Budget Resolutions and Economic Situation

Luciana Berger Excerpts

Wednesday 20th March 2013 Commons Chamber

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

It was in June 2010 that the Chancellor presented his emergency Budget. He said then that the measures he was announcing had

“set the course for a balanced budget and falling national debt by the end of this Parliament.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]

However, today our economy is flatlining. We have a cost-of-living crisis, borrowing is increasing and we have lost our triple A credit rating. Since the last spending review the economy has grown by just 0.7%, rather than the 5.3% that was forecast, and last year the country went through a double-dip recession. Instead of the books being balanced by 2015, as the Chancellor promised, national debt as a percentage of GDP is not predicted to fall again until 2017-18. The whole country can see that, when judged by actions not words, this Government have failed every test they have set themselves. It is people up and down the country who are paying the price for their failure—families hit by the mummy tax; part-time workers who have lost tax credits; the 250,000 people in this country who have had to access emergency food aid or visit a food bank last year so that they did not go hungry; and the 200,000 more children who will be pushed into poverty as a result of this Government’s assault on support for families.

Today was a chance to change course—a chance to put right the mistakes of the past 33 months and correct a failing economic strategy. Instead, all we got was more of the same from a Chancellor and a Prime Minister who, despite all the evidence, refuse to accept that their plan simply is not working. In 17 days, millionaires will get a tax cut, so why do my constituents have to wait more than 900 days for help with child care?

[Angela Smith]

It has emerged today that £38.5 million of shares have been given to nine top executives by Barclays bank. Does not that underline the point my hon. Friend is making about how millionaires seem to be faring much better under this Government than people on low pay or middle incomes?

[Luciana Berger]

It is incredibly insensitive that that announcement was made today. People up and down this country will rightly be shocked by it. In a moment I will reference the fact that we are seeing the gap between the richest and the poorest in our society widen. The Government should be doing everything to ensure it is closed.

I acknowledge and welcome the extra money we have heard about today for infrastructure projects, but I note that the majority of it will not be delivered until 2015-16, while work on many of the projects is not expected to begin for years. We must not forget that the Chancellor has spent £12 billion less on infrastructure over the past three years than under the plans he inherited. What is needed is a plan to get our economy growing and to create more jobs across the country right now. The fact that we have a chronic shortage of jobs was reinforced to me last week when I held a jobs fair in my constituency, which was attended by 66 companies. They ranged from local businesses such as the Liverpool Dental Spa and Davey’s Chemists to big global companies such as Nutricia Danone. On the day, more than 500 different job and apprenticeship opportunities were on offer.

My jobs fair last Friday was a great event, with more than 2,000 people coming through the door. That far exceeded my expectations; we had printed only 1,000 welcome packs. Despite what the Chancellor would have us believe, I did not meet anyone whom he would describe as a shirker. That point was also made in a letter to the Liverpool Echo this week from Bernie Hunt of Kensington Fields, a section of which I want to share with the House. Bernie said:

“What a surprise I had on March 15. I called in at the Wavertree Jobs Fair…half expecting to have the car park to myself as Mr Cameron’s Welfare State dependents were supposed to be too busy watching daytime TV recovering from the dole fuelled bender from the night before. What I actually found was those desperate for the chance of a job, or even training for a job, packing the place to the rafters.”

The fantastic turnout reinforced the fact that people who are out of work are not shirkers, but the real problem is that there are not enough jobs. Even if we filled every one of those 500 job and apprenticeship opportunities available at the jobs fair, three quarters of those who attended would still have missed out.

We have learned today that 2.52 million people are still out of work, with youth unemployment at almost 1 million again. There are still more than five people chasing every job vacancy, and even those who can find work still have to accept lower living standards.

[Alison McGovern]

I hope that my hon. Friend will also comment at some point on apprenticeships and on the fact that part of the reason for the shortage of jobs in her constituency, and the mismatch of Government spin, is the rebadging of existing jobs as new apprenticeships. Does she not think that the Government should come clean about that?

[Luciana Berger]

I have spoken on a number of occasions on the issue of youth apprenticeships, particularly those for people under the age of 19. We have seen a decrease in the number of such apprenticeships. As my hon. Friend says, there is also the issue of the rebadging of different types of jobs. The House will have heard many a representation from the Labour Benches about the Government’s consistent claim to have created 1 million jobs in the private sector, but we know that many of those jobs are simply public sector jobs that have been rebadged.

