Meg Hillier
Main Page: Meg Hillier (Labour (Co-op) - Hackney South and Shoreditch)Department Debates - View all Meg Hillier's debates with the HM Treasury
Youth Unemployment and Bank Bonuses
Meg Hillier Excerpts(12 years, 3 months ago)
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Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Does my hon. Friend agree that the growing trend of extended unemployment—more than six months—for young people creates the real worry that we will have a lost generation unless the Government act?
Rachel Reeves
My hon. Friend is right that long-term youth unemployment has a scarring effect, which affects more and more people throughout the country. It is similar to the situation in the early 1980s and early 1990s—the last two times a Conservative Government presided over a recession.
With more people out of work and fewer businesses succeeding, the Government end up paying out more in benefits and getting less in through taxes. They are filling that gap with the £158 billion more borrowing. The inheritance that that leaves for the next Government will mean more tough decisions about taxation and spending—the unnecessary and avoidable cost of the Government’s failure.
The Chief Secretary to the Treasury (Danny Alexander)
I welcome this opportunity to discuss youth unemployment and bank bonuses. Both matters are hugely important as we tackle this country’s extremely difficult economic circumstances. The recent youth unemployment figures demonstrate just how significant a challenge we face repairing the damage that the previous Government inflicted on the economy, restoring growth and creating new jobs in the recovery. This coalition Government will not let the young and the vulnerable bear the brunt of these difficult times, nor will we let them bear the consequences of the previous Government’s profligacy. Youth unemployment is not a price worth paying.
One thing that the shadow Chief Secretary failed to mention was the record of the Labour Government, who oversaw a 40% rise in youth unemployment.
Danny Alexander
I will give way to the hon. Lady, and then I will make some progress.
Meg Hillier
What would the right hon. Gentleman say to the young people in my constituency, where there has been a 12.5% increase in youth unemployment among 18 to 24-year-olds from December 2010 to December 2011, on this Government’s watch?
Danny Alexander
I would say to them that in very difficult times we are doing everything we can to support them. Let me tell the House what we are already doing.
Danny Alexander
I have already given way to the hon. Gentleman and to the hon. Lady, and I want to make some progress.
Danny Alexander
My hon. Friend has made his point, but I do not think that it is for me to comment on the tax affairs of any individual taxpayer.
Meg Hillier
Last week the right hon. Gentleman made a speech in which he talked about co-operatives, and ideas to bring them into the mainstream. When the Government had the choice and opportunity to remutualise Northern Rock, why did they sell it off to a private bank? Surely a mutual would have been fairer to all, particularly to the taxpayer, than a cheap sell-off.
Danny Alexander
I am quite confident that in that case we chose the option that was best for the taxpayer, best for Northern Rock customers and best for the many hard-working people who work for Northern Rock in the north-east of England. I think that was the right decision on all those bases.
Lisa Nandy (Wigan) (Lab)
I want to make the case as to why, at a time when not everything can be priority, this subject really ought to be one. It is not just because in my constituency of Wigan, one in four young people is not in education, employment or training, and it is not just because I have begun to detect a sense of hopelessness among them that really frightens me. It frightens me because for nearly a decade before I came to this place, I worked with some of the most disadvantaged children and young people in this country, and what I am detecting in my constituency is a ripple effect: the sense of hopelessness is spreading outwards from the most disadvantaged to groups of young people who previously had strong hope for the future and strong resilience within themselves and their families. It is because young people cannot wait that I want to make the case for the proposal in the motion.
We heard from my hon. Friend the Member for Leeds West (Rachel Reeves) about the wage-scarring effect, and we heard a powerful speech from my hon. Friend the Member for Leeds East (Mr Mudie) about the impact that youth unemployment has on young people’s confidence. I have seen for myself the levelling-down effect when jobs are scarce: graduates leave university with a sense of despair because they have to take jobs that they could have got three years earlier; 18-year-olds leave college with a sense of despair because they have to take jobs that they could have got two years earlier; and 16-year-olds are left with literally nowhere to go. That is why the issue should be our top priority: it is different, and it cannot wait.
I worked for five years for the Children’s Society, which has spoken out very powerfully about child poverty this week, and I saw what happened to young people who were put out of work in the 1980s. They never recovered resilience in the labour market and were forced to bring up their children in workless households. Twenty years later, we were still dealing with the impact of that, so I say to Ministers that they are storing up trouble for future generations if they do not take action now.
I am concerned about what I have heard, because the Government are tinkering when what we really need is a step change in approach to the wider economy and to this issue. Young people have a very, very strong sense of fairness, which is why the starting point that my hon. Friend the Member for Leeds West has chosen is exactly the right one. More than anyone else whom I represent, young people understand the concept of something for something. They have seen the education maintenance allowance, which they worked hard to get, axed; they have seen Aimhigher, which raised the number of young people in my constituency going to university by 40% in six years, axed; they have seen tuition fees hiked up way beyond anything they could even conceive of paying; and they have seen the future jobs fund, which was making a dramatic difference to their confidence and to their friends’ confidence, axed. At the same time, they see bankers’ bonuses and pay continue to rise, so it is no wonder that they are angry.
