Finance (No. 4) Bill

Phil Wilson Excerpts

Wednesday 18th April 2012 Commons Chamber

[Mr MacNeil]

Perhaps I can expand the hon. Gentleman’s thinking. If we were to grow from four non-EU routes to 10 or 15, or to the 24 that Denmark has, we might see a growth in revenue. This is about raising revenue, not the precise level of taxation. We would be looking to raise revenue in Scotland and grow our economy, which is the plan for independence—indeed, it is why we want independence.

If APD is increased, Scotland will be put at a further disadvantage in attracting not only international passengers, but international business. As I said earlier, the Government have already conceded that point in devolving APD to Northern Ireland.

[Phil Wilson (Sedgefield) (Lab)]

The hon. Gentleman is being a bit disingenuous as far as Northern Ireland is concerned. The reason APD was devolved to Northern Ireland was because the airport in Northern Ireland was in serious danger of losing continental flights. Also, people were travelling to the south of the island, to Eire, to travel. The decision was made for economic reasons, to maintain the airport in Northern Ireland. It was nothing to do with the principle of devolution.

[Mr MacNeil]

It is not unusual to see Labour once again abandoning principle in its arguments. Surely we should be looking to allow Scotland to compete with other countries in the world. I hope that the hon. Gentleman would reflect on that.

[Mr MacNeil]

As I have pointed out, our proposal would benefit the south-east of England as well as Scotland. Surely the hon. Gentleman can see that, given what Conservatives say about taxation.

[Phil Wilson]

Will the hon. Gentleman give way?

[Mr MacNeil]

I am sorry, but given the time I will take no further interventions.

Three airports support the devolution of air passenger duty, as do the chambers of commerce. They want it to be independently controlled in Scotland. They will be frustrated by what the House of Commons in London will probably do this evening, when I press amendment 61 to a vote. Frustration is a negative, but in my view this will have a positive outcome. Members who cannot yet understand the rising support for Scottish independence can surely see that those who are frustrated about APD this evening will begin to see a better way of dealing with the allied intransigence from London, on this and other matters, large and small. That will be one of the many reasons why people will vote for Scottish independence in 2014—to move the Scottish economy and Scottish connectivity forward.

I only hope that I have aided Members in understanding that this is not an SNP call: we are only a vehicle for the community of Scotland, along with the three airports and the chambers of commerce, in improving industry and creating better chances for families. The amendments in my name and those of my hon. Friends therefore seek to stop the increase in APD and to continue the pattern of devolving things to the Scottish Parliament, which is a more sensible locus for controlling air passenger duty.

[Cathy Jamieson]

I shall keep my remarks brief in order to give other Members an opportunity to speak. I have listened to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) and, as I said in an intervention, it is important that we should have an opportunity to look at this matter in the round. Given that a recent review of air passenger duty resulted in no changes being made, I hope that the Minister will take this opportunity to consider taking a further look.

[Phil Wilson]

I have a small airport, Durham Tees Valley airport, in my constituency. The problem with air passenger duty relates to regional airports, and I believe that we need a UK solution, rather than a Scottish solution or a Welsh solution. There are specific reasons for the arrangements in Northern Ireland. We need a duty that reflects the needs of the regional airports outside the south-east of England.

[Cathy Jamieson]

That is exactly the point that I was going to make. I understand the strength of feeling in Scotland on this matter. I also understand the situation in Wales. I understand why people want to grow the economy there, and I could talk about a whole range of issues relating to that. I shall resist the temptation, however, and stick to the matter in hand.

The workings of the Silk commission could provide an opportunity to look at this matter. There are also opportunities to do so in Scotland. The Labour party there has said that it is not against the notion of further devolution in principle, but it would have to be done for common-sense reasons and at the right time. My hon. Friend the Member for Sedgefield (Phil Wilson) has just made a sensible point. Every part of the UK arguing for its own small bit of devolution would not provide a joined-up solution or a common-sense approach to growing the economy; it would be unhelpful.

