Social Mobility: Treasury Reform

Debate between Justine Greening and Alison Thewliss

Tuesday 11th June 2019 Westminster Hall

[Justine Greening]

I agree. I am setting out how to fix the underlying problem of why we are underinvesting in people in our country and their potential. That starts with the Treasury. In my view, the Treasury has a twofold problem—first, how it operates across Government and, secondly, its policy approach.

On how it operates, it starts going wrong with the Treasury—UK plc’s finance department—having its own separate strategy from the Prime Minister, the chief executive. We have seen this down the years. It is traditional to see Chancellors at loggerheads with their Prime Ministers. We would never see a finance director able to countermand the CEO and undermine their strategy in any other organisation, yet that is exactly what we see, year to year and day to day. It has happened under Governments of every colour with the Treasury, as it is currently set up. Time and again, we end up with a Prime Minister, who is meant to be running the country, with one strategy, and a Chancellor with a different one, and both at loggerheads and going nowhere fast. It is no wonder that Prime Ministers do not get to deliver their strategies when the finance Department has an entirely separate one.

Parliament has a Budget speech every single year; it is essentially the Government’s strategy statement to Parliament and MPs for the year. It is not, however, the Prime Minister who delivers the strategy statement; it is the Chancellor. That does not make sense at all. Of course, these Budget statements are traditionally packed with politically driven, willy-waving, “look-at-me” projects for the Chancellor. Most are not even Treasury ideas. The best ideas are hoovered up from every other Secretary of State running Departments across Government, and they are generally not even the Treasury’s. Worst of all, most of these excellent policy announcements—for example, the one that we made a couple of years ago on vocational education and T-levels—are held up in order to wait for the Chancellor to announce them in a Budget statement. That is entirely dysfunctional, and it has to stop.

We should abolish the Budget statement in its current form, as delivered by the Chancellor. By all means, let us downgrade it and have it as a very important, but functional, annual presentation of the nation’s finances. Why do we not replace it with a Queen’s Speech update? This could be a proper strategy speech for Parliament every year, delivered by the Prime Minister. There is no reason why a Queen’s Speech update—a strategy speech—could not introduce a Finance Bill. I have listened to enough Chancellors effectively introduce other Departments’ Bills on social care and all sorts of things over the years. There is no reason why a Prime Minister giving an annual update on the Queen’s Speech progress could not set out the key terms of a Finance Bill. The Chancellor could fill in the details later.

I will move on to the spending review, which is also a hugely dysfunctional process—that is assuming it happens, which I will come to in a second. The spending review is essentially a strategy process for the Government, yet it is not led by No. 10 and the Prime Minister; it is led by the Chancellor and a finance Department that potentially micro-manages a wholly separate strategy from that of the Prime Minister of this country. Through this process, the Treasury has other Departments totally over a barrel. I think there would be less of a problem with how spending reviews are approached if the Treasury actually approached them effectively, but it does not. Right now, the UK has budgets set to 2020, which is next year. The country has no budgets in place for any of its spend after next year, which is wholly unacceptable.

Look at how this plays out on the ground. Last week I was up in Bradford to meet the opportunity area team, who are doing some absolutely fantastic work on the ground by connecting improvements in schools, businesses, the local authority and communities. This is a long-term—probably a decade-long—project to get structural change in a community that has bags of potential but needs its schools to do better and its businesses to connect with and develop the talent coming out of those schools. However, the team does not even have a budget after next year. How can we expect to get long-term change in our country, if budgets do not even extend beyond the next 12 months? It is entirely disconnected from the real world of how change happens on the ground. I have talked about opportunity areas, but it is writ large across virtually every single Government-delivered project that is happening on the ground to change things and improve lives.

The Treasury has just cancelled the spending review. From what I read in the papers, we will simply be rolling budgets forwards. At such a crucial time, I cannot think of a less strategic way to manage the UK’s public finances and invest in the future.

[Alison Thewliss (Glasgow Central) (SNP)]

The right hon. Lady is making a compelling point on longer budgets. Does she agree that short-term budgets cause huge uncertainty for the responsibilities of devolved Administrations, who rely on knowing when the Budget will come and what the spending will be?

[Justine Greening]

Indeed I do. Of course, not being able to plan ahead is a hugely inefficient way to manage resources. We spend efficiently when we can get long-term deals from suppliers and contractors, and when we can plan into the future. The inability of any of us to do this is absolutely an inefficient, sub-optimal way to manage finances. If we were to have the spending review, it would be a three-year spending review, but even a three-year or five-year spending review is not long term for a country. The companies that I spent 15 years working in did three-year to five-year spending reviews, but they were not Britain, which needs to invest for the long term.

