Economy and Jobs

John McDonnell Excerpts

Monday 20th January 2020 Commons Chamber

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

I beg to move an amendment, at the end of the Question to add:

‘but respectfully regrets that the Gracious Speech fails to put an end to a decade of austerity, to invest in the UK’s underfunded public services, or to scrap universal credit; notes the damaging impact that the four-year freeze in working-age benefits has had on families on low income; and calls on the Government to bring forward a plan to reverse the damaging impact austerity has had on communities in the UK, tackle the climate and environmental emergency, and reshape the economy to work for everyone by clamping down on tax avoidance, tackling insecurity in work by extending full employment rights to all workers, ending in-work poverty, and introducing a real living wage.’.

I appreciate that many new Members will want to speak today, so I will seek to be as brief as possible. [Interruption.] I thought that would be appreciated on both sides. We aim to please.

You, Mr Speaker, have been in the House as long as I have, so you will know that the classic approach to a good Queen’s Speech and its subsequent debate combines an assessment of the position of the country—a state of the nation address—with at least some attempt to address the issues facing our people. On both counts, the latest Queen’s Speech and this process is by any stretch of the imagination crushingly disappointing—I believe that the overriding view that will come to be associated with this Government may well be one of disappointment. They appear to have no appreciation of the lives so many of our fellow citizens live or of the often heartrending problems they face.

The Government’s programme in the Queen’s Speech fails to reverse the decade of austerity. As the Institute for Fiscal Studies has said, austerity is baked into the Government’s economic policies, which fail to tackle insecure work, to end in-work poverty and to introduce a real living wage. Worst of all, the Queen’s Speech fails to address the brutal hardship caused by universal credit, introduced by this Government. We face twin emergencies: first, a climate emergency, an existential threat to our planet that, as we have seen only too well in Australia and Indonesia, is rapidly spiralling beyond control; and, secondly, in this country, a social emergency resulting from a decade of harsh austerity and decline. Last year, the House resolved that we faced a climate emergency. We should also resolve that we face a social emergency.

[Simon Hoare (North Dorset) (Con)]

If what the right hon. Gentleman says is true—and I very much doubt it—and if his Eeyore approach to what the country thinks is correct, to what does he ascribe the best result for the Conservative party since 1987 just last month?

[John McDonnell]

I suppose we will have a longer debate at some stage about the outcome of the last general election. I will be straight with the hon. Gentleman: I think the overriding issue was Brexit and that the overriding message was the one the Conservative party put out of “Get Brexit Done”. I ascribe the victory of the Conservative party to that. I cannot be straighter with him than that.

In the last three months in this Chamber, we have had debates on the spending review and the last Queen’s Speech in which hon. Members have highlighted report after report from independent agencies exposing the impact of a decade of austerity. I want to seize on one group as an example—a group dear to all our hearts. If we are to lay any claim to being a compassionate or even a civilised society, surely the most effective test is how we care for our children, and on that count the Government fail appallingly. Surely no Government could ignore organisations such as the Children’s Society and the Child Poverty Action Group, which have reported that more than 4 million of our children are still living in poverty. That means that one child in three is living in poverty in our country in the 21st century. Some 125,000 of those children are homeless and living in temporary accommodation.

The effects on our children of living in poverty are well documented by the Children’s Society. Those children are more likely to be in poor health, to experience mental health problems, and to have a low sense of wellbeing. They underachieve at school, and experience stigma and bullying. The shocking statistic, though, is that 70% of children living in poverty are in households in which someone is in work. The Children’s Society describes that experience as being hit by a perfect storm of low wages, insecure jobs and benefit cuts. The result is remarkable: this Government have achieved the historic distinction of being the first modern Government to break the link between securing work and being lifted out of poverty.

The Chancellor boasted recently that wage rises were at record levels compared with those of the last 10 years. That is a bizarre boast. Wage rises are at a 10-year record high because his Government have kept wage growth so low for the last decade. Average real wages are still lower than they were before the financial crisis. [Interruption.] The Chancellor, from a sedentary position, has again used the slogan “Labour’s crisis”. Let me try to find a quotation for him. George Osborne said:

“did Gordon Brown cause the sub-prime crisis in America? No.”

