Working People’s Finances: Government Policy

Miriam Cates Excerpts

Tuesday 21st September 2021 Commons Chamber

[Bridget Phillipson]

We would not be cutting it in the first place. We would replace universal credit with a better and fairer system that supports people into work. If the hon. Member wants to have a discussion about semantics, I suggest she has a chat with her constituents and sees how she gets on, arguing about the distinction between a temporary uplift and a cut. It is more than £1,000 a year from families’ budgets—that is what really matters.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

The hon. Lady has made it clear that Labour wants to keep the temporary uplift. However, given that Labour does not support increasing national insurance, which is a very broad-based tax, how does it propose to pay for a permanent £6 billion a year increase in public spending? How would she pay for a blanket extension of £20 a week for every single universal credit claimant—it is not targeted to families or those with children in particular—in a way that is fair and does not involve raising taxes?

[Bridget Phillipson]

First, it is worth considering why the increase to universal credit was put in place. It was because, during the pandemic, the Government had to recognise that universal credit had been set at an inadequate level on which families might survive. On the hon. Lady’s wider point, I have a long list of places where we could find some money, if she is interested: the 1.9 million pieces of personal protective equipment, worth £2.8 billion, procured by the Government that were useless; the stamp duty holiday that was a £1 billion-giveaway to landlords and second homeowners—I could be mistaken, but I do not recall her objecting to that—and the hundreds of millions of pounds about to be wasted on the Prime Minister’s vanity yacht. That is before we get to the Test and Trace system that the National Audit Office said had not worked properly and had had a “minimal impact” on transmissions, literally wasting billions. This is about choices. There is always money for the Government’s projects, their friends and their people, yet when it comes to dealing with some of the poorest families in our community—those who have got us through the pandemic—I am afraid they are told that there is nothing for them.

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[Mr Clarke]

I want to make progress because it is important that we reflect on the employment situation in the United Kingdom. Our joblessness rate is now lower than that of the United States, lower than that of Canada and lower than those of France, Italy and Spain. People have been coming off the furlough scheme very rapidly now, and the numbers are down to 5.1 million in January to 1.6 million at the end of July, while almost half of those people still on the scheme, lest we forget, are already working through flexible furlough. The number of people claiming self-employment grants has fallen significantly, too. But that is not all: broader economic growth has exceeded expectations as restrictions have been lifted.

[Miriam Cates]

My right hon. Friend refers to the furlough scheme, which has of course been a phenomenally successful scheme. It has been credited with preventing mass unemployment and saving the job market. Does he not agree that Opposition cries that we are clobbering working people absolutely do not stack up when we consider the furlough scheme?

[Mr Clarke]

I thank my hon. Friend for her point, and this is absolutely right. The furlough scheme has been absolutely essential to supporting the UK throughout this very difficult period. It has been an historic success, and we only need to consider how serious the employment situation would have been had we failed to intervene and failed to show the decisive leadership that this Government have shown.

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[Miriam Cates (Penistone and Stocksbridge) (Con)]

It is a pleasure to follow my constituency neighbour, the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss), and it was a delight to hear the maiden speech by my hon. Friend the Member for Hartlepool (Jill Mortimer) earlier. As a fellow MP in a post-industrial area, I absolutely recognise what my hon. Friend said about the importance of levelling up being about not only materially restoring to northern areas the opportunities that have been given to the south, but honouring those areas for their contribution to the wealth of this nation over hundreds of years.

Throughout my whole adult life, inflation rates and interest rates have been remarkably stable. That is not normal historically, and when I speak to constituents or more senior Members and hear about what life was like in the ’70s and for many decades before, I realise that the inflation that is a threat now is very different from the stability we have enjoyed in previous years. It is a concern.

My constituents are worried: they are worried about energy prices, and we have heard much about that over recent days; they are worried about commodity and construction prices; and they are worried about shortages. I have just heard from a major importer in my constituency who is concerned about the cost of shipping. The cost of a shipping container from China has risen from around $2,000 a container last November to getting on for $20,000 now. That will have a huge inflationary pressure, given how much we import.

It is also the case, though, that wages are rising and our job market is buoyant. Our plan for jobs is working. We have heard much about the furlough scheme, which has rescued our economy from the fate of mass unemployment. We have a record number of job vacancies—more than 1 million—and businesses in my constituency of Penistone and Stockbridge are hiring people of all ages for all different types of jobs.

We have heard Brexit being blamed for the situation that we find ourselves in, and there is no doubt that Brexit has caused changes in our economy. I draw the attention of hon. Members to an article by Matthew Lynn in this week’s Spectator entitled “Who’s afraid of rising wages?” It starts:

“During the Brexit referendum, Stuart Rose, the former boss of Marks & Spencer, and chair of the Remain campaign claimed that if Britain left the EU, wages ‘will go up’. This was, he added, in a rare moment of candour, ‘not necessarily a good thing’. But the idea that salaries might rise was exactly the reason that a great many people voted for Brexit.”

Why should we be afraid of rising wages? It is what the Opposition have been calling for. More competition for employees will lead to rising wages, and we are seeing that: Costa, for example, is paying over 5% more. On average, wages have risen 8% over the past three months, and, from April, this Government raised the national living wage to £8.91.

