Living Standards

Kwasi Kwarteng Excerpts

Wednesday 4th September 2013 Commons Chamber

[Greg Clark]

I will make some progress, then I will give way.

We must have a serious analysis of how that can be achieved in a way that is substantial and sustained. The first requirement is to do everything that we can to ensure that people are able to earn a good living. The second is to do everything that we can to reduce the costs that people face—especially those that are imposed by the Government.

On the first requirement, if people are to earn enough to generate a good standard of living, our country needs to be competitive against its rivals. The UK is at the top of KPMG’s league of the best countries in which to do business, ahead of Switzerland, the USA and France for the first time ever.

[Kwasi Kwarteng (Spelthorne) (Con)]

I am grateful to the Minister for the point that he is making about international competitiveness. How did Labour’s 12 increases in fuel duty improve competitiveness and the living conditions of British families?

[Greg Clark]

Those increases hit people in two ways: they hit the people who paid the duty when they filled up their tanks and they hit small businesses who employed people. It was a disastrous policy, which is why we scrapped it.

We will shortly have the joint lowest corporation tax in the G20. Last year, Britain was the biggest destination in Europe for inward investment. That competitiveness is creating jobs—jobs that give people incomes. Since 2010, 1.3 million jobs have been created in the private sector. More people are working in Britain than ever before and we have the lowest proportion of workless households for 17 years. There have been more net new private sector jobs in the past three years than there were in the previous 10 years under the Labour party.

People’s living standards are higher if they are in work, but I also want people to be able to earn higher wages. The only way to achieve that is to improve the levels of education and skills in the workforce. That is why the reforms of my right hon. Friend the Secretary of State for Education are so vital. It is why we need rigour in the exam system. It is why his announcement this week that we must ensure that people leave school qualified and skilled in all ways, but especially in maths and English, is so important. It is why the 86% increase in new apprenticeship starts between 2009-10 and 2011-12 is so important.

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[Kwasi Kwarteng (Spelthorne) (Con)]

Living standards, of course, form part of a context in which the wider economy must be considered. I notice that the shadow Chief Secretary to the Treasury is leaving the Chamber, but I wanted to address some of her remarks. She was, I felt, very ungracious in the way she took interventions from Government Members. I am pleased to see her back after her long break and I wish her all the best, but she did not do enough to observe the courtesies of the House in listening to other points of view.

The first point to remember is that the economy is recovering, despite the protestations, gloom and doom and talking down of the economy by Opposition Members. The OECD and Office for National Statistics have doubled their forecasts for 2013 growth, and the OECD is even suggesting that Britain will outstrip her competitors in economic growth. That should be welcomed on all sides of the House.

On living standards, the Labour party has engaged in a series of speeches that have shown collective amnesia, and it has been deeply hypocritical, complacent and unapologetic about the appalling record it left us in 2010. You will remember, Madam Deputy Speaker, that the Chief Secretary to the Treasury in the previous Labour Government left a note that suggested there was no money, simply because they had spent it all. They spent and spent and spent, and that is the context in which our debate about living standards in Britain must take place.

[Fiona O'Donnell (East Lothian) (Lab)]

Perhaps now the hon. Gentleman can prove that he does not suffer from short-term memory loss and tell us by how much wages have fallen in real terms since his Government came to power.

[Kwasi Kwarteng]

What I will tell the hon. Lady is that it is particularly nauseating to listen to Labour Members talk about increased living costs when under their Government fuel duty was increased 12 times. It is not right for members of the public and people listening to this debate to look on those remarks, when Labour increased fuel duty 12 times without any respite.

[Gavin Barwell]

The hon. Member for East Lothian (Fiona O'Donnell) makes a perfectly fair point about wages, but does my hon. Friend think there is some hypocrisy there, given that just about the only cut that those on the Opposition Front Bench have supported is the freezing of public sector pay over a number of years? It is clear that even under Labour, many people would have seen a real-terms reduction in wages.

[Kwasi Kwarteng]

Absolutely right. My hon. Friend mentions hypocrisy, and I think that has framed the approach of Labour Members on this issue. They have spoken really from either side of their mouths. On one hand they decry the difficult measures that we have had to implement and, on the other, they refuse to apologise or accept any responsibility for the appalling fiscal situation that they bequeathed to this Government.

[Gloria De Piero (Ashfield) (Lab)]

How did the hon. Gentleman feel when he learned in April that bonuses in finance and business services rose by 82.2% compared with the same month a year ago?