How on earth are we going to invest long term in people and unlock social mobility if we will not even look beyond the next two or three years? If we will not even look beyond the next 12 months, it is absolutely impossible. This is a failing strategy, and a functioning department or ministry of finance should know that. The fact that the Treasury does not know that tells us everything about why it is not fit for purpose and should, as it stands today, be abolished.

The way in which that failing extends, operates and works on policy in practice—I speak as a former Secretary of State who ran three spending Departments—is that unless a departmental policy area is demonstrably and critically failing on the ground, the Treasury’s attitude is to turn a blind eye and hope that it all gets better. The Treasury’s technical explanation for this is that it hopes that that will drive efficiencies; that the system will have to work harder and deliver the same for less money. That might be true in some cases, but we are set up to fail because the Treasury has no way of understanding when that point has been long passed, and we do not have enough resources to deliver the Government’s plan—possibly the Prime Minister’s plan, but often it is the Chancellor’s plan.

Problems are not fixed early and are simply left. By the time the Treasury finally understands that it is a crisis, it is more expensive to fix it. Alongside a total lack of long-term planning, the Treasury does not fix problems early, which is hugely expensive. Departments’ spending—be it on prisons, schools, healthcare, local government or children’s and adults’ services—ends up in crisis, needing last-minute funding. That is a hugely expensive way to run the nation’s finances. Most importantly, it leads to real hardship on the ground, which is the exact opposite of what Governments of all colours try to achieve.

In my area of education, it was blindingly clear in early 2017 that, although the schools funding formula was broadly the right approach—levelling up schools that had traditionally been underfunded—more money needed to go through the formula, and the money should have come from the Treasury. That was clear to me from talking to colleagues and MPs in the House, and from talking and listening to teachers and parents, yet it was only after the election that we could take any action on that obvious problem. In fact, as everyone knows, I ended up doing my own mini-budget to release £1.3 billion to put into frontline funding. One might have expected that the Treasury would welcome a Secretary of State doing its job for it, but I had to haggle to get that agreement through the Treasury and be able to announce it. I fear that the Treasury yet again is making a similar mistake on school funding and repeating the process.

Reviews are another classic Treasury ruse. The recent Augar review managed to waste well over a year coming up with obvious conclusions about additional funding for further education, but no doubt the Treasury is delighted that it can kick the issue into the long grass for another 12 to 18 months. However, if the substance of the point is that FE needs additional funding, the Treasury has not done young people in the FE system any favours by turning its face away from the need to fund the system properly. It simply cannot be allowed to continue operating in this way.

I have talked about my experience of how the Treasury interacts with other Departments, but what about its policies? It should be managing the nation’s finances to maximise long-term value by unlocking the potential of its most crucial, precious resource—its people. It should set taxation and public investment policy to deliver that strategy for the long term. That is how to reduce the deficit sustainably. It needs to be a finance Department with policies to tackle weak access to opportunity.

For example, how do we recapitalise a generation of young people who do not have access to capital and therefore are not only disconnected from the fact that Britain is a capitalist society but cannot access opportunity? The Government and Parliament decided that they are willing to give young people access to capital if they want one kind of opportunity—a degree—but other opportunities are a wholly different matter. If young people want resources to move across the country to get the apprenticeship opportunity that they really want, to start a business, to put down a deposit on a house, or to rent a place somewhere where they can get on with their career, we do not capitalise them to do that. We should be doing that, and a functioning Treasury would look at those sorts of strategic measures to unlock a structural change in access to opportunity and social mobility in our country.

My hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) asked a good question about the leadership candidates. At the moment, we are hearing only simple, tactical taxation suggestions that, frankly, would not strategically or structurally shift the dial on social mobility.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Robertson.

To my shock and surprise, I suppose, I agreed with an awful lot of what the right hon. Member for Putney (Justine Greening) said. It is just a shame that her Government have no intention of doing a lot of the things that she spoke about. There is no evidence that they will do any of those things, despite her best efforts. In many cases, indeed, what the Government have done to people across these islands is quite the opposite.

The right hon. Lady spoke about the Treasury running a separate policy to the Prime Minister and about the need for investment in the long-term rather than only year to year. I agree wholeheartedly with such things, which need to see change. Again, however, the Government seem intent on having reviews that go nowhere and on other delaying tactics, and not on investing in that long term. As I suggested in my intervention, that has a knock-on effect on the Scottish Government and their ability to do the things that they want to get on with and do.

Ongoing uncertainty about budgets, the wait or lag times between what the UK Government announce and their Budget, and then what the Scottish Government have to do with that money and the implications of the Barnett formula—whether things go up or down the UK—all determine what is left for the Scottish Government to spend. That adds to the unpredictability of the Scottish budget and the priorities within that, because the priorities of the Scottish Government are not necessarily anywhere near those of the UK Government, who set the budgets and determine how the money will flow. A huge amount therefore needs to change in how things are done in the UK. Unfortunately, however, I do not see things changing anytime soon.

