Living Standards

John Howell Excerpts

Wednesday 30th November 2011 Commons Chamber

[Mr Duncan Smith]

I agree with my hon. Friend. The reality is that we are raising people out of tax, while what the Labour Government did by getting rid of the 10p starting rate was to drop more people into higher rates of tax. It was really dismissive, very regressive and attacked the poorest.

[John Howell (Henley) (Con)]

Is my right hon. Friend as surprised as I am that there has been little or no mention from the Opposition of the benefit to living standards that comes from keeping interest rates low?

[Mr Duncan Smith]

I was going to come on to that. Had interest rates gone up and had we been paying more for our borrowing, we would all—including those paying mortgages—be poorer.

This debate about living standards is important. Of course, those standards are very tight, and I make no bones about the challenge that we face, but let us not forget where we came from. Let me take the House back to 2007, when personal debt had rocketed to about £1.3 trillion and we had the highest structural deficit in the whole of the G7. That was before the recession began. That is a completely unsustainable picture, and it required very painful readjustment. As my colleagues know, the problem was that we entered the recession ill prepared for the consequences. When Labour Members ratcheted up spending by a massive degree, they simply postponed the inevitable. After all, the IFS forecast for the period 2008-2011 was that living standards would fall by 1.6%. This was a case of a fall in living standards postponed, with pain pushed on to future generations. People do not have to take my word for it—the IFS said:

“Much of the impact of the…recession on UK living standards was not felt until after the economy had stopped contracting, but that…pain was most definitely delayed rather than avoided”.

Oral Answers to Questions

John Howell Excerpts

Monday 14th February 2011 Commons Chamber

[Mr Duncan Smith]

My right hon. Friend the Minister of State is doing that just now. The Work programme will be tailored to people’s needs and not implemented flatly. If people have a problem, the programme will deal with them. Jobcentres will be given more flexibility to ensure that they match employment to the person as necessary. My hon. Friend should therefore welcome the changes that we are making.

[John Howell (Henley) (Con)]

7. What steps he is taking to reduce levels of pensioner poverty.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We have restored the earnings link for the basic state pension and given a triple guarantee that the basic state pension will increase by the highest of earnings, prices or 2.5%. We are also protecting key benefits for older people and working to ensure that older people receive the help to which they are entitled.

[John Howell]

My hon. Friend may recall the “Tackling Pensioner Poverty” report produced by the Select Committee on Work and Pensions in the previous Parliament. The Committee was concerned that many pensioners who are entitled to pension credit are simply not claiming it. What measures are the Government taking to ensure that support reaches those who need it most?

[Steve Webb]

One thing we are considering is whether the data we hold about people can be used better. We are therefore undertaking a modest research study, drawing on data that my Department and Her Majesty’s Revenue and Customs hold to see whether we can identify people who look as if they ought to be getting pension credit but who are not doing so. We will then make automatic payments to them, and test how that works over a pilot period, on which we will report in the summer.

Jobs and the Unemployed

John Howell Excerpts

Wednesday 7th July 2010 Commons Chamber

[Mary Creagh (Wakefield) (Lab)]

I was unable to intervene on the Minister of State on the role that big firms will play in creating the jobs of the future. I wondered whether he had seen the survey by the consultancy and accountancy firm Deloitte which concluded that big firms fear that a new recession will hit the UK. It said that business confidence has been knocked, in large part by the shroud-waving and fiscal hysteria from the Conservatives in creating the mood music for this draconian Budget. The survey of finance directors from 32 FTSE-100 companies and 93 UK companies accounting for 28% of the equity market showed that the net percentage of those who were more optimistic had dropped from 40% to 24%.

The hon. Member for Bedford (Richard Fuller) made a point about small business investment, but businesses need confidence if they are going to invest in the future. They will not invest in creating the jobs of the future if they are worried that this deflationary Budget, which will knock 1.3 million jobs out of the economy, will leave them high and dry. The money that they would otherwise invest could be kept for a rainy day or a potential future run on the bank.

[John Howell (Henley) (Con)]

The hon. Lady says that what business needs is confidence. I do not disagree, but most of all business needs money. It was her Government that deprived people of the money to make their businesses work.

[Mary Creagh]

That is an extraordinary allegation—that somehow the Labour Government took money away from businesses. I thought that it was the banks—[Interruption.] There was a failure of regulatory oversight, but it was not just in this country. It happened across the world. In future, economic historians will look at the psychological group-think that prevailed across the world in all Treasury departments. There was an economic orthodoxy that the level of growth was sustainable. In the end, the bubble burst and it was not sustainable, but we made the decision not to allow the collapse of a bank to mean that people lost their savings.

We also decided to follow the Keynesian route back to employment. For those Members on the other side of the House who are unaware of Keynesianism, I recommend an excellent article in The Independent by Robert Skidelsky, who was Keynes’s biographer. He is no left-wing madman: he is a sensible and respected economist. He has an interesting analysis of the Budget that makes sobering reading, and I recommend it to all hon. Members of whatever party.