[Kwasi Kwarteng]

The hon. Lady will remember that the bonus pool under the Labour Government was far bigger. It was outrageous. Indeed, it was Lord Mandelson who suggested that he was very relaxed about people getting “filthy rich”. That was the legacy of new Labour: debt, credit, massive bonuses and a totally irresponsible way of running the economy. Such irresponsibility is largely responsible for the situation we are in. We have had to follow a deficit reduction strategy. That is working and the deficit has fallen by a third over the past three years, from £160 billion to about £115 billion. That is a signal success. We see not only deficit reduction, but—the jury is out on this, but I am confident—economic recovery. This is very successful stewardship of the economy. It is not only Government Members who agree with that assessment. Let us look at the opinion polls. Even though it is true that Labour is maintaining a slim lead, on the economic question and the question of the credibility of economic policy, Labour, and the shadow Chancellor and Leader of the Opposition as a team, consistently under-poll the Chancellor and Prime Minister as economic stewards, because the public have not forgotten the appalling mess that Labour left behind. Despite three difficult years, the public refuse to accept that Labour has any ideas or solutions to our difficult problems. They are well aware of the appalling fiscal situation that Labour Members left behind.

Let us look at some of the figures on fuel duty increases. We have suspended the fuel duty escalator and prices have not gone up. We have taken many low-paid people out of the tax system. People will recognise that the Government’s efforts have been partly successful. We have not reached the promised land and the goal that we set, but we are getting there. People realise that any return to the Labour policies of spend, borrow and spend even more will be fatal to the recovery. The hon. Member for Coventry North West (Mr Robinson) mentioned killing off the recovery. The quickest way to kill off any recovery would be a return of the Labour party to government. In my view and the view of many of my constituents, that would be a form of national economic suicide. As a nation, we must address and debate living standards, but we must also put them in the context of the appalling economic and fiscal situation that Labour Members left behind. It is hypocritical and disingenuous of them to blame the coalition Government for the mess they created and bequeathed.

Finally, I should say a few words of optimism. It is clear that there is a renewed sense of optimism in the economic community. I am not rash enough to suggest that the path ahead will be smooth. There will be checks and times when there are doubts, but the general trend and direction is clear. The latest Office for Budget Responsibility forecast, from March—it seems likely to be upgraded—predicted that average earnings in 2014 would increase faster than consumer prices index inflation. It also predicts that, by 2016, living standards will be growing twice as fast as inflation. We might well have reached an inflection point that will prove the success and wisdom of the Government’s polices.

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[Mr Brown]

I thank my hon. Friend for visiting—I appreciate that he did not tell me that he was coming, but it was on unofficial business. He is right that, in that remote rural locality, jobs are few and far between.

My area lost 1,300 local authority jobs over nine quarters. In those same nine quarters—between June 2010 and September 2012—we lost 2,000 private sector jobs, including quality jobs. The figures are staggering. The average wage in Dumfries and Galloway is some 24% less than the national average. In May 2010, 460 people were long-term unemployed; there are now 970. Jobseeker’s allowance claimant numbers are above the UK average.

Worst of all—the House needs to take this to heart—is youth unemployment. Under the previous Conservative Government, we almost ended up with a complete lost generation. In my area, we have 8.9% youth unemployment. That is not acceptable when the Scottish average is 7.4% and the UK average is 6.2%. I will not stand by and allow the youth—those aged 18 to 25—to sit wasting. That is why, two weeks ago, I held a cross-party summit in my area to discuss the difficulties that we face.

I do not have the answers, but welfare reform has played a big part in what is happening on our high streets. We have seen the Government freeze benefits at 1% because they thought that it was the right thing to do, but all that has done is take money out of the local economy.

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Mr Brown]

No, because the hon. Gentleman would eat up my time, and I am not prepared to allow that to happen. I need all the time I have got.

Taking money away from the poorest, who would have spent it on the high street, is bound to have an impact on what is going on. It takes even more jobs out of the economy.

Let me put the record straight on energy and fuel costs. The hon. Gentleman made a point about fuel costs—[Interruption.] Never mind the hand signals. On 11 occasions over nine years, the Labour Government froze the planned fuel duty increase. When Labour came to government in 1997, duty and tax on fuel was 78%: when it left government, duty and tax was 66%. Let us not forget that the price of fuel sometimes increases because the price of oil increases.