He went on to say that “broadly speaking”, the Labour Government

“did what was necessary in a very difficult situation.”

The Chancellor, again from a sedentary position, refers to the deficit. Let me quote again. In 2007, George Osborne said:

“Today, I can confirm for the first time that a Conservative Government will adopt these spending totals.”

He was referring to the spending totals of a Labour Government, by implication. Let me caution the Chancellor, because we might want to examine his role at Deutsche Bank, where he was selling collateralised debt obligations, described by others as the weapon of mass destruction that caused the crisis.

As I was saying, average real wages are still lower than they were before the financial crisis. The Resolution Foundation has described the last decade as the worst for wage growth since Napoleonic times. The recent increase in the minimum wage. announced with such a fanfare by the Government, reneges on their minimal commitment that it would be £9 an hour by this year. It certainly is not. The UK is the only major developed country in which wages fell at the same time as the economy grew after the financial crisis.

The Government seem to believe that the answer to low pay is raising national insurance and tax thresholds. When tax thresholds are raised, the highest gainers are largely the highest earners, and raising them and national insurance contributions is the least effective way of tackling poverty. According to the IFS, only 3% of the gains from raising the national insurance threshold would go to the poorest 20% in our society. A £3 billion cut in the national insurance contributions of employees and self-employed people—which, at one stage, was promised by the Prime Minister—would raise the incomes of that group by 0.1%, which pales into insignificance in comparison with the losses endured from benefit and tax credit cuts since 2010. It is also worth bearing it in mind that, while the heaviest burden of austerity has been forced on the poorest in our society, this Government have given away £70 billion of tax cuts to the corporations and the rich.

We have also heard Ministers refer to the so-called jobs miracle. Of course we all welcome increased employment, but when we look behind the global figures we find nearly 4 million people in insecure work with no guaranteed hours and 900,000 people on zero-hours contracts. Britain has one of the highest levels of income inequality in the developed world. A FTSE 100 chief executive will be paid more in three days than the average worker’s annual wage. Surely no Member of this House can think that that is right, can they? The gender pay gap is 17.3% and there is now an inter-generational pay gap of over 20%. There is an 8% pay gap for black workers, and if you are disabled the pay gap is 15%. There is nothing in the Queen’s Speech that will address any of this. There is nothing that will address the grotesque levels of inequality in our society and at work, certainly on the scale that is needed.

[Sir Edward Leigh (Gainsborough) (Con)]

And 30% of all tax receipts come from the top 1% of earners.

[John McDonnell]

That is just income tax. It is interesting that the lowest earners pay 40% of their income in tax while the highest earners pay 34%. We know who is paying more in comparison with what they earn.

There is nothing in this Queen’s Speech that will address the grotesque levels of inequality. Actually, the reverse is true because the Government are now launching another assault on trade union rights and, in particular, the human right of the ability to withdraw one’s labour. The Chancellor has also rejected future dynamic alignment with EU employment rights and standards, and there is a real fear—let us express it now—that this prefaces the fulfilment of ambitions of Conservative Members to undermine workers’ rights and conditions. Maybe that is what some of their campaigning for Brexit was all about. Wage levels are low, in part because this Government have produced a productivity crisis. Over the past decade, productivity grew at its slowest level in 60 years. A German or French worker produces in four days what a British worker produces in five, not because the UK worker is any less industrious; far from it. It is because investment in the UK has been broadly weaker than in the rest of the G7 countries, especially since 2016, and investment is currently stagnating.

This has been exacerbated by the lack of investment not just in capital but in human capital—in training and skills. In his interview at the weekend in the Financial Times, the Chancellor highlighted the role of further education colleges, and I agree with him. He talked about the role they could play in raising productivity by promoting lifelong learning and skills training. As someone who benefited from further education while I was on the shop floor, I fully agree, but the reality is that this Government have brought FE to its knees, with the IFS suggesting that at least £1.16 billion is needed just to reverse the cuts that the Government have imposed on further education. We have seen a decade of a Government denying opportunities to the very people whose skills have been desperately needed, not just to fire up our economy but also to lift their families of poverty.

