Workers (Economic Affairs Committee Report)

Lord Sikka Excerpts

Thursday 8th February 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the Economic Affairs Committee for its report. The title, Where Have All the Workers Gone?, is intriguing. Neoliberal economists would argue that markets do not have shortages if buyers are willing to pay the appropriate price. However, the report does not advocate higher real wages to address market failures, even though that reduces staff turnover and training costs. The report seems to hanker for an expanded reserve army of labour at low wages, and it associates higher wages with inflation. This logic is at odds with the current bout of inflation, which is caused by profiteering. The real average wage has not changed since 2007. The Government themselves do not associate inflation with higher executive pay and bankers’ bonuses, so it is surprising that they are not advocating the same for workers in order to relieve worker shortages. Perhaps the Minister would like to comment on that.

Government policies have caused labour shortages in this country. With never-ending austerity, millions are struggling to get access to good food, housing, education, clothing, upgrading of skills and healthcare. Deprived people cannot work long hours or fulfil their potential. More workers are reporting being sick and have mental health problems, as has been said by other speakers. So higher disposable income and good public services are key requirements for maintaining and expanding the labour supply.

But the Government have done the opposite, cutting real wages and access to healthcare. Some 6.3 million people in England are waiting for 7.6 million hospital appointments—that is 1 in 9 people. Around 2.8 million people are chronically ill and unable to work, and more than 500,000 under-35s in the UK are out of work due to long-term illness. An August 2023 study by the Times reported that, in the five years to 2022, some 1.5 million people in England died while waiting for a hospital appointment—that is 300,000 a year. A 2022 study published in the Journal of Epidemiology and Community Health reported that, between 2012 and 2019, government-imposed austerity caused 335,000 excess deaths in England and Scotland—nearly 48,000 a year. One-third of these deaths were among people under 65. The Government’s obsession with austerity, wage cuts and defunct economic theories has turned the state into a debilitating killing machine, and this is a major cause of the labour shortages we are experiencing.

Reskilling should be a major issue. Apprenticeships have more or less vanished, or are scarce, and fewer people in England are now going to universities. They are burdened by student debt of £206 billion. Unlike other European countries, England charges university fees, which is now deterring people. The Government seem to have little by way of a strategy to address these issues. I hope that the Minister will announce that the Government will write off student debt, because it will have to be written off sooner or later.

The labour shortages are deepened by having too much dead weight in the economy. For example, the UK has nearly 400,000 professionally qualified accountants, which is the highest number per capita in the world. Nearly a quarter are engaged in what is called “tax planning”, which is really a euphemism for tax dodging—there is no other word for it. They are well paid to plunder the public purse, but this adds little to the productive capacity of the economy. The higher rewards from tax abuse persuade graduates to shun other sectors of the economy. Just think about the huge social cost associated with producing one tax-dodging accountant. There is a huge misallocation of resources, which exacerbates labour shortages in other industries. The Minister will, I hope, tell us how he will rebalance the economy.

Labour shortages can be alleviated by new technology, but there is chronic underinvestment in the UK economy. Investment has fallen from 23% of GDP in the late 1980s to around 17% from 2000 onwards, compared to 20% to 25% in other major industrial economies. In the OECD league table of investment, the UK occupies the 35th spot out of 38 countries. The private sector does not invest enough because people do not have enough purchasing power to buy the goods and services it might actually produce. These days, the public sector is more about handing cash to footloose corporations, rather than directly investing in industries. There was a time when we had an entrepreneurial state that directly invested in new industries and created information technology, aerospace, biotechnology and other industries. But these days, we just give cash away and nothing is created.

To sum up, government policies are a key reason for labour shortages. We cannot alleviate them with further doses of neoliberal policies that oppose higher wages, better public services and the creation of new industries. I hope the Minister will tell us that the Government will change all their policies.