Meg Hillier
Does my hon. Friend agree that there may be poverty among young people—my constituency, unfortunately, was shown to have a high level of poverty by the excellent work that she referenced—but there is no poverty of aspiration, certainly not in my constituency? Will she comment on whether that is the case in hers?
Lisa Nandy
I share that sentiment, but I am concerned. Those young people are turning to a Government who said, “If you work hard and try hard, we will support you” but they see poverty of aspiration from the Government. They are angry, because the Government have broken the deal and the pact that, if young people tried hard, they would have the chance of a better future.
Mr Pat McFadden (Wolverhampton South East) (Lab)
At first glance it might seem as though youth unemployment and bank bonuses are separate issues, or that if they are linked it is only at the level of an argument about fairness or equity. But that is not the case. The level of reward at the very top of the financial services industry is not just an argument about fairness or equity, although it is certainly that; it is something that has a material effect on the functions carried out by our financial institutions, including the level of lending available to the economy and, thus, the capacity for job creation in it.
I should make it clear that I am talking about bonuses at the very top. We should not forget that the vast majority of people who work in the financial services industry receive ordinary salaries, and that if they do get a bonus it is of a modest amount to which no one would object.
Indeed, we all value the employment created by our financial services industry, but there is a broader problem, which we all know. In recent years we will have all met businesses that cannot find the funding that they need to keep going or, in some cases, to expand, grow and employ people. Sometimes that is because the price of credit rises so much that the business in question cannot afford it, but sometimes it is because the credit is not available on any terms.
No Government can second-guess every individual lending decision, but there is no doubt that access to finance has become a barrier to the creation of employment. This Government’s answer was to get together with the banks in the Merlin agreement, which was based on gross lending, not net. Let me give the House one politician’s verdict on such agreements. He said:
“This would be completely letting the banks off the hook. It’s perfectly possible for banks to achieve a gross lending target while withdrawing capital from small to medium-sized businesses.”
He went on to say that, in agreeing to gross lending targets, the previous Government allowed the banks to run rings around them. I am of course quoting the current Business Secretary, who had that opinion on gross lending agreements before he came into office—and then supported exactly the same thing.
The right hon. Gentleman subsequently pirouetted and said that the Merlin project had not worked, telling the House last month:
“The Merlin project certainly did not succeed in its central objective, which was to achieve growth in gross lending by banks.”—[Official Report, 8 December 2011; Vol. 537, c. 397.]
The banks’ argument is that they are under conflicting pressure both to increase the amount of capital that they hold and to lend more to business. They tell the public and they tell us politicians that we can have either safe and secure banks or more lending, but not both; and that brings us back to bonuses.
The hon. Member for Bury St Edmunds (Mr Ruffley), who is no longer in his place, referred to the evidence, given last week to the Treasury Committee by the new regulatory body responsible for financial stability, which suggested that that was not the case at all.
Meg Hillier
Does my right hon. Friend wish to comment on the sudden enthusiasm of Conservative Members for regulation, given that, when regulation was proposed by the previous Government, they were not keen on it at all?
Mr McFadden
There are many quotations from Conservative Members calling for less regulation during the previous Government’s period in office, but I refer to the Treasury Committee evidence from Mr Robert Jenkins, a former Credit Suisse trader who is now a member of the Bank of England’s Financial Policy Committee. He recently made a speech in which he said:
“The truth is that banks can strengthen their balance sheets without harming the economy. They can do so by cutting bonuses, by curtailing intra-financial risk-taking and by raising term debt and equity.”
As the hon. Member for Bury St Edmunds said, last week Mr Jenkins told the Select Committee that if the banks reduced the bonus pot by £1 billion, that would make available £20 billion more for small businesses.
This weekend, the banks hit back at that estimate. The Sunday Times was briefed, by an industry insider who clearly has a thing or two to learn about rapid rebuttal, that the real figure if bonuses were cut would not be £20 billion but only £13.5 billion. That argument is based on whether we apply the capital and regulatory rules that exist at the moment or those that may come in future. But whether the figure is £13.5 billion in future or £20 billion at the moment, the argument is clear: reward is an issue not only about fairness, but about the function that we want the banks to have in the economy.
Of course it is galling for a nurse on a pay freeze to be paying for a crisis that they did not cause and then to see a seven-figure bonus, but it is more than galling—the truth is that we have been presented with a false choice between restoring the capital position of banks and supporting lending in the economy. There is not an automatic trade-off between levels of safety and levels of funding once we take into account issues of reward at the top. Put simply, less money in excessive pay at the top would make more available for the lending we need to create jobs. That is why youth unemployment and bank bonuses are linked.
I have one final thing to say. In the coming days, we are going to hear a lot about what top bankers are entitled to contractually; no doubt that argument will be wielded by Ministers. However, contracts are not the only thing that matters. Context matters too, and the context is the greatest squeeze on family living standards since the war. That should be taken into account by the bankers themselves as we decide on restraint on bonuses.