Alongside skills, a vibrant economy needs to invest in the future if we are to compete in the fourth industrial revolution, but on investment in research and development, the UK is now 11th in the EU. We await the Government’s detailed proposals on investment in R and D, and if they are of a scale we will support them, but it will take a lot to make up for the lost decade in this field. A lack of investment in infrastructure and R&D has resulted in productivity going backwards in many regions of the UK. The 2017 Kerslake report identified a £40 billion productivity gap in the three northern regions compared with the south, which has produced some of the worst regional inequality in all of Europe.

[Mr Richard Holden (North West Durham) (Con)]

The Labour manifesto wanted to scrap R&D tax credits. How does the right hon. Gentleman square that with his support for R&D now?

[John McDonnell]

Quite simply. It is a good question, because we wanted to scrap the tax credits and put direct investment into R&D. Some of the very advisers the Government have called upon, such as Mariana Mazzucato, have been ripping apart some of those tax credits for inefficiency and ineffectiveness. We shared the objective, but we found a different and more effective route.

We have referred in the past to the differentiation between types of investment, and the example that we have used in previous debates is stark. Planned transport investment in London is 2.6 times higher per capita than in the north, so it is no wonder that rail infrastructure in the north has been falling apart. After a decade of decline, the Government at last seem to have at least acknowledged their mistake in refusing to invest in the regions—something we have been crying out for—but we will see what scale of investment is produced after the fine words.

However, this is not just about capital investment in infrastructure. There is also a desperate need for revenue investment in the social infrastructure of our regions and nations. It is interesting that many cities and towns in the north have borne the brunt of austerity. Seven out of the 10 cities with the largest cuts in the country are in the north-east, the north-west and Yorkshire. That came about not by some miracle, but as the result of deliberate Government policy.

Imitation, they say, is the highest form of flattery, so I suppose Labour should be flattered that the Government are now looking to rewrite the Treasury Green Book to reorient investment decisions towards the regions outside London and the south-east—an exercise that Labour undertook two years ago. I suppose we should also be flattered by the Government now following Labour in adopting a fiscal rule that enables them to take advantage of low interest rates to borrow, which we advocated at least four years ago.

[Richard Fuller (North East Bedfordshire) (Con)]

As we are in the habit of stealing clothes, as the right hon. Gentleman would present it, the Labour Party had its election manifesto and the costings—two documents that obviously have been consigned elsewhere—but the third document was about corporate tax breaks, so does he suggest that the Government should look at existing corporate tax breaks and reorient them to support investment in other regions?

[John McDonnell]

Again, Labour undertook work to look at exactly that. We looked at the regional impacts and at how tax breaks are distributed unequally around the country. There is an important and exciting piece of work to be done, and some of those issues were considered by the Kerslake review in 2017. There will be some element of consensus on how we can direct future investment, and we can build upon that in the long term, because if anything comes out of the lessons of the past 10 years, it is that we need a longer schedule than just a five-year parliamentary process for capital investment of that scale.

Returning to fiscal rules, the Government have now advocated a fiscal rule that largely follows Labour’s advice, but it is this Government’s third or fourth fiscal rule—I have lost count. Some of them have been adhered to—no, actually, looking back at it, none of them have actually been adhered to, which largely defeats the object of having fiscal rules. It will be interesting to see how long this one lasts and how far it is achieved. The problem is that, even if they use all the headroom that their new fiscal rule allows, they are only paying lip service to the need to invest at scale and for the long term. If we are to tackle the issues of poverty, regional inequality and, yes, climate change, the amount of new investment mooted so far by the Chancellor is nowhere near the scale needed to address the dilapidation of our infrastructure outside London, and it is certainly not at the scale needed if we are to tackle climate change. From what we have heard so far, the maximum amount of increased investment talked about by the Chancellor is less than today’s estimate of the cost of High Speed 2.

The Chancellor’s idea in his Financial Times interview, of splitting the Treasury and sending some of its officials to work in satellite offices outside London, is a pale imitation of Labour’s plans not just for regional offices but to move whole sections of the Treasury to the north, to move the Bank of England to Birmingham and, similarly, to locate a national investment bank outside London. If the Government are going to plagiarise Labour’s policies, they at least have a duty to do so competently.