The Social Mobility Commission’s “State of the Nation” reports provide a further damning indictment of the UK Government. The commission has found that social mobility has stagnated over the past four years at virtually all stages from birth to work. That is not a huge surprise to anyone, because poor social mobility has a close relationship with income inequality, an indicator that the UK has consistently failed to improve. The UK is the fifth most unequal county in Europe, according to the Institute for Public Policy Research.

Income inequality as an issue is of course not exclusive to the UK. Global trends point to inherited wealth increasing faster than earned income. Sustained efforts are required to get rid of the sticky floor, which makes it incredibly difficult for people to climb out of poverty. The OECD estimates that it will take five generations for children in poverty in the UK to reach the average income—that is a sobering statistic—and gives no prospect of things changing soon.

I have raised some of the issues surrounding the tax system before in this place. The tax system in the UK is simply not fit to tackle big issues such as income inequality and social mobility. It is unwieldy, unnecessarily complex and full of holes to hide in. This UK Government have provided a catalogue of tax reliefs for those who are already wealthy. A report by the Tax Justice Network illustrates that well. It found that wealthy families substantially reduce inheritance tax obligations by invoking tax reliefs on the value of agricultural and business property. Last year, the combined cost of that particular tax relief was £930 million—equivalent to the cost of employing 23,000 NHS nurses. In fact, £930 million can buy a lot of things—it is nearly the cost of expected savings to Government of the universal credit two-child limit. It is extremely telling that this Government prioritise tax breaks for the very wealthy while simultaneously cutting support for children at the lowest end of the income scale—those who need it the very most.

The hon. Member for Strangford (Jim Shannon) was absolutely correct to point out the gender gap in social mobility, and the gap for black and minority ethnic communities. That is writ large in the statistics and in the people I see at my surgeries. He was correct that, when done right, tax credits are a great boost to many people and that those wishing to better themselves within the bizarre structure that the UK Government have put together have lost out.

In my own family, my Papa Thewliss studied, went to night school and did the best he could for his family. In essence, that is part of the reason why I am here today—my grandparents were willing to put that investment into their children, so that my parents could be the first in their families to go to university, and so I am here today. On Saturday, my gran turns 99, and it is some satisfaction that she sees what has happened in her family to get me here.

The structure has to be in place for such social mobility to happen, however. University has to be affordable and apprenticeships have to be supported and achievable. That is not always available for too many people. The points that the hon. Member for Strangford made about the accessibility of apprenticeships and other things, and that the right hon. Lady made about people being able to travel to reach those apprenticeships, are important. It is also important that apprentices can earn a real living wage, because the minimum that apprentices are entitled to is a pittance. We cannot expect people to put their lives on hold for the pittance of an apprenticeship wage. More support needs to be put into real living costs, because apprentices have bills to pay and families to support, and that needs to be part of the package.

The social contract has been ripped up for the people who need it most. Last month’s report by Philip Alston, the UN special rapporteur, stated that austerity has decimated the lives of many people and actively pushed them into poverty. The UK Government have said that that kind of fiscal discipline is vital to reduce the deficit and build a strong economy, but that need for fiscal discipline evaporates completely when it comes to tax breaks for the wealthy, spending billions of pounds on Brexit preparations or putting nuclear weapons on the Clyde.

It is not difficult to draw the conclusion that the cuts were never about reducing the deficit and are ideologically driven. We are seeing even more blatant rhetoric coming from the Tory leadership race, in which the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) has promised a huge cut in income tax for the highest earners if he is elected. The Fraser of Allander Institute at the University of Strathclyde in my constituency has hinted at the impact that that will have on the Scottish budget. Because of the devolution of income tax, the tax cut would not apply in Scotland, but the resulting budget cuts would. To pay for it, national insurance would increase, which will have an impact because it is reserved—Scotland has no control over national insurance. We would lose out on the budget because of that policy, and national insurance contributions for people in Scotland would increase.

If I had the opportunity to give an extra £6,000 a year to one group of people, it would not be those earning over £80,000 a year. It would be some of the families rendered destitute by the hostile environment policy, for whom my office has to source school uniforms, food bank vouchers and Christmas presents, year in year out in some cases; or the women who are victims of domestic abuse, who have to declare that their third child was born as a result of rape just to put food on the table; or people with disabilities, who have to be hauled through a degrading and inhumane assessment system at the risk of being threatened with sanctions. Those are the people in society who desperately who need a break and to receive that £6,000. That is a choice that leadership candidates are putting forward as something they would bring in to Government if selected.

My colleagues on the SNP Benches and I have consistently called for devolution of all welfare powers, inheritance tax and other taxes, so that the Scottish Government can get on with the job of tackling income inequality. We have created the first Scottish income tax system, which is the fairest in the UK. The system has meant that 55% of Scots pay less tax, while raising £68 million for public services. The report I referred to by the Social Mobility Commission, which was so damning of the UK Government, congratulated the Scottish Government on the work they have been doing to increase social mobility. The report says that Scotland is going against the UK trend and becoming more socially mobile.