Will the Minister tell us whether, having listened to the debate tonight, she is minded to look again at the matter, given that the review produced no change? Perhaps she could look into the matter, taking into account the points that have been raised not only about Scotland and Wales—vital though they are—but about other parts of England.

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[Jonathan Edwards]

I was going to make a far longer speech on the probing amendments that I have tabled, but I shall be brief. In Wales, we are normally calling for equality with Scotland, but tonight we are calling for equality with Northern Ireland. Phase 1 of the Silk commission is looking into fiscal powers. A precedent is clearly being set, in that this Finance Bill is being used to devolve job-creating levers to one devolved Government of the British state. If there is cross-party consensus on phase 1 of the Silk commission, we would expect those recommendations to be implemented in the next Finance Bill. We do not want to be told that we shall have to wait years and years for another Government of Wales Bill.

[Phil Wilson]

This is an important issue for airports outside the south-east of England. We should pursue a course of action that reflects its importance to regional airports and other airports in Scotland and Wales. I have been sent a letter asking for regional and national variation in air passenger duty outside the south-east. It is signed by people who run airports not only in Scotland but in England. This is a UK-wide issue.

[Bob Stewart (Beckenham) (Con)]

Will the hon. Gentleman give way?

[Phil Wilson]

I will not give way, as I do not have much time.

Will the Minister look into whether there is a way of varying air passenger duty? I understand that there might be some European issues to deal with, but we must consider the congestion around Heathrow and Gatwick. Perhaps there could be two variations in the duty, and a small congestion charge to encourage the growth of regional airports around the country.

[Miss Chloe Smith]

I thank hon. Members for the breadth, and the brevity, of their comments in the debate, and I shall endeavour to cover all the relevant points in the few minutes available to me. Of course the Government firmly believe—as I think all hon. Members do—that aviation plays a vital role in the UK economy, by which I mean all the UK economy. I have taken on board the regional aspects of tonight’s debate. As hon. Members know, recent economic conditions have been difficult for airlines, but the UK remains internationally competitive and there are positive signs for the air industry, as shown by the growth in passenger numbers at major British airports—including Heathrow, but not limited to the south-east of England.

Budget (North-East)

Phil Wilson Excerpts

Tuesday 17th April 2012 Westminster Hall

[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Gateshead (Ian Mearns) on securing the debate.

People talk about investment in the region, and three examples of investment have been mentioned. GlaxoSmithKline in Cumbria, which also has a plant in the constituency of my hon. Friend the Member for Bishop Auckland (Helen Goodman), SSI in Redcar, and Hitachi in my constituency have one thing in common: they would not be there were it not for a Labour Government. They were the result of initiatives established and settled under a Labour Government and which came to fruition after the general election. From personal experience, I know how much time and effort went in to ensure that Hitachi came to the north-east of England—it was not certain that it would.

I set a “We are all in this together” test for the Budget, and it did not pass that test. Some 57,000 households in the north-east will lose tax credits. I met a young mother at the weekend with twins—two little boys—who will start school in September. She has lost more than £300 in tax credits every month. That is a lot of money for someone with a young family. I know that 940,000 people will be better off under the new tax threshold, but let us not forget that the Institute for Fiscal Studies has said that the changes coming in this month will mean that on average they will be £511 worse off.

[Tom Blenkinsop]

My hon. Friend gave three examples of programmes starting under the Labour Government: SSI, Hitachi and GSK. That is also the case with DigitalCity in Middlesbrough, where public-led investment increased private-led investment. The hon. Member for Redcar (Ian Swales) referred to information from Experian in relation to Middlesbrough, Hartlepool and Redcar being the hardest-hit areas, but those statistics related not to the RDA, but to an investigation post this Government’s autumn statement.

[Phil Wilson]

My hon. Friend is right. That proves how much we have to celebrate what the previous Labour Government did for the north-east of England. The hon. Member for Redcar (Ian Swales) mentioned the minimum wage. The minimum wage has been frozen for people under the age of 21. It has gone up by only 11p this year as a consequence of the decisions made by this Government. At the same time, 4,000 to 5,000 taxpayers on the 50p tax rate in the region will on average receive a tax cut of £10,000 each. If that does not show that we are not all in this together, I do not know what does. The Government put VAT on pasties, but they did not put VAT on caviar.

