Youth Unemployment and Bank Bonuses
Debate between Mark Tami and Michael Meacher(12 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Michael Meacher (Oldham West and Royton) (Lab)
If I said that the Chief Secretary’s defence of the Government’s position was unconvincing, that would be generous.
I want to focus on bank bonuses and the impact that they have on the economy, particularly on youth unemployment. It is striking that this year the pig-fattening season in the City—otherwise known as bonus time—happens to coincide not only with unemployment among young people exceeding 1 million but with the rest of the population being informed, through research undertaken by Resolution Foundation, that the pay freeze is now expected to last until 2020. Last year the squeezed middle, which represents about a third of the population, suffered a big 4.2% real-terms fall in their incomes; now they are being told that by 2020 they will have £1,700 a year, or about £33 a week, less than they had in 2007—an 8% drop even before inflation kicks in. On the other hand, the City’s 1,200 code staff—the people who take and manage risk—will this year take home, on average, about £1.8 million. That is £34,500 a week or, to put it another way, 78 times the average wage.
Of course, those people are the elite—the risk takers. It is not a bad reward for those who took and managed risk so skilfully until 2008 that as a result, a gargantuan bail-out was required that has cost this country and the Government £70 billion, and torn a hole in the Government budget amounting to 8.5% of GDP, £120 billion. That is the difference between the deficit before the crash and 11.6%, which was the figure afterwards, and it is still projected to lead in 2013-14 to a national debt of about £1.4 trillion—slightly more than the nation’s entire income. That is not a bad achievement for just over 1,000 people. It is a pretty good thing that there were not a million of them, as that would have bankrupted the economy totally.
What makes this greed—and that it is what it is—so unconscionable is that it is so unrepentant. There has not been a shred of remorse or apology for what has been done to the country; indeed, it has been quite the opposite, with an arrogant decision that we should return to business as usual as though nothing has happened. As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) rightly said, the banks have not even fulfilled the very modest requirements of them under Merlin to increase lending to businesses and home owners and contribute to the creation of jobs, especially for young people. Indeed, the opposite has happened. Lending to business has actually declined because of the degree of deleveraging, and the number of jobs going to young people has also declined, leading, of course, to a disastrous increase in unemployment.
The truth is that the bankers do not seem to get it. There is public outrage that a banking system that owes its continued existence to massive Government intervention can still pay itself mega increases in salary and bonuses, and that in an age of austerity 90% of investment bank profits are directed not at strengthening balance sheets, at shareholders’ dividends, at lowering costs to customers or at creating jobs for young people, but at a gigantic personal pay-off.
I simply ask this: what is the justification for bankers’ bonuses? Bonuses were what caused the reckless stampede into derivatives, securitisation and other new-fangled financial instruments that it turned out all those clever chaps in the City did not even understand. Even now, they still do not want to put their money into what the nation really needs, which is jobs for young people—that is what the debate is all about—and a massive revival of manufacturing industry. In 2010 the UK deficit on traded goods was a staggering £100 billion, which is the worst by far that this country has ever suffered, and 2011 is likely to be much the same, or possibly worse. That is unsustainable, and dealing with it should be our No. 1 priority.
Mark Tami (Alyn and Deeside) (Lab)
My right hon. Friend is making a powerful case. Does he agree that the other problem is that bankers are still obsessed with the short term? That is why they are not investing in such things as manufacturing. They are still obsessed with the short-term measures that deliver them large-scale bonuses.
Mr Meacher
My hon. Friend makes a very important point. As I am sure everyone in the House realises, there is far too much short-term instinct, particularly in the City. What we need, and have not had, is the relational banking that exists in the mittelstand in Germany. Banks there spend a lot of time, effort and money producing a long-term relationship with manufacturing units that they can support. That is the type of model that we need in this country, but it is not what we have got.
The banks continue to put their money overwhelmingly into property, mortgages, offshore speculation and tax havens, all for their own enrichment, and stuff the rest of the economy and jobs for young people. I am putting it strongly, but there is huge bitterness outside, as one can see from the August riots, from the Occupy movement and from many other instances of anger beginning to bubble up.