--- Later in debate ---

[Elizabeth Truss]

My hon. Friend is absolutely right. Not only was the analysis of where the money was spent incorrect, but the processes by which it was spent were cumbersome. I believe that the Building Schools for the Future process had nine stages. That has taken a lot of money that could have been used to create real jobs in our economy, by improving our infrastructure and education. I completely agree.

We have heard a lot of arguments from Opposition Members about how people would support a particular fund or a particular level of spending, but we have not seen a cost-benefit analysis. We have limited funds. We need to prove that those funds are better used on one project, such as the future jobs fund, or another project, whether that is the A14 or the A11. We have not seen such analysis. What we have heard from Opposition Members is a number of anecdotes. I do not think that anecdote is a good way to conduct government. We need to conduct government on the basis of evidence.

[John Howell]

Would my hon. Friend put the £13 billion spent on regional development agencies since 1999 in the same category as the white elephants that she has been describing?

[Elizabeth Truss]

I would. That is not to say that everything spent by RDAs was wrong. There have been many good projects. But the way it was spent and prioritised did not use Government money to its best effect. That is my point. That is why I want to see the Government assess projects on the basis of economic return, as I mentioned earlier to the hon. Member for Luton South (Gavin Shuker). I want the way in which the projects are assessed to be fully open and transparent, so that we can have a proper debate about the best way to spend our limited money.

It will be growth on the basis of real jobs and on the basis of decent infrastructure, good railways and roads, that will seal our economic future in the right direction, not pursuing the initiatives and schemes that we have seen time and again during the past 13 years, frittering away valuable money. It is our money, not the Government’s money. Ultimately, it is the money of all those in my constituency who pay taxes.

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[Jack Dromey (Birmingham, Erdington) (Lab)]

Historically, Birmingham and the midlands was the industrial heartland of Britain. In the 1970s, the regional economy outperformed the national average, but in the 1980s Birmingham and the midlands was blitzed by the effects of the Conservative Government and 200,000 people lost their jobs, overwhelmingly in manufacturing. A proud region paid a terrible price. Sadly, decline has continued since, and the area has gone from being at the top of the league to the 7th best region on economic performance. If my region had matched the UK average on output per head, the regional economy would have benefited by an additional £16.5 billion.

The human cost of that long-term decline starting in the 1980s has been immense. Four of the five most deprived wards in Britain are in Birmingham, 10 of the 20 most deprived wards in Britain are in the midlands and the constituency I am proud to represent—Birmingham, Erdington—is the sixth most deprived in Britain. The statistics are stark and so, too, is the appalling human price that I see day in, day out in my constituency. Birmingham and Erdington both believe in a tradition of self-help, but the problems we face are incapable of resolution, other than through the role of good government. The role of government is not to wash its hands of responsibility for the unemployed, because that is a Pontius Pilate approach towards those who need the help of government.

I wish to focus on Advantage West Midlands, which is the most successful regional development agency in Britain; the National Audit Office’s recent report gave it a rating of four out of four, and for every £1 of public money spent, the regional economy benefits by £8.14. AWM is a constantly improving RDA with an outstanding track record. Sir Rod Eddington’s transport study said that its work on transport infrastructure was the best in Britain. The Treasury review of June 2009 said that AWM was the most cost-effective RDA in Britain. I have seen at first hand the power of its work. I remember that when Rover was saved from closure in 2000, it was thanks to what AWM did in diversifying the supply base that when Rover tragically went under in 2005, tens of thousands of jobs that would have gone in the supply chain in small and medium-sized enterprises were preserved. I, too, experienced that terrible day when 5,000 workers lost their jobs at Longbridge. Advantage West Midlands swung into action immediately, and in nine months, by way of effective programmes, 4,000 of those 5,000 workers had been found alternative employment.

The transformational change has been remarkable. The development of the Longbridge innovation centre and Bournville college has meant 10,000 new jobs and 1,450 new homes. The development of our regional infrastructure, with the New Street Gateway, the single-biggest investment by any regional development agency, involves £100 million of public money, but it levered in £2 billion of private sector investment, with enormous economic benefits, including 10,000 more jobs.

There have also been solutions for business. Since 2002, 5,000 manufacturing companies, overwhelmingly small and medium-sized enterprises, have benefited from the world-class advice of the Manufacturing Advisory Service, adding £150 million to their turnover. It is little wonder, therefore, that the midlands business community strongly supports Advantage West Midlands. The voice of the business community, Business Voice WM, having consulted its members in June, said to the Government, “Do not abolish the regional development agency. An intelligent debate about change and reform? Perhaps. But do not abolish the regional development agency.”

[John Howell]

How much of Advantage West Midland’s programme reflects the wishes of local councils, rather than those of central Government?

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[John Howell (Henley) (Con)]

May I begin by paying tribute to my hon. Friend the Member for Mid Norfolk (George Freeman), whose maiden speech was erudite, sophisticated and entertaining? It has almost persuaded me to abandon my plan to go and live in the south of France in my retirement—when the date comes, a long time in the future—and instead to go and live in Norfolk.