I urge the right hon. Member for Putney to look at what Scotland is doing in that regard. A person’s socio-economic status is now less likely to be determined by their parents’ socio-economic status. The likelihood of being in a professional job for those from a working-class background compared with those from a professional background has narrowed over the past four years, from 28 percentage points in 2014 to 23 percentage points. The Scottish Government have tried to tackle the issue of people from different socio-economic backgrounds getting into university. A huge amount of work has been done to switch that trend.

I give credit to businesses, as the right hon. Lady did, that are involved in that kind of initiative. I visited Zurich in my constituency, which is taking more people straight from school into the insurance sector. It recognises that having a degree is not necessarily what it needs in its business—it wants a rounded range of skills for a better business. It has found it hugely beneficial to bring people in from school.

[Justine Greening]

I am sure the hon. Lady will be pleased to hear that Standard Life Aberdeen is also very much walking the walk, and genuinely making an impact that goes well beyond its employees and into the wider community.

[Alison Thewliss]

I agree that there are great examples of businesses right across Scotland—I could stand here all day talking about them. It is good that Standard Life Aberdeen is doing that and that more businesses recognise that including a degree on job adverts and applications is not necessary in many cases. By removing that and looking much more widely at the range of skills that people can offer, rather than what degree they do or do not have, social mobility will increase, so that is to be commended.

The Scottish Government are pursuing an inclusive growth agenda and view tackling inequality and growing the economy as two sides of the same coin. I am sure that the right hon. Lady would agree with that, given her speech. It is important to think about the type of society that we are creating with economic policies, and to consider what the point of growth is, if it is built on the backs of the most vulnerable. The Scottish Government have invested in decreasing child poverty, with an ambitious target to reduce it to 10% by 2030. They have introduced a legal requirement on public sector bodies aimed at reducing socio-economic disadvantage. Fundamentally, the Scottish Government oppose Brexit, which continues to threaten hard-fought steps towards reducing inequalities.

The right hon. Lady laid out the dysfunction of the British state in great detail. That is what we see from Scotland. Increasingly, people in Scotland do not believe that the British state will work for them. We have tried, we have waited and we have looked for changes, but they have not come. In fact, from the Scottish perspective we can only see things getting worse. We have asked for more powers, so that Scotland can try to tackle these things, but we do not yet have the full levers of powers that we would have as an independent nation in which we could tackle inequality head-on, using the full range of powers of an independent country. Time and again, the UK Government have abdicated their responsibility to the most vulnerable people. If they cannot do their job, they should allow Scotland the powers to do it instead.

Oral Answers to Questions

Debate between Justine Greening and Alison Thewliss

Monday 10th October 2016 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

T1. If she will make a statement on her departmental responsibilities.

[The Secretary of State for Education (Justine Greening)]

This Government are determined to make this a country that works for everyone, and education is at of the heart of that ambition. I have already had the opportunity to see some of the excellent work being carried out in our classrooms. As my hon. Friend the Minister for Schools has said, there are now 1.4 million more children in good or outstanding schools than there were in 2010. The Department for Education has an expanded role, taking in higher education, further education and skills. That was reflected in my first announcement as Secretary of State of the six opportunity areas where we are going to trial a new approach to boosting attainment and outcomes in social mobility coldspots that have been identified by the Social Mobility Commission. We will work inside schools and outside them, with communities and businesses, to make sure that we can turbo charge those children’s opportunities.

[Mr Speaker]

The Secretary of State clearly does not wish to be outdone by her hon. Friend the Minister of State. That much is clear.

[Alison Thewliss]

I welcome the Secretary of State to her place. The reputation of Scotland’s higher education sector is of huge significance at home and in the wider world. What assessment has she made of the damage that could be caused to that reputation by the marketisation of the HE sector opening it up to unknown and disreputable new providers?

[Justine Greening]

That is not at all what the Higher Education and Research Bill seeks to do. It is about opening up the higher education sector, so that we have the next wave of institutions that can provide fantastic degrees, and about making sure that there is teaching excellence. It is a strong Bill that will move the sector forward for the first time in 25 years.

Oral Answers to Questions

Debate between Justine Greening and Alison Thewliss

Thursday 21st July 2016 Commons Chamber

[Justine Greening]

I have great news for my hon. Friend: there are plenty of fantastic women out there who are ready, willing and able to get into the top jobs, so I assure him there will be no compromise on merit—indeed, dare I say, Mr Speaker, that we might see a raising of the performance levels?

[Alison Thewliss (Glasgow Central) (SNP)]

6. What assessment the Government have made of the effect on gender equality of their welfare policies.