The 40p tax rate has been ignored by many people. The threshold has been reduced from £42,475 to £41,450, so that 300,000 people will be brought into the 40p tax rate. How many more people will lose a proportion of their child benefit because of the reduction in that threshold? Will the Minister indicate whether she knows that figure? By reducing the threshold, the number of people paying the 40p tax rate in the region has gone up by 8%. There are now nearly 110,000 people paying the 40p tax rate. Little by little, the Government’s fairness agenda is being found out—actually, we are not all in this together.

I am very concerned about regional pay. The hon. Member for Stockton South (James Wharton) mentioned the flexibility in local pay in the court system, but we reduced the number of bands from 40-odd to five; we did not increase the number of bands. The latest survey by the TUC states that 68%—more than two thirds—of Conservative voters do not believe that regional pay in the public sector will boost jobs in the private sector.

The Budget is divisive. It is also complacent. It does nothing for growth, not just in the north-east of England, but in the rest of the country.

[Sir Roger Gale (in the Chair)]

Order.

Budget Resolutions and Economic Situation

Phil Wilson Excerpts

Friday 23rd March 2012 Commons Chamber

[Phil Wilson (Sedgefield) (Lab)]

This is a landmark Budget, because it has redefined the meaning of complacency. The Budget speech, in essence, was nothing more than a review of the previous week’s press, rather than a strategy for growth, although we did learn one thing: the Conservative party is a one-region party, not a one-nation party. The Lib Dems—I notice none of them is here at the moment—have followed such a crooked path since the general election that I am surprised they can now lie straight in bed.

Transport is a very important issue in Sedgefield. In the south-east corner of the constituency, Durham Tees Valley airport is doing its best to continue to serve the Tees valley, even though it has faced difficult times recently. I am pleased that the Minister responsible for aviation has agreed to meet MPs from the area to discuss the airport’s future, and I will be pleased to hear the Government’s plans for expanding runway capacity in the south-east, which would greatly help regional airports.

The Hitachi train building facility is due to start construction in my constituency at the back end of this year or the beginning of next year, and I hope that one day in years to come it will compare with Nissan for the number of private sector jobs it creates. I would like to record once again my thanks to the people of Newton Aycliffe, Sedgefield and the north-east who campaigned to ensure that this Government went ahead with the Labour Government’s plans for investing in new rolling stock to guarantee the Hitachi investment.

Beside the concerns about the future of the airport, the other great concern is the state of public transport in County Durham, especially local bus services. The lack of a credible bus service in the area, which has been restricted because of the cuts in central Government grant, is counter-productive. The local Jobcentre Plus has informed me that it knows that poor transport in the area is making it difficult for people to get to work, and it is such a problem that it is thinking about buying bicycles so that people can make the journey to work. At present, nine jobseekers in Sedgefield are chasing every vacancy, and there are fewer public sector workers in Sedgefield than in the Prime Minister’s constituency.

Although the north-east has the highest proportion of public sector workers of any region in England—just under 26%—private sector jobs increased in the north-east between 2003 and 2008 by 9.2%, while public sector employment grew by 4.1%. In other words, private sector employment in the region was accelerating faster than public sector employment was before the international financial crisis. Therefore, public sector jobs were not crowding out private sector jobs.

As in other parts of the country, in the north-east 40% of households with dual incomes include someone who works in the public sector. The loss of significant public sector jobs and a public sector pay freeze can only exacerbate the loss of spending power in the region if those factors are joined by the localisation of public sector pay. I believe that the move in the direction of localised public sector pay is driven by ideology, rather than economic facts. It belies the fact that we can have national pay bargaining and still have flexibility within pay structures without hitting regions such as the north-east.