There has also been a shift in the kind of jobs available. The number of people working in full-time jobs fell in the last quarter. It is now down 378,000 since the beginning of the 2008 recession, while the number of people in part-time work has risen by 572,000 in that period. Since the general election, people have taken an average £1,200 pay cut because jobs are so hard to come by.

[Charlie Elphicke]

If jobs are so hard to come by, why does the hon. Lady think that the Office for Budget Responsibility is predicting that 600,000 more jobs will be created next year, and why have we seen 1 million more private sector jobs since the election?

[Luciana Berger]

I thank the hon. Gentleman for his intervention, but I refer him to the comments that I have just made about the rebadging of public sector jobs. Many fact checks have been done to determine what those jobs actually are, as the intervention from my hon. Friend the Member for Wirral South (Alison McGovern) highlighted. Many of them are now apprenticeships. We also know that many of the assessments by the OBR have had to be downgraded because its estimates have often been too optimistic.

It is in the context of this maelstrom of frozen wages, rising prices and reduced opportunity that the Government are making some of the most draconian cuts to our public services and welfare, despite the fact that the OBR has said that those cuts are reducing growth in our economy. The cumulative impact of the cuts has been to widen the gap between the richest and the poorest, and to ask the most vulnerable and disadvantaged in our society to pick up the bill for the Chancellor’s mismanagement of the economy.

Today should not have been about more of the same; it should have been about changing course. If this had been a Labour Budget, we would have acted to boost confidence, create jobs and support struggling businesses. We need to bring forward long-term infrastructure investment in schools and transport, and we need to use the money raised from the 4G mobile spectrum auction to build thousands of affordable homes—getting builders back to work, creating the homes we need and strengthening our economy for the future. Alongside that, we would have cut VAT temporarily, including to 5% on home repairs, maintenance and improvement, which would have helped the energy efficiency side of our economy. The result would have been a plan for a steadier and more balanced pace of deficit reduction with measures that support our economy and create jobs now.

Government Members say that we cannot do that because it would mean more borrowing. They neglect to mention that it is their policies that are already leading to much higher borrowing. The Government and this Chancellor are already borrowing £212 billion more than they said they would to plug the holes in our public finances caused by a flatlining economy and a higher unemployment bill. The Government argument seems to be, “We will not borrow to grow the economy, but we will borrow to shrink it”. Instead, the real question is not whether we should borrow or not, but what we are borrowing for. Are we going to continue to borrow to pay the cost of the Tory Government’s economic failure and to keep people at home out of work or are we going to act to support those small businesses that want to invest in new equipment, to kick-start house building, to support research and development and investment in low-carbon energy and high-tech manufacturing with a proper plan to get people into work? In other words, we need a real plan for jobs and growth, which would be fairer, more successful in getting the deficit down and make Britain better off for the future.

[Mr Iain Wright (Hartlepool) (Lab)]

On a point of order, Mr Speaker. It says on page 93 of the Red Book:

“The Government will…publish the Business Bank’s first business strategy”

this coming Friday, on 22 March. Given that you, Mr Speaker, have been very clear that important announcements should be made first to this House, and given that it is my understanding that the Secretary of State for Business, Innovation and Skills will open tomorrow’s Budget debate, can you give me any guidance about the powers you have either for the publication to be brought forward to tomorrow to allow hon. Members to question the Secretary of State when he is at the Dispatch Box during the debate or to provide for an oral statement to be made to the House on Friday morning? Mr Speaker, how can we question the Government on this important topic?

--- Later in debate ---

[Alison McGovern (Wirral South) (Lab)]

Thank you, Mr Speaker. I am pleased to have caught your eye in this debate on today’s Budget.

I want to talk about three issues: interest rates, under-employment and the place of young people in our economy. Before I do so, let me be clear that in today’s Budget we heard conclusively that the Government have failed on every economic test they set themselves. We heard the Chancellor having to announce those debt figures. How he must feel he has let himself down, but he has not just let himself down; he has let the whole country down. He is not just the downgraded Chancellor; he has now had to come and tell us how much more he is borrowing.

The Bank of England has kept interest rates at a historic low. The Chancellor had more to tell us about the framework within which the Bank of England operates. When he was talking about the arrangements for setting interest rates in the Monetary Policy Committee, I noticed that some Government Members’ eyes were glazing over slightly, so let me give them a warning. The Prime Minister has lauded the low interest rates, and he is right to do so, because, frankly, it is the only thing that has gone right. In fact, the Government’s saving grace of low interest rates has resulted from the use of the one economic tool that is not under their own management. While the Governor of the Bank of England has got his foot to the floor in holding interest rates low to try to support the economy, the Chancellor keeps slamming on the brakes. Is it any wonder that we are seeing such poor growth? Under the Chancellor’s stewardship, we should have had growth of about 5.5%; in fact, it has been less than 1%.