I regret to say that in Dumfries and Galloway 41% of all households are in fuel poverty, with the average in Scotland being 28%. I am not boasting about those figures: I am frankly ashamed of them. We are a low-wage economy, after decades of low pay in agriculture and tourism.

I pay tribute to the hon. Member for Suffolk Coastal (Dr Coffey), who chairs the all-party group on off-gas grid. She has made a valiant effort, with support from the all-party group, to get the Minister with responsibility to make early payments of the winter heating allowance to those people who want to use it in time to buy cheaper fuel. Regrettably, her effort has failed, as the Minister has declined to make early payments.

Things may be going well in some Conservative Members’ constituencies, but the picture across the country is patchwork, and that should not be forgotten.

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[Lisa Nandy (Wigan) (Lab)]

I do not need to tell most Opposition Members about the crisis unfolding for individuals, families and whole communities, including in my constituency of Wigan. It is not just that unemployment has hit communities like mine hard and had an impact on people’s living standards, it is that the unemployment figures mask the reality facing many families of cuts to pay and hours, which have had a devastating impact on their daily lives. Many Opposition Members are also familiar with the picture we are seeing in Wigan, where payday lenders have sprung up to fill empty shops on the high street and are charging extortionate rates of interest, and where the queues at food banks, such as the Brick in the centre of my constituency, are lengthening by the day. In the past eight weeks, the Brick has given out more than 1,000 food parcels—it is running out of food.

We are now in a situation where one in five children in Wigan arrive at school too hungry to learn. Across Greater Manchester and Greater London, that figure rises to nearly 50%, leaving teachers having to feed children out of their own fridges and their own pockets.

[Kwasi Kwarteng]

rose—

[Lisa Nandy]

I will give way to the hon. Gentleman. I would be grateful if he told me what he thinks his Government should do about it.

[Kwasi Kwarteng]

I am grateful to the hon. Lady for giving way. Does she not recognise that if over 10 years a Government consistently spend a lot more than they get in and leave a huge deficit, any attempt to deal with that deficit will be difficult? Does she not accept that basic point?

[Lisa Nandy]

I find the hon. Gentleman’s comment alarming. Perhaps it is time for Government Members to attend an economics course or, more pertinently, a history lesson. If we fail to learn what happens when considerable deregulation causes a global financial crisis—supported and egged on by Conservative Members—we will be condemned to repeat it.

I was telling the House about the indignity, anguish and anxiety that afflict many of my constituents, and that daily grind people down. There are a number of things the Government could do, and I want to address them in the short time that I have. First, the Government should and could take immediate action to create jobs by investing in infrastructure. We badly need new schools, we badly need new homes and, in some areas, we badly need new hospitals. Constituencies like Wigan, where the construction industry has always been important to the local economy, need that investment, not just because we will get the buildings we need but because it will provide jobs and apprenticeships for young people.

Construction used to be one of the key routes for young people leaving school to get into the labour market and learn skills that could take them beyond the sort of low-paid work that hon. Members have described. If the Government were to take action immediately, it would be a huge relief not just to me but to the 1 million young people who are out of work and who ought to be a national priority. We know that this should be a national priority, because we know what happens when young people are left out of work: they suffer prolonged periods of unemployment, insecure employment and wage-scarring effects well into their 40s. What we are seeing at the moment is limited action to create apprenticeships. I am seeing young people in a revolving door of apprenticeships, taking on work experience, internships and apprenticeships over and over again. These do not lead to a real, paid, lasting job. Government Members heavily criticised the future jobs fund for being expensive, but I say to Ministers: please recognise that investing money in young people up front is repaid in droves. It is the right thing to do morally; it is the right thing to do economically.

Many young people are on zero-hours contracts and I want to say something about the increasing casualisation of the work force, something that the workers in the Hovis factory in my constituency are rightly standing up against at the moment. People on zero-hours contracts tend to earn lower wages as a whole, and we have seen compelling evidence of widespread exploitation. I would be grateful if the Minister paid some attention to what I am saying, because this is something that affects people across the country, including, perhaps, in his constituency.