We must remember that we are still in economic shock. We are coming out of an extraordinary period of time, but things will settle. In fact, the International Monetary Fund has forecast that the UK will have the highest growth in the G7 this year, so while there are concerns around inflation and the cost of living, which must be addressed, there is also a good chance that we will have a fairer jobs market at the end of this.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Will the hon. Lady share with us the solution to the seasonal agricultural workers scheme, which is not adequate for farmers to be able to employ enough people to pick crops in the field and to avoid the situation that we are seeing in Scotland where many fields of crops are just being left to rot because of the lack of workers?

[Miriam Cates]

The hon. Lady makes an excellent point. While, overall, on a macro level, having more jobs available for British workers will push wages up, it is of course the case that certain sectors will need specific interventions to save them, and I would support any such measures.

While there are concerns like the one the hon. Lady has raised, and concerns in the wider economy, our plan for jobs is working and the future is optimistic. None the less, there are some long-term structural issues with the cost of living and threats to living standards that must be addressed, and this is the moment to do so. We must find a solution for the sake of future generations.

First, housing affordability is a key driver of problems with the cost of living. Solving the housing crisis will unlock many issues, such as generational inequality, and it will reduce the cost of living. I am delighted that the Secretary of State for Levelling Up, Housing and Communities, my right hon. Friend the Member for Surrey Heath (Michael Gove), has been appointed to look at this specific problem, because it is very important. Many of the serious issues that Members have raised in this House today would be much aided by a reduction in the cost of housing.

Secondly, we also need to look at fairer finance for families. Again, much has been said about the changes to universal credit, but I want to consider what we could do in our taxation system to make life fairer and cheaper for families. Unlike many countries, the UK has an individualistic tax system. We tax individuals rather than households, which means that we do not take into account the number of dependants in a particular house, and that can make life very expensive for families. Some families on low and middle incomes can end up paying around 30% more tax than individuals living on their own. When we couple that with the way that benefits are clawed back as people earn more, some families can effectively face a marginal tax rate of 75%, making it very difficult for them to get out of poverty. We must recognise the importance of raising children not just for the nuclear family, but for our whole society. We need to look at how we can make it less expensive for families to exist and to raise their children.

[Alison Thewliss]

The hon. Member is making an interesting point about support for families. Does she agree that the UK Government’s two-child benefit cap punishes those who have a larger family and puts them in a position where they cannot work their way out of poverty?

[Miriam Cates]

What is far more significant is the way in which we tax individuals—potentially spreading people’s income tax allowance and things like that—rather than looking at household income; that would give families far more choice about how they spend their income and organise their lives, and make family life much more affordable.

Thirdly, we have to address the long-term affordability of our public spending commitments. The welfare state that we have today was designed 80 years ago, when life was very different. Demographics were different then. There was no paid-for childcare or paid-for social care. Most women did not work. There was a huge amount of free care and community living going on that we just do not have, or that there is not nearly as much of, today. Of course, people then also spent a far higher percentage of their life working, whereas now people spend much longer in education and much, much longer in retirement, which means that proportionally, over the course of someone’s life, they are spending far less time paying tax and paying for insurance—paying for the benefits that we all want to enjoy.

The Office for Budget Responsibility forecasts that public sector net debt could rise to 300% of GDP by 2070. We just cannot continue in the way that we are now. We need a reset. We need to redesign our public spending and welfare state for modern life and modern demographics. I think we have already established that we cannot tax our way out of this. Of course, we should be trying to grow our way out of it, but we also need a fundamental redesign of the welfare state and public spending.

We also need much more emphasis on community solutions and prevention. It has been an honour to be part of the early years review of my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom), whose start for life recommendations look at the importance of the first 1,001 days of a child’s life. If we get that period right, we can prevent so many problems that destroy people’s lives in the long term and which are incredibly expensive for public spending. We must spend more and invest in the early years and health prevention. About 40% of the NHS budget is spent on preventable and lifestyle diseases. We have to tackle those things if the state is going to be affordable in the long term. Of course we should innovate, use technology and look at what other countries are doing to address these issues.

We should be concerned about the cost of living. Families up and down the country are struggling, and there are families that are not able to take advantage of opportunities in jobs and higher wages. But this Government have taken action on jobs over the last 18 months, and that is bearing fruit. As our economy is reset, we now have an important opportunity to solve some of the structural issues that we face.

[Mr Richard Holden (North West Durham) (Con)]

One thing that the Government could look at is the 2017 plan to extend pensions auto-enrolment to people who are 18-plus, rather than 22-plus, and to low-paid workers. Does my hon. Friend agree that the Government should take that forward at the earliest opportunity as part of a long-term solution?

[Miriam Cates]

I absolutely agree. In my speech on national insurance contributions a couple of weeks ago, I made the point that the auto-enrolment scheme was a fantastic invention and that we could extend it, as my hon. Friend says, but also that we could look at using it as a model to help contribute to social care, so that people pay into it now and reap the rewards later.

We have to address some of the structural issues that I have discussed. Now is an excellent time to do that, and I would welcome the opportunity to work with Ministers and colleagues across the House to look at innovative solutions to do that.