What all these things have in common is a failure to tackle the root causes of the problems to which the Government pay lip service: the grotesque levels of inequality in income and wealth in our society; the concentration of wealth and power in the hands of a few; the ownership of the economy by an elite, with the vast majority of people locked out of decision making and having no say on how the economy works or on who it works for; and an economy increasingly serving the few, not the many. There is no sign that the Government recognise the root causes of the crisis we face, whether social or environmental—at least, there is no sign of them doing anything about it.

Of course, all these investment proposals will count for very little if the Government fail to secure a post-Brexit trade deal with our EU partners that protects jobs. On that score, it is hardly surprising that businesses’ fears rose when the Chancellor, in his weekend interview, cavalierly threatened to throw our manufacturing sector under a bus, as he rejected the calls from business for alignment with the EU to ensure his own Government’s long-standing promise of frictionless trade. He casually said:

“There will be an impact on business one way or the other, some will benefit, some won’t.”

Let us be clear that if frictionless trade is not achieved in a future trade deal or, worse, if there is no deal, the bulk of our manufacturing sector, including cars, aerospace, pharmaceuticals and food and drink, will be in the “some won’t” category. One recent estimate identified that, in the past decade, we have already lost 600,000 manufacturing jobs.

Today, business leaders and unions have combined to warn the Chancellor that his promise to split from the EU will cost billions and damage UK manufacturing. Bizarrely, he blames the manufacturing companies for not having already prepared for any regulatory divergence coming out of any future trade deal, when no one knows what the deal or the rules will be. There is an element of Samuel Beckett or Kafka here, I am not sure which.

We hear that the Chancellor is the only Minister to be secure in his job ahead of the possible “night of the long knives” reshuffle in February.

[Matt Western (Warwick and Leamington) (Lab)]

Following the Chancellor’s interview in the Financial Times, the response from the likes of the CBI, the Engineering Employers Federation, the Society of Motor Manufacturers and Traders, and the Food and Drink Federation is extremely alarming. They have said in unison just how concerned they are about the Government’s ambivalence, as my right hon. Friend says, about the real cost both to jobs and to industry.

--- Later in debate ---

[John McDonnell]

The Chancellor’s statement was reckless. I wish him well, as always, but I caution him that the Prime Minister may well be preserving him in his job to take the hit for any trade deal outcomes that go pear-shaped if frictionless trade is not achieved.

I am aware that many new Members wish to make their maiden speeches. It is important that the Front Benchers do not take too long, so I will come to a conclusion. There is so much more to be said about the operation of our economy: about the failure of the Government to effectively address tax avoidance and evasion and money laundering, which infects our financial system; and about the failure, despite the scandals within the City, and within our accountancy and audit systems, to address our failing regulatory structures.

[Chris Stephens (Glasgow South West) (SNP)]

Is the shadow Chancellor aware that Her Majesty’s Revenue and Customs’ wealthy unit had 1,046 full-time equivalents 18 months ago but now has 961? What does that say about the Government’s approach to tax avoidance and evasion?

[John McDonnell]

The whole process of cuts in HMRC over the years has been a self-defeating one, by which we remove the expertise we need to ensure a fair taxation system and to tackle tax evasion and avoidance.

There is a desperate need to harness our economy effectively, as we will discuss at a later date, and to end our dependence on fossil fuel and to do so much sooner than the inadequate target date of 2050. We will still have some opportunity to address these issues in the run-up to the Budget, but for now let me conclude by cautioning the Government that this Queen’s Speech fails dramatically to demonstrate the sense of urgency and scale of action needed to provide the decade of renewal they promise. Our people have endured a decade of decline. On the basis of what is laid out in this Queen’s Speech and the policy direction laid out so far by the Chancellor, they face not a decade of renewal but a decade of disappointment. We already have had a foretaste of the dangerous politics that disappointment and disillusion creates. We must avoid it, and I ask Members to support our amendment.

[Madam Deputy Speaker (Dame Rosie Winterton)]

As the shadow Chancellor said, a great number of colleagues wish to speak this afternoon. Just to warn Members wanting to speak, let me say that I will impose an eight-minute time limit immediately after the Front-Bench contributions. I am sure that the Chancellor and the Scottish National party spokesperson will bear that in mind.