The Economy and Work

John McDonnell Excerpts

Thursday 26th May 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move amendment (e), at the end of the Question to add:

“but respectfully regret that the Gracious Speech fails to deliver for working people, to protect public services and to address the black hole in the public finances; further regret that the Government’s economic policy has unfairness at its core and includes tax cuts for the wealthy while failing to deal with inequality; regret the refusal of the Scottish Government to use its new tax powers to put an end to austerity in Scotland; regret that the Government is presiding over the worst decade for pay growth in nearly a century; call on the Government to adopt Labour’s Fiscal Credibility Rule to invest in a sustainable economy for the future and to adopt Labour’s Tax Transparency Enforcement Programme to tackle tax avoidance; regret that the Government has failed to defend the UK steel industry, believe the Government should reform the lesser duty rule and call on the Government to give Parliament a vote on giving China market economy status and to adopt Labour’s 4 Point Plan to save the steel industry as a part of a long-term industrial strategy; further call on the Government to reverse the cuts to Universal Credit work allowances; and call on the Government to abandon its misguided proposals to repeal the Human Rights Act 1998.”.

I rise to speak to the amendment in the name of the Leader of the Opposition, myself and several colleagues.

Last week was the first time I had actually visited the other place to listen to Her Majesty read the Queen’s Speech. Usually, I avoid the crush and stay here to have a chat with my hon. Friend the Member for Bolsover (Mr Skinner). I have to say that my admiration for the Queen was immensely increased by her ability to keep a straight face while reading the fictional drivel that is called the Queen’s Speech.

The Queen’s Speech before us demonstrates conclusively the massive distance between the Chancellor and the real world. It opened with an extraordinary piece of doublespeak. The Government apparently think we live in a “strengthening economy”. They are seemingly not paying attention to their own statistics and their own forecasts. After precipitating the slowest recovery in modern British history, the Chancellor is now presiding over a recovery built on sand. Business investment has slumped again—by 0.5% in the first quarter, according to this morning’s figures—and the Office for Budget Responsibility’s most recent forecasts are for downward revisions in business investment across the life of this Parliament. Consumer debt is rising at record rates, and is forecast to remain at unprecedented levels. The current account deficit has reached record highs. We are borrowing more than ever before from the rest of the world as a result. We are not, as the Queen’s Speech claimed “living within our means”—far from it, on the Government’s own figures.

Productivity has slumped under this Government. The gap between what the average hour worked in Britain produces and what the average hour worked in the US, France or Germany produces is bigger than it has been for a generation. Every hour worked in Germany produces one third more, on average, than it does here. Low productivity is the sign of a weakened, damaged economy. It means lower wages and more insecurity. The slump that has occurred in productivity has been far worse in this country under this Chancellor than in any comparable G7 economy. It is what has caused the Office for Budget Responsibility to revise its future forecasts downwards.

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

Does my hon. Friend accept that in the 10 years of the Labour Government to 2008—pre-crash—the economy grew by 40% and that, after the banking crash, we left debt at 55% of the economy in 2010, a figure that is now 83%? Does that not show a failure to grow the economy effectively or to manage productivity?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I just say to the hon. Gentleman that he has already tested the patience of the House and should not continue to do so? I care about colleagues on both sides of this House and will make sure that everybody gets in, so—unfortunately—interventions must be very short. The list of speakers is very long, and I do not want any Members to miss out.

[John McDonnell]

I do not want to be discourteous to any Members, but as you suggest, Mr Deputy Speaker, I will take only a limited number of interventions.

On the crash, let us be clear—[Interruption.] Well, let us talk about the crash. The policy of deregulating the banking system, turning the City of London into a casino, was the policy pursued by the Conservative Government for the previous 30 years.

Let us move on to the criterion of growth. Growth has been revised downwards for every year for the rest of this decade, and when the OBR revised its forecasts downwards, the Chancellor’s entire Budget plan was shot to pieces. He has been left with a £4.8 billion black hole of committed spending, but there is no committed funding. It is nonsensical to claim, as the Government’s Queen’s Speech did, that the public finances are being placed on a “secure footing” when there are gaping holes in the Budget and the Institute for Fiscal Studies thinks there is only a 50:50 chance of meeting the Government’s own fiscal surplus target. This is betting the nation’s finances on the equivalent of tossing a coin. There is nothing responsible and there is nothing “secure” in setting unrealistic and politically motivated targets for public spending cuts.

