confidence they need to get in to the workplace, and its downsizing will no doubt contribute to the high youth unemployment that we experience as a city and as a region.

The children, learning and young people’s directorate has announced the loss of a further £1.2 million as a result of the 5% cut to the standards fund. The council had been relying on those crucial retention funds, but they will not be transferred to the next financial year.

On that note, the Friargate development, which will revitalise and transform Coventry city centre, was going ahead on the expectation that Coventry would be one of the eight core cities to benefit from the tax incremental financing scheme. The Deputy Prime Minister told the local authority in 2010 that Coventry would be a recipient of that scheme. Not only is Coventry excluded, but the pot of money has been reduced to £150 million. The council was relying on that money, which was to be paid back on a tax basis, to allow the development to go ahead.

The abolition of the funding from regional development agencies means that there is little funding to lever in private sector investment for large-scale redevelopment projects. Some colleagues will remember that Coventry and Warwickshire were led to believe that they would get an enterprise zone. Once again, they lost out. I therefore call on the Minister to reconsider the use of tax incremental financing to allow the city to grow. I understand that the council is also looking to take part in the city deals initiative. The city’s project is urgently in need of that money.

All of that will have an irreversible effect on the economic growth of the region and of Coventry. The leader of Coventry city council estimates that up to £25 million will be taken out of the local economy. The public and private sectors will not be able to invest in regeneration and infrastructure in the region. With the loss of the £355 million schools programme and the missed opportunity for the building industry, it is clear that the Government are wilfully blind to the devastating effect of their policies in Coventry. In addition, Coventry university hospital has to find an additional £28 million over the next year or two. The Government need to stop thinking only of London and think more about the other regions and cities that make up this country.