Energy Bill [Lords]
Debate between Mark Tami and Michael Meacher
Mr Michael Meacher (Oldham West and Royton) (Lab)
We have listened to a distinctly Panglossian rosy glow of a statement from the Secretary of State. I think that we can all support the green deal’s ostensible objectives, but there are profound problems with the mechanisms and financing necessary to deliver on the rhetoric. The Bill’s biggest flaw is the failure to address adequately the central issue in energy policy, which is to establish a target for the most efficient way of meeting the nation’s energy requirement over the next 20 years or so, and then to put in place secure and effective mechanisms to ensure that those targets are met. I think that the Bill is the wrong way around: it makes assumptions about the level of energy supply in future decades, and then proposes mechanisms, albeit—as I shall show—rather uncertain and dubious ones, to green that supply.
The Government’s draft overarching national policy statement blandly states, as a sort of unchallengeable datum, that a doubling, or even tripling, of generation will be required by 2050. That clearly puts the cart before the horse, however. If, instead of planning for X terawatts of extra power over the next two to three decades, it was practicable to reduce the figure by, say, 40%—I think that is practicable—it would make much more sense to set that reduced level of energy production as the central target, and then to implement measures to ensure that it is met in as green and cost-effective a way as possible. That is all the more the case given that energy saving is more cost effective, which is a mantra that spokesmen, including the Minister, of all three main parties have repeatedly asserted.
Why, then, are the Government still refusing to undertake a proper cost-benefit assessment of energy demand? Obviously one can see that the big six operators and power generators will be anxious about anything that might impact on their future profits, but I think that the Government, who are far too committed to accommodating the private sector, need to put the national interest first.
Then there is the question of whether the measures in the Bill will deliver what the Government purport to be aiming at. The fundamental issue, on which the whole green deal hinges, is what the interest rates will be. When that was put by me and other hon. Members to the Secretary of State, he gave a studiously vague answer—a discourse, but not an answer. However, without a low interest rate, households will be paying a full, unsubsidised rate for measures such as cavity-wall or loft insulation, which were previously available at no cost or little cost under successive supplier obligations. Without a low interest rate, households will be worse off than they are now. I do not wish to be over-critical, because this should be a reasonably non-partisan debate, but it is irresponsible for Ministers to present such a major Bill to the House and yet remain silent on the intended rate of interest, when the success or otherwise of the entire Bill—certainly the green deal part of it—hinges on that point.
WWF has done a lot of research on the issue and reports that the cost of borrowing for the green deal is likely to be around 8% to 10% over the 25-year debt. Do Ministers agree? If that is the likely interest rate, the effect of the Bill is likely to be fairly minimal without much greater financial support being offered. Market research by the so-called Great British Refurb campaign found last September that even if the interest rate were no more than 6%, only 7% of households—one in 14—would be likely to take up the green deal offer. That is all the more significant when, as we all agree, we recall that the people who need help most in energy saving are those in fuel-poor and vulnerable households, who unfortunately live in the most poorly insulated and energy-wasteful houses.
Given the Government’s savage cuts to the Warm Front programme over the next two years and its discontinuance in 2013, it is perfectly clear that they are not going to lift a finger to help with repayment charges for fuel-poor households, so I ask this question. Realistically, within the parameters of the Bill, is there any reason why energy suppliers should not be required to meet green deal repayments on behalf of fuel-poor households? After all, as we know, such companies regularly report vast profits arising from adventitious rises in fuel prices. However, such a requirement would help them, because they would be able to spread the capital costs over the full length of the green deal finance arrangements and thereby be able to install far more packages in a much shorter time than under the carbon emissions reduction target.
Mark Tami (Alyn and Deeside) (Lab)
Does my right hon. Friend agree that our experience of how the big companies have treated the fuel poor—with pre-payment meters, for example—does not really set a good example or give any hope for how they would look to the future?
Mr Meacher
The point about pre-payment meters is important, because, again, it is the poorest households—the most fuel-poor and vulnerable households—that are so often forced to use pre-payment meters. Their experience under the Bill would be questionable if it were left to private companies to decide how to deal with the issue. Again, that is an area where the Government need to step in and offer support.
A minimum energy efficiency standard is clearly needed in the private rented sector—a point that several hon. Members have made. There is little or no incentive for landlords to do very much to improve their properties, because it is their tenants who pay the fuel bills, not them. What is needed, therefore, is an energy efficiency baseline to prevent properties with an energy performance certificate rating of F or G, or whatever the Government choose, from being re-let or marketed for rent after a reasonable period—say, five years—in which the necessary energy-efficiency measures can be installed.
Lastly—and briefly—it is regrettable that the Home Energy Conservation Act 1995, or HECA, which was a Lib Dem private Member’s Bill, is being repealed rather than extended and toughened, because it delivered more savings in domestic fuel than the entire first phase of the energy efficiency commitment.