The banking industry is hugely important to this country, but its relationship with the public has been broken. It is time to repair that relationship, and there is no better place to start doing that than in striking a better balance between reward at the top and the job that we want the banks to do—to lend in the real economy.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
It is timely that I follow the hon. Member for Salisbury (John Glen), who lamented the increase in youth unemployment in his constituency, which is less than half the 1,305 people aged 24 and under claiming jobseeker’s allowance in my constituency—an increase of 12.5% on the same time last year.
In December 2011, 420 jobs were advertised in jobcentres in Hackney, which equates to around 14 claimants per vacancy. Young people who are just leaving school or college are competing for those jobs against people who have work experience on their CV, which is one reason why I lament some of the changes this Government have introduced—getting that experience is crucial to helping people to get on their career path.
Hackney is a very young borough—around a third of Hackney residents are under the age of 24—which means that youth unemployment is a particularly striking and important issue in my constituency. The percentage of 18 to 24-year-olds who have been unemployed for six months in Hackney is now higher than the national and London averages. In December 2011, 2.1% of young people in Hackney had been unemployed for six months, compared with 1.5% in London and 0.9% nationally. In Hackney, 1.2% young people were unemployed for more than 12 months, compared with 0.5% in London and 0.6% nationally. One of my concerns is that we are seeing a growing trend of longer-term unemployment for young people. They might be small in number, but the trend is in the wrong direction.
It is important that we hear from young people themselves. I have been talking to providers of the Work programme in my constituency that work with some of the hardest-to-reach people. The private companies take the easier-to-place people and give specialist agencies and organisations the harder-to-reach ones. Janet Usoro, the student contact co-ordinator at East London Advanced Technology Training, which is a third sector IT training company for young people based in my constituency, told me of a young man who comes from a troubled background. His mother has mental health issues and his father is unknown to him, and he had difficulties in the past with drugs that resulted in a prison sentence.
This young man decided to get his life back on the straight and narrow and at ELATT has achieved NVQ levels 1 and 2 in IT networking. He is progressing through level 3. He has gained confidence and found new personal self-discipline. He is on the right track, but with his background, his chosen career path will require a record of work experience and extra support, which, I worry, the Work programme is not entirely equipped to give him. I hope the Minister responds to that in his summing up.
Anthony Harmer, the chief executive of ELATT, tells me of his worries about long-term, sustainable funding for the high-level support work it does with such difficult-to-reach young people.
The Minister of State, Department for Work and Pensions (Chris Grayling)
As the hon. Lady has raised a specific point, may I put it to her that the Work programme providers have complete freedom to do what works to help people into work, including securing work experience places for them? It is my hope that the providers in her area find work experience places precisely for someone such as the young man she describes, even if they have not found work experience through the Government scheme or Jobcentre Plus.
Meg Hillier
If what the Minister says transpires, I will be a very happy Member of Parliament for Hackney South and Shoreditch, but I am picking up on the ground that that is not happening in the way that it should be. The bulk of the business is going to private providers, for the easier-to-place people, and they are taking the money, but the harder-to-reach people are going to the voluntary providers, which are struggling to make the packages work because their funding is crumbs from the bigger table. There may be a structural issue, which I hope the Minister will watch closely as the programme is rolled out, because we do not yet know about the success of the Work programme. Ministers herald it as a success, yet we have seen no figures or results, for all the reasons that have been well rehearsed. This is an issue that the Minister, if he is serious about his job, needs to monitor.
In my area, the third sector agencies are picking up the harder-to-place young people, after what we might call cherry-picking. However, I am not trying to be political; I am concerned that those young people should get that work. Ian Ashman, the principal of Hackney community college, has similar stories to tell. For example, he has told me about Kevin, a 23-year-old father of two with a baby on the way who had an accident going to work one day and, as a result, lost his job. After 100 job applications, he has not been able to find another job. When it comes to full-time college courses, although the college has a good relationship with the local jobcentre, the employment advisers there do not know enough about what colleges can provide. As the Minister is probably aware, that concern was shared by 44% of colleges in a recent Association of Colleges survey. Full-time courses such as those provided by Hackney community college are not always appropriate for young people such as Kevin, because of the impact on their benefits. Indeed, there is an issue with young people wanting to progress and improve their lives, but often being unable to undertake the extra qualification or study that they need. Where do they go in the meantime? As we have heard, some of the apprenticeships on offer are not really true apprenticeships. I am all for more apprenticeships if they are real apprenticeships, but not if they amount to cheap, unpaid work experience.
Agencies, job brokers and colleges need long-term sustainable funding to help their work with the most difficult-to-reach people, which is something we need to look at. The young people in my constituency are not interested in party politicking; they want to know that there is a career path for them. We have seen huge improvements in schools in my constituency, with more than 84% at one school alone getting A* to C grades at GCSE, and seven young people placed at Cambridge, including one young woman who had a baby at 15 and is now at the university with her child. There is real opportunity and a real desire to achieve in Hackney. There is no poverty of ambition among the young people in my area. Most of all, however, we need to get those young people on pathways into jobs. We need work experience available, so that they can get the experience they need to compete in the job market. I want to see the unemployment levels in my constituency fall dramatically.