It is useless to preach to us about the need for a “stronger economy” when, by his actions in office for six years, the Chancellor has methodically undermined the economy. This was his choice. Austerity was a political choice, not an economic necessity. We all now live and are still living with its consequences. Because it was the wrong choice to make, the Chancellor has failed, and it is the British people who are bearing the cost.

The Chancellor has piled failure upon failure, but at the centre of it all is the failure to sustain productivity. Productivity is the key to growth in any modern economy, and the surest way to achieve increased productivity is through increased investment. Increased investment means installing new equipment and replacing old infrastructure, yet business investment remains weak. When business investment is weak, the Government should step up to make sure vital, world-class infrastructure is provided—from high-speed rail to high-speed broadband. There is now consensus from the International Monetary Fund to the OECD, and from the CBI to the TUC, in urging Governments—not just in this country but across the world—about the need to invest in the future, but this Government are clinging to their fiscal surplus target, which is set actually to cut real-terms Government investment over the course of this Parliament. Mr Deputy Speaker, you could not imagine a more perverse and inadequate economic policy.

Behind the failure to invest lies the failure of our economic institutions. Too many of them have been captured by special interests or place short-term gain ahead of long-term growth. We have major corporations, which are sitting on a cash pile of up to £700 billion, paying out high salaries to senior executives while failing to invest. It is no wonder that in the past month we have seen a series of shareholders revolts against the remuneration packages of some chief executives.

We have a Business Department that does not actually believe in supporting business and refuses even to mention the words “industrial strategy”. In Her Majesty’s Revenue and Customs, we have a department for tax collection that does not believe in collecting taxes—not, at least, from major corporations. That was demonstrated by the fact that when it struck a deal with Google that reflected an effective tax rate in single digits, the Chancellor calls it a “major success”. I have written to the Chancellor to make sure he urgently contacts the French authorities, so that any information they find during their investigation into Google’s Paris headquarters is shared with us to give us a better understanding of Google’s operations in the UK.

[Oliver Dowden (Hertsmere) (Con)]

Will the hon. Gentleman tell us exactly how much money was raised from Google when Labour was last in power?

[John McDonnell]

It is interesting to note that the inquiry into Google was started under the Labour Government. It is also interesting that the last assessment that was made, not by us but by the Financial Times—an independent organisation—said that the measures introduced by that Labour Government would reap tax rewards 10 times greater than anything introduced by this Government. After six years, the Chancellor has no one to blame but himself.

The Queen’s Speech furnished us with plenty more unreal promises. The Government say that they

“will support aspiration and promote home ownership”.

Tell that to the hundreds of thousands of our young people who now have no serious chance of ever owning a home of their own. Home ownership has fallen to its lowest level in decades on this Chancellor’s watch. Rough sleeping has risen in London by 30% in the past year, the biggest rise since the current reporting procedures were introduced. Nearly 70,000 families are now living in temporary accommodation, including bed and breakfast accommodation. Nine in 10 under-35s on modest incomes could be frozen out of home ownership by 2025 according to independent analysis.

[Andrew Gwynne (Denton and Reddish) (Lab)]

That phenomenon is not just happening in London; we now have tents in the streets of Manchester. Is that not a shocking indictment of this Government’s housing policy?

[Jake Berry (Rossendale and Darwen) (Con)]

It is a shocking indictment of a Labour council.

[John McDonnell]

I have a Conservative council. In my constituency tonight I will have possibly 200 families living in bed and breakfasts. There are individuals sleeping in our parks and along the canals. In my constituency, we have reinvented the back-to-back, where one family rents the front of a house and another rents the back. We have beds in sheds rented to families. It is a disgrace. This Government have been in power for six years and homelessness has escalated.

According to the Queen’s Speech, the Government will “spread economic prosperity”. Tell that to the steelworkers I met in Redcar, where the Government failed even to mothball the plant to save their local futures. Tell that to the British Home Stores workers facing redundancy as their boss, Sir Philip Green—a Government adviser—stripped their business clean.

In the Queen’s Speech the Government said they will

“continue to support the…Northern Powerhouse.”

That will be why they are closing its Sheffield office and threatening another six offices across the north with closure. That will be why, of the top 15 infrastructure projects with the most public funding, one is in the north.

In the Queen’s Speech, the Government say not that they will tackle poverty and deprivation, but that they will redefine them. The Chancellor’s shameful response to the 1 million people using our food banks every year is to

“introduce new indicators for measuring life chances”.