I should like to talk about the words at the end of the Opposition motion and the decision

“to abolish regional development agencies”,

which the hon. Member for Birmingham, Erdington (Jack Dromey) and the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) mentioned in their speeches. We need to put RDAs into some sort of perspective. Between 1999 and 2008, RDAs cost £13 billion; salaries increased from £38 million to £120 million and running costs increased by 159%. PricewaterhouseCoopers said that the return was £4 for every £1 put in, but it is not clear whether that takes account of the increase in overhead costs. Either way, it is not a particularly interesting amount of return.

In addition, we should not forget the rather destructive way in which RDAs have gone about promoting areas overseas and reaching out for inward investment. The total cost of RDAs’ overseas activities in the seven years to 2008 was £24 million. Even Advantage West Midlands, which the hon. Member for Birmingham, Erdington much praised, has 11 offices overseas. There is wasteful competition between RDAs. Five RDAs have offices in China, which, as I have mentioned in the House before, prompted a rather indignant group of business men returning from China to complain that the Chinese do not understand the difference between the east and west midlands.

The creation of employment through the RDAs essentially happens through the regional economic strategies. We have all heard about the regional spatial strategies, but the regional economic strategies are their precursors. The RSSs are there to deliver in planning terms what the RESs deliver. I suspect very few Members have read, or even heard of, the RES for their own region. That is unsurprising; like the RSSs, the RESs are reflective not of a bottom-up approach, but of a top-down approach.

In my own region of the south-east—where I am asked to believe that the town of Henley has an enormous amount in common with the town of Dover—the concentration of resources on infrastructure has been around the Government’s agenda in Kent, whereas places such as Oxfordshire, which is an economic area in itself, have been left out of receiving any investment for many years. Such areas have had to fight to get what is due to them.

I agree that the RDAs have done some good work, but we must accept that most regions are artificial. They are political constructs, and there is no identity with the region. There is quite a lot of academic work on that, including papers by, among others, Hadjimichalis and Hudson, which I recommend to Members. Few regions have longevity or a common identity. The potential exception is the north-east, where there has been some argument for a common focus since the 1930s. The reality, however, is that the boundaries are artificial. Local Government Association research into the trading, travelling and working patterns of the British economy demonstrates that the principal sub-national economic unit is sub-regional, not regional. That was a good piece of analysis. The Labour approach to RDAs has, therefore, been part of the tired centralist agenda. It has ignored natural areas and, arguably, suppressed growth by focusing on a centralist agenda that ignores local flexibilities and opportunities.

Opposition Members tried to suggest that abolishing the RDAs would leave regions and sub-regions in a vacuum, but nothing could be further from the truth. We have proposed local economic partnerships, some of which may, if local councils and businesses wish, have similar configurations to the current RDAs. What is important is to give control back to local councils and business, and to liberate growth and local ideas. That challenge has been welcomed by local councils. I was interested to see press reports of 22 councils in Yorkshire and The Humber agreeing to support local economic partnerships, and, again, the LGA has shown there is huge support for that.

Local government is up for this. My own county has a very good vision of a technology arc from Oxford across to Cambridge. It does not need an RDA—or in this case, two RDAs—to tell it how to do that. There is no better quote with which to end my comments than one from the chairman of South East England Councils, the leader of Kent county council, Paul Carter, who said:

“The future is local. We need to strip away the old bureaucratic, regional structures quickly. Councils”—

in this case in the south-east—

“are ready and willing to take on the role of working with businesses.”

I think that is an extremely powerful route to real growth in our local economies.

Capital Gains Tax (Rates)

John Howell Excerpts

Monday 28th June 2010 Commons Chamber

[Mr Duncan Smith]

I am going to continue.

We have to seize the long-term prospectus for reform, and I shall introduce radical, long overdue changes to the welfare system, reforming the working-age benefit and tax credit system with measures consistent with our core principles: protecting the most vulnerable; improving incentives to work and providing the best route out of poverty; and tackling the pathways into poverty, welfare dependency, family breakdown and debt. That is crucial if we are to tackle income inequality, which is at its highest since records began in this country.

[John Howell (Henley) (Con)]

A vulnerable group that my right hon. Friend has not yet mentioned is pensioners. Will he say something about what we intend to do to protect pensioners’ incomes?

[Mr Duncan Smith]

I was going to come on to that, but I shall deal with it now.

As my hon. Friend knows, the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), fully supports all of this, and has made an announcement. [Interruption.] We are a coalition, and we are together. He has announced some radical proposals on pensions, and I am enormously proud to be the first Secretary of State for Work and Pensions to say that we have relinked pensions and earnings. Moreover, even in these difficult times, we will triple-lock that pension, so that it will rise in line with earnings or prices, whichever is highest, or by 2.5%. [Interruption.] I heard the hon. Member for Wallasey (Ms Eagle) chuntering about the consumer prices index, but earnings will rise in due course well above that, so she does not know what she is talking about. [Interruption.] Okay: she had 13 years to do that, but she did not do it. She should go and look pensioners in the eye, and tell them why the previous Government did not do so, when they had the opportunity.

The coalition is proud to make sure that we will reform the system that we have inherited. We will reduce the deficit, and we will improve the lot of the poorest in society. We will look back on this and say, “What a shameful 13 years the other side had.”