It is important that the Bank of England uses its economic tools properly. What the Chancellor said about having a broader remit and taking the long-term view on interest rates is extremely important, and I welcome that discussion. But let us be clear that using monetary policy in this way will not help rebalancing; in order to achieve this, we need serious investment. Government Members need not take my word for it; they need only listen to the Business Secretary, who has clearly been listening to the shadow Chancellor, because they seem to be in agreement that we need a different plan. When the Chancellor made his announcement about the national insurance position of small companies, I wondered whether he had taken a leaf out of the shadow Chancellor’s book and it was an announcement about the Government’s commencing our five-point plan. The Minister is giving me a tentative smile, and being a cheerful soul I will take that positively. Before Government Members talk in too-positive terms about the Budget and the level of income tax, they should worry about food prices, house prices, housing costs, and the real value of the money in people’s pockets.

The Government must address under-employment. Sadly, unemployment has gone up today, but we should be grateful that, despite the fallout from the crash, it has not reached the extreme levels of Greece and Spain. Some people say that they cannot understand why unemployment is not worse when growth is next to zero. In fact, the Chancellor said today that it continues to be a surprise. I do not know why he thinks that, because what is going on is under-employment. People cannot get the hours they want.

I have asked Ministers about under-employment on three occasions in the past month and they have not provided an answer. I have asked the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), and the Leader of the House, and on 25 February the Chancellor dismissed out of hand my concern about under-employment. Nobody in government seems to accept that it is a problem. They talk about their 1 million new jobs, but I believe that up to a fifth of them could be the result of reclassification.

On the growth in part-time work, my constituents tell me that they cannot get the hours they want. I hope that I have made it abundantly clear to Ministers that this is a massive problem.

[Luciana Berger]

Has my hon. Friend, like me, heard stories of local supermarkets receiving more than 30 applications for increased hours in order to meet the new requirements for tax credits? The unavailability of those hours means that people are struggling to get by as a result of the decrease in tax credits.

[Alison McGovern]

Of course I have. I thank my hon. Friend for flagging up the issue of the changes made to tax credits, which mean that people now have to work for 24 hours, rather than 16 hours. That alteration has added insult to injury and disintegrated work incentives.

All Ministers need to do is look at their own labour force survey, which shows that between 2008 and 2012 under-employment went up from just over 2 million to just over 3 million. Do Ministers read the labour force survey? They should do so if not. Spare capacity in our economy is causing real problems. Not only does it hold back our economic development, but it causes real unhappiness.

Hon. Members may remember the Prime Minister talking about a general well-being index when he came into office, but I dread to think what its results would be given people’s misery at not being able to get all the hours they want at work in order to put food on the table for their family.

On the subject of unhappiness, I must mention youth unemployment. Just under 500,000 young people are claiming the dole. Treasury Ministers need to speak to people at the Department for Work and Pensions and find out what on earth is going on. They cancelled the successful future jobs fund in favour of the failed Work programme; the Government’s claims about apprenticeships are, as has been said, simply a rebadging exercise; and the DWP itself knows that its policies are failing. I have asked questions about the Department’s business planning projections, which show that the number of people under 24 to whom it will have to pay the dole before the end of this Parliament is going to increase. That is a disaster for our country. We need a better policy to help young people get into the labour market.

In the time remaining, I want to say what I think that policy should be. We have hammered local authorities despite the fact that it is basic economics to understand that unemployment forms in clusters. Specific localities face significant unemployment, especially among young people, who want a place in the labour market.

--- Later in debate ---

[Charlie Elphicke]

The hon. Gentleman is right about the 3G licences, but the taps were then turned on and public spending rose. We had a structural deficit and we were seriously exposed when the crisis struck in 2008. We can see that from the statistics relating to the previous Parliament. We inherited a structural deficit of 11.2%—an enormous level of borrowing. We inherited a massive rise in unemployment, as measured by the claimant count—it went up by 80%. Youth unemployment went up by 78% under the jobseeker’s allowance claimant count. Those were staggering rises and real concerns. It is all very well for the Labour party to say that there is a continual problem with unemployment. It is, of course, a concern to us all in our constituencies, but youth unemployment has been coming down. Unemployment has stabilised and we have not seen the rise that we saw under the previous Government.