His failed austerity programme has a human cost, with 500,000 more children in this country forced into poverty and nearly 13 million people now living in poverty. More than half of those people are in work. This Queen’s Speech offers no solutions to those who have barely enough to feed their families and cannot pay to heat their houses. Instead, the Government will simply make sure that they are counting those people’s misery properly.

[Huw Merriman (Bexhill and Battle) (Con)]

Will the shadow Chancellor consider celebrating the fact that one third of the working constituents in Bexhill and Battle are receiving a pay rise because of the national living wage, taking those people off the breadline and further up the pay scale?

[John McDonnell]

I would celebrate it if it was a real living wage and if many of those people were not also suffering from cuts to universal credit.

The reality is that after six years of desperate efforts to impose cuts on our economy, against the best available advice from the economics profession itself, the Chancellor is staring an entirely predictable failure in the face. He started out with such high-flown promises. There was going to be a “march of the makers”, yet today, manufacturing is still smaller than in 2008. There was going to be a rebalancing of the economy, yet today for every three jobs created in London just one is created in the rest of the country. There was going to be a modernised tax service, but, as the National Audit Office pointed out in a damning report earlier this week, the quality of service at Her Majesty’s Revenue and Customs has collapsed in the past year as a result of staffing cuts. He promised increased investment, but he cut Government investment spending and now plans to cut it further. In 2010 he forecast the fastest recovery in living memory, but he has delivered the slowest recovery in modern British history.

Let us talk about job creation. The Chancellor and his Government have, perhaps understandably, clung to the job creation figures. Every month they are greeted with rare enthusiasm by Ministers. The reality is that two thirds of those in poverty—nearly 9 million people—are in work. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The Treasury Bench does not need to be echoing all the way along. Can we give it a break? The Chancellor will be speaking soon and you will expect me to treat people in the same way. I expect the shadow Chancellor to be heard, not shouted down. [Interruption.] Now, I have been very good so far, but I do not want to hear any more. I am sure that the Whips Office could do with someone to go and make a cup of tea. If they do not want one, I might later.

[John McDonnell]

Mr Deputy Speaker, you are a class act. The shout was, “Do we welcome the jobs?” Of course we do, but let us be clear: too many of the jobs created since 2010 have been poorly paid and insecure. Some 800,000 people are now on zero-hours contracts. Insecurity at work has been made worse by the undermining of employment rights by the Government. There is no need for that.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

Does my hon. Friend share my concern that the Trussell Trust, which provides the food bank in Southwark, is providing food bank support to hundreds of people in work? It estimates that 10% of the people it serves in central London are in work.

[John McDonnell]

We welcome new jobs, but insecurity and poor pay mean that the numbers in work who are going along to get support from food banks is growing rather than reducing.

[Several hon. Members rose—]

--- Later in debate ---

[John McDonnell]

I will press on, Mr Deputy Speaker, as I know we are under time pressure.

All this is the direct result of a failure to invest. Too many businesses have substituted cheap labour for expensive investment. To be frank, they cannot be blamed for that, as the Government have set the lead, cutting their own investment spending. Low investment and weak productivity have real-world consequences. They mean talent wasted and opportunities lost. Some people are stretched to breaking point, working long hours just to make ends meet. Others are left to languish, desperately searching for extra hours. Even the Government’s own forecasters do not expect wages to recover before 2020.

[Julian Knight (Solihull) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

I will in a second. Millions of people are now self-employed, but their average earnings have fallen by 22% since the right hon. Member for Tatton (Mr Osborne) became Chancellor. The Queen’s Speech tells us that the Government plan to create an economy

“where work is rewarded.”

Nothing could be further from the truth. Those who work hardest are being punished with cuts to tax credits, but tax dodgers and the super-rich are rewarded with tax cuts.

[Steve Brine (Winchester) (Con)]

On the subject of jobs, the former Leader of the Opposition—he is a proven winner who the shadow Chancellor and the current Leader of the Opposition want back on the Front Bench—said that the Government’s policy would cost 1.2 million jobs. Does the shadow Chancellor concede that that was plain wrong?

[John McDonnell]

As I said earlier, rather than invest, employers have tried to use cheap labour, and that has had an impact on wages and living conditions, which is unacceptable.