Concern about the localisation of public sector pay is not restricted to people in the public sector and trade unionists. The chairman of the Leighton Group, a technology company in the north-east, Mr Paul Callaghan, has warned:

“I’m very concerned about the negative impact on the North East economy of regional pay rates. Clearly we do not have regional pricing on gas, electricity, petrol and most other goods, so freezing of regional public sector pay must reduce demand for local goods and services, further dampening an already depressed economy. I have seen no credible research to show that this move will have anything but a negative impact on both the region’s private and public sector.”

[Roberta Blackman-Woods (City of Durham) (Lab)]

Does my hon. Friend agree that taking £78 million out of the economy in a time of recession, which is what the TUC estimates regional pay would mean for the north east, is simply economic madness?

[Phil Wilson]

As I have said, I think that it is ideologically driven. The facts of the matter have been thought through, so my hon. Friend is quite right.

The previous Government turned their back on the wholesale devolution of pay determination at local level in 2003. A Treasury guidance note published in the autumn of 2003 stated:

“At the extreme, local pay in theory could mean devolved pay...to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

[Gavin Shuker]

Does my hon. Friend also agree that one of the risks of this approach is that it will have a further deflationary effect in areas where money being spent in the local economy is vital to ensuring proper growth?

--- Later in debate ---

[Phil Wilson]

It will end up increasing the division between the north and the south in this country. If the Government go forward with this proposal, I believe that it will prove the point that the Conservative party is no longer a one-nation party, but a one-region party.

I believe that the proposal would mean that poorer regions would be starved of talent. Social mobility would be restricted because of too much variance in pay rates, especially between the north and the south. There are many myths about local pay determination. For example, last year’s autumn statement said:

“While private sector pay is set in accordance with local labour markets, public sector pay is usually set on a national basis.”

The fact is that most large, multi-site private sector companies have national pay structures, among them retailers, banks and telecom companies. The Government give the impression that private sector pay is set by myriad individual-level decisions based on specific local labour market variations. In reality, large, multi-site, private sector companies operate with up to four or five bands or zones within a national framework.

The Government have put across the idea that there is significant regional pay variation outside the south-east and London, but there is much more similarity than difference. In practice, most retailers and banks that operate zonal-type pay systems have national pay structures outside the south-east and London without having to set different rates for sites in Durham, Doncaster or Daventry.

There is a myth that local labour market and cost-of-living factors have displaced skill-level qualifications in setting pay in the private sector. Even in small private sector organisations, skills and qualifications will be key factors, and there is plenty of evidence, according to Incomes Data Services, that international engineering companies with regional bases are using international salary data on skills and qualifications rather than local data for recruitment purposes. Human resources professionals in the private sector who work for companies with multiple sites around the country would say that national pay structures are important because they provide simplicity, avoid the costs of duplication, allow better payroll control, create consistency, and avoid poaching and leapfrogging.

Another myth states that geography is a key factor for determining pay, yet in fact the industrial sector is the key determinant. In the car industry, with different companies working in different locations such as Sunderland, east London, the west midlands, Merseyside, Oxford, Derbyshire, north Wales and Swindon, there is a great deal of similarity in pay levels. These manufacturers benchmark pay against each other and other successful manufacturing companies. Geographical pay differentiation within the UK is not a major factor for them, although global pay differentials can be a factor. Localisation of public sector pay will also open the way to greater cost in the public sector, as local management will need to expand to handle negotiations and to collate and analyse local labour market data. There could be more challenges over equal pay.

Complex localised pay systems are rare because of the resources involved. Official earnings data show that there is very little difference in earnings outside London and the south-east. There are two labour markets in the UK: the south-east and London, and the rest of the country. Even zonal pay systems, which may cross regional boundaries, usually equate to the boundaries that I have mentioned and extend no further.

I do not believe that public sector jobs are squeezing out the private sector. Unemployment is highest in the north-east, with nine jobseekers chasing every vacancy. Thousands of jobs have been lost in the public sector, so why is not the private sector growing in the way anticipated? It is because there is a lack of growth and demand in the local economy. The Government’s plans for excessive localisation of public sector pay are misguided and ideologically driven, and they should not be implemented.