Let us look at what this Government have achieved: 1.25 million new private sector jobs and 1 million new apprenticeships. The deficit is now down by a third. Rather than the structural deficit of 11.2% that we inherited, it is down to 7.4% of GDP today and moving in the right direction. We have had record low borrowing costs. The Opposition’s idea that we should borrow more to borrow less will take us one way and one way only—to higher interest rates. The hard-won fiscal credibility that this Chancellor and this Government have achieved is greatly valued by every mortgage holder in this country.

[Luciana Berger]

Will the hon. Gentleman remind the House how many more billions the Chancellor is borrowing on top of what he said he would?

[Charlie Elphicke]

I thank the hon. Lady for reminding me to point out that the Institute for Fiscal Studies said that the Labour party, under its plans, would be spending £200 billion more, so she should be careful before indulging in fantasy economics.

We also need to look at the Government’s welfare reforms, which will do more to make work pay, and education reforms, which will help Britons get the skills they need to compete in the global race. The Government are right to help those who want to work hard, get on and do really well. We hear from Labour Members about the difficulties faced by, and the squeeze on, many hard-working families, but they forget to say that this is nothing new. According to the Office for National Statistics’ family spending survey, disposable income in real terms was £600 in 2000-01 and was £600 at the last general election—it has not moved in real terms for about a decade. The challenge is that families have been squeezed for quite some time. The Labour party forgets that the economy was shielded by the boom of borrowing and debt and that, as a result, those difficulties were glossed over for too long.

It is right that the Government are now getting the house in order and doing more to help hard-pressed families and households. For example, council tax in Kent has been frozen for three years, whereas under Labour it doubled; fuel duty is now 13p lower than Labour planned; and as a result of the £10,000 personal allowance to be introduced next year, many will pay £700 less tax than under Labour’s plan, which will help average families and take 2.7 million out of tax altogether. I also welcome the axing of the beer duty escalator and the 1% outright cut in beer duty. The Government have got the right priorities and are moving in the right direction. Their plans for child care will help families up and down the country who, with the rise of joint working over many years, have found things very difficult.

On business, we need to get the country growing as quickly as possible, but we get growth and jobs not from Government, but from the private sector, enterprise and businesses. The Government have done the right thing in giving an awful lot of help to small businesses, but I want us to go a bit further. We have had the new employment allowance and the seed investment allowance, but I would like us to consider a “get set and grow” scheme, under which somebody could set up a new business and have a two-year holiday from all company filings, corporation tax and employers’ national insurance, light or no employment law and other measures. That way, somebody setting up a business could focus on running it, rather than on ticking boxes, filling in forms and dealing with paperwork. That kind of change would provide real assistance to people who want to get going and do really well.

Studies by the OECD, particularly the “Fostering Entrepreneurship and Firm Creation as a Driver of Growth in a Global Economy” in 2004, show that enterprise formation, growth and entrepreneurship are strongly linked. I hope that the Chancellor and the Government will look more closely at measures to make it easier to set up a business to a certain turnover threshold or certain period of time. As I said, the new employment allowance and the massive national insurance reduction for many businesses are a big step in the right direction, but I would like us to go further.

I also welcome the measures to deal with tax avoidance. Too much corporation tax avoidance has gone on for too long. It grew up over many years. Tax law was not kept fit for purpose in the internet age, and the Government have taken the right action through their general anti-avoidance provisions and their work on the international tax system.

Personally, I would like us to go further and see whether we can reduce corporation tax still more by restricting tax reliefs, which would put our home businesses and multinational businesses from overseas on a much clearer, more level playing field. We should look at minimising deductions for interest and royalties, along with other deductions that are available in the tax system, and restricting transfer pricing. We should also look at the rules on tax presence and whether there is a branch or establishment in the UK, and say to companies such as Amazon, “You’re not really abroad; you’re trading in the UK and you should be taxed as such,” and the international rules should be changed accordingly. That would be the right direction of travel, because we would have an even lower rate of corporation tax than we do today or than we plan to have, and a level playing field for businesses at home and those from overseas.

The last thing I want to say—this will surprise Opposition Members—is how much I agreed with capital gains tax being at 10% for businesses. That was a real spur to entrepreneurs and perhaps the only policy of the former Prime Minister that I agreed with. I regret that the rate has become 28%. We ought to look at how we can foster entrepreneurship, so that entrepreneurs can not only set up businesses and get them going, but sell them and get new businesses going. It is the serial entrepreneurs who are the real wealth creators in this country—the people who drive small businesses, job creation and enterprise creation. The more we can get the tax system to be their friend—to be on their side and support them in what they do—the more we will drive the economy forward and create more jobs for the future.