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[Chris Leslie]

I said it was reshuffle season. We nearly got an apology; the hon. Gentleman does not think rich people need that tax cut, but he voted to give it to them anyway because he is that sort of generous guy. I say to him, and to other Members, that the Office for Budget Responsibility, which the Government created, predicts that by the next general election in 2015, annual incomes will be £1,520 lower than they were in 2010 in real terms. That is lower wages. Just think about that statistic for a moment. Five years of Conservative and Liberal Democrat administration will have left a legacy for working people in which they are actually worse off, and significantly so.

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Chris Leslie]

I will give the hon. Gentleman another little statistic. If we add up the five years of the falling wages predicted by the OBR, a typical working person will have lost an amazing £6,660. Imagine the difference that could make to ordinary working people. It is the equivalent of a year and a half’s grocery bill for the average family; they could even have bought a small car for that amount. Those diminishing wages are in addition to the tax and benefit changes since 2010, which are costing families an average of £891 this year.

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[Chris Leslie]

Of course my hon. Friend is right, and he understands that having that level of activity in the economy would have helped us get a better growth rate than we have had under the flatlining record of Government Members. Think of the different course the Government could have chosen. They could have tackled soaring energy bills with tougher regulation to pass on wholesale price cuts to ordinary customers, as my hon. Friend the Member for East Lothian (Fiona O’Donnell) suggested. They could tackle rip-off rail fares for commuters with an enforceable cap on train fare rises, they could protect tax credits for working people by reversing the millionaires tax cut, and they could cut income taxes with a new 10p starting rate to be paid for by a mansion tax on properties worth more than £2 million. However, they will not go that extra mile. Why? Because they do not understand the pressures that household budgets are under. After all, how could they? Government Members think that everything in the garden is rosy. They are either ignorant of the pressures on most households, or in their complacency they are ignoring the issue.

After three wasted years of a flatling economy, it is about time we had some economic growth. This growth, however, comes despite the Government’s economic policies, not because of them, and as everybody knows, growth is still falling short of what we ought to be seeing by now. Deficit reduction has stalled because the Government are borrowing more to pay for the costs of economic failure.

[Kwasi Kwarteng]

Will the hon. Gentleman give way on that point?

[Chris Leslie]

No, I will not give way but I will ask the hon. Gentleman what sort of economic recovery this is. So far, it has all the hallmarks of a recovery for the few, not the many. It is no wonder that the Prime Minister has abandoned the fiction that we are “all in this together.” The lucky minority of the already wealthy are doing very well thank you very much, but that is not much solace for everyone else who is working harder just to stand still. The Government have failed spectacularly to put in place conditions for a balanced recovery, and instead have fuelled a lopsided escalation in the cost of living, without a simultaneous focus on capacity or affordability, as my hon. Friend the Member for Coventry North West (Mr Robinson) said.

The Chancellor needs to act now to guard against escalating prices, inflation and interest rates, but he is not building broad-based growth in every region. He is not focusing on long-term, sustainable investment; he is putting short-term, debt-fuelled, business-as-usual economics first. His housing policy is all demand and no supply.

Business investment is thwarted by banks that are still not serving the real economy. How nice it is for bankers who can stave off their bonuses until the new tax year kicks in and pocket the Chancellor’s generous tax cut. No wonder there was a record-breaking bonus bonanza—bonuses soared by billions at the exact moment the Chancellor cut that 50p rate.

It is not looking like a recovery for ordinary people. It is a recovery for the rich, an unbalanced and narrow recovery, and a recovery for millionaires but not working millions. Times are tough, and, for most people, life is getting harder, with the cost of child care, the daily commute, the family shop, school uniform costs, the rent and the mortgage. People are taking on more hours if they can or, worse, joining the rise of the zero-hours economy. No wonder people are driven increasingly to payday lenders and extortionate credit. As my hon. Friends will have seen in the news yesterday, Wonga is lending as much to consumers as some of our major high street banks, such as Nationwide. Does that not say it all? It is not a recovery for those struggling to make ends meet; it is the Wonga recovery, benefiting those at the top at the expense of the majority.

Those are the consequences that flow from three years of economic stagnation. The cost-of-living crisis is felt in middle and lower-income households across the country. Enough is enough. We need action now to help ordinary taxpayers, commuters and householders to fight back against those rising prices. Ensuring that wages rise faster than prices should be a central objective for the Government. The Prime Minister and the Chancellor are out of touch. Working people up and down the country are out of pocket as a result. We cannot go on with this cost-of-living crisis year after year. Every day it becomes clearer, especially to ordinary working people in our constituencies, that we cannot afford this Government.