This Government have failed and will continue to fail on every measure they set themselves. They have failed in their target to reduce the debt, on their welfare cap target, and on their target to close the deficit. The Government have lost their way. Gone is the pretence of being the new “workers party”, as was trumpeted so loudly last summer. That disappeared when they started cutting in-work benefits. The Government wander around from crisis to crisis, looking for another U-turn to make. Cuts to personal independence payments were scrapped, as was forced academisation. Measures to address the tampon tax and cuts to renewables subsidies were abandoned. Only one policy directive seems to hold this sorry excuse for a Government together, and that is the policy—in defiance of all sound economic advice—to impose spending cuts of a viciousness not seen in this country for generations.

There is consensus across this House that a strong economy is the foundation on which all else can be built. This Government have not created a strong economy—strong on rhetoric perhaps, and strong on creative accountancy, as the last Budget revealed, but the Chancellor’s economy is a jerry-built structure that rests on a recovery built on sand. The Chancellor has had plenty of opportunities to “fix the roof when the sun was shining” —as he so memorably put it in happier times—but he has simply failed. That would have meant taking a different approach, and we all hope that once the referendum is out of the way, the economy will pick up. Without change, however, the trajectory for our economy is clear.

We are trapped in a low-wage, low-skill, low-investment and low-productivity economy. We need a Government who adopt a sensible and credible fiscal rule, enabling long-term and patient investment in our economy, and we need a Government who use record low interest rates to invest in the future. As a minimum, the Government should now invest in the infrastructure, skills and technology that can help to transform how this economy operates. We need a Government who clamp down on tax avoidance. They could go further and overhaul a tax system that is manifestly failing to levy fair rates on those who can pay the most.

We need a Government with an industrial policy who back the steel industry, and who work with our European partners to clamp down on the flooding of our markets with cheap subsidised Chinese steel. The Government could also seek to transform the institutions that govern our economy, from the Treasury to the great corporations, unlocking potential that is otherwise wasted when vested interests dominate decision-making. The Queen’s Speech was an opportunity for the Government to accept that austerity has failed and to change course, but it was not taken. If the Government cannot write a speech for Her Majesty to undo the damage they have inflicted and set out a confident course for this country’s economy, it is clearly time for Labour to lead the way.

Let us be explicit: Labour rejects the failed and cruel austerity programme adopted by this Government. Instead, working in partnership with business, entrepreneurs and workers, Labour would create an entrepreneurial state to support innovation, create wealth, and drive growth, and we would share the proceeds of that growth fairly. By investing in our economy, Labour would lay the foundations of a new society that is radically fairer, more equal, and more democratic—an alternative based on a prosperous economy that is economically sound, environmentally sustainable, and where such prosperity is shared by all.

--- Later in debate ---

[Mr Osborne]

My hon. Friend is absolutely right. If the verdict of this report is that Labour is on life support, the policies of the shadow Chancellor are “do not resuscitate”. That is what he is condemning the Labour party to.

[John McDonnell]

The right hon. Gentleman is more interested in talking about Labour’s policies than his own. May I remind him that the Tory party just lost every mayoral election in the recent elections?

[Mr Osborne]

Labour had the worst results for an Opposition party in more than 30 years and were reduced to third place in Scotland. And Labour Members think that that is a good set of results! As far as we are concerned, if they want to carry on in this parallel universe that suits us just fine. Meanwhile, we are going to get on with governing the country, improving the economy and reforming our society.

The Government have made huge progress in the past six years. We inherited one of the weakest economies in the advanced world, which had had one of the biggest crashes. It is now one of the fastest-growing economies in the advanced world. We inherited an economy in which millions of people risked losing their job, and hundreds of thousands had. We now have a record number of people in work. We reduced the budget deficit. Our commitment to the northern powerhouse has seen investment projects in the region increase by 120% in the past two years. The verdict of the IMF in its recent examination of the British economy is clear:

“The UK’s recent economic performance has been strong, and considerable progress has been achieved in addressing underlying vulnerabilities.”

It said growth was robust and that

“the unemployment rate has fallen substantially, employment has reached an historic high, the fiscal deficit has been reduced, and financial sector resilience has increased.”

That is the independent verdict of the IMF. In the past, article IVs have been critical of the British economy; now they celebrate what we have achieved.

Many challenges remain, of course, and that is what the economic reforms in the Queen’s Speech will address. There is the immediate crisis in the global steel industry. My right hon. Friend the Business Secretary has just outlined to the House all our efforts to secure jobs here at home. There is a long-term challenge facing western societies of how we increase productivity growth. Improvements in productivity drive lasting improvements in living standards. That is a challenge for all countries. Indeed, the latest figures today from the United States show that productivity is set to fall this year for the first time in 30 years.