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[Richard Fuller]

As always, I have a lot in common with the hon. Gentleman, but that is not the point. The point is that the damage was already being done in our national economy. It was the strategy of the previous Government not to be content with leveraging up their own debt; they required the leveraging up of household debt and corporate debt, as well as financial sector debt and Government debt. Debt was the answer in the period when they came up with the statement that they had ended boom and bust. That debt has to be paid for. It is two years since the Labour Government left office and there is not enough time to pay for the 10 years of the growth of debt in our economy. It will take a significant amount of time for us to de-leverage the economy in every sector. This Budget is part of that process.

[Phil Wilson]

If that is true, why did the Tory Opposition go along with our spending plans right up until 2008?

[Richard Fuller]

That is a good question, which the hon. Gentleman should address to the Chancellor. I was not in Parliament at that time and I am not sure that that is what I would have said.

Much has been said about the granny tax. The one thing that grandparents want is what is best for their grandchildren. They understand that in tough times—this is because many of them have been through tough times—they have to give something to ensure that we will be stronger in future. That is what this Budget will deliver, and it is part of getting our economy balanced and back on the right track.

Regional Pay (Public Sector)

Phil Wilson Excerpts

Tuesday 10th January 2012 Westminster Hall

[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Chope, and I congratulate the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on securing the debate. The issue of regional pay is important for people living in Wales, Scotland and Northern Ireland, and in regions such as the north-east of England.

I spoke about regional pay, or the localisation of pay, in a debate on 6 December 2011, and the issue has been on the agenda for Governments since at least the 1980s, when I was a civil servant in Durham. The Megaw report wanted to devolve public sector pay in the civil service on a regional basis, but that proposal did not get anywhere. Introducing local rates of pay is difficult. The previous Government looked at the issue with regard to the public sector, and a Treasury guidance note from 2003 stated:

“At the extreme, local pay in theory could mean devolved pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

That is the basic, fundamental reason why devolution of levels of pay in the public sector has not been introduced.

This is a time of austerity. Public sector pay has been restricted and will not be increased for two years, and then it will increase by just 1% for two years. Let us look at markets in the north-east of England; if we had devolved local pay bargaining, people might say that pay should be frozen in that region for another year because of the difference between the public and private sectors. Do the Government believe that public sector workers in some parts of the country should have a pay rise, while those in other places should not receive one, because, according to Government analysis, the pay difference between the public and private sectors is too big?

We should not look at only one region. The difference in pay in the north-east and in the south-east of England is 10%, and we should try to decrease that. Why is it right for a nurse working at St Thomas’ hospital, across the way from here, to be on a different pay rate from a nurse who works at the university hospital of North Tees in my constituency, or in Bishop Auckland or Hartlepool? I cannot see how that can be right if both nurses are doing the same job. Many private sector companies, especially supermarkets and some banks such as Santander, have national pay agreements. There may be some flexibility within those agreements, but they have national pay systems. To say that some public sector workers should suffer austerity measures for longer than others because of where they live is divisive. How can we encourage a public sector worker to move from south-east England to the north-east to do exactly the same job if the rates of pay in the north-east are completely different from those in London?

[Tom Blenkinsop]

My hon. Friend makes an excellent case. There are institutionalised national bodies that survey and assess prices in supermarkets. How on earth would regionalised public sector pay work in an economy with five or six big supermarkets that are supposed to have national rates for pricing their goods?

[Phil Wilson]

My hon. Friend raises an important point. One reason why the previous Government did not introduce such measures is because the complexity of having different pay bodies, boards and regions would create unnecessary bureaucracy, which any Government should want to keep to a minimum.

In north-east England, average pay is £19,000 per year, but it is only that high because of public sector workers in the area. How low does the Minister want pay in north-east England to be? Public sector workers maintain the average salary at £19,000; without them it would be much lower. The differential in rates of pay is not a reason for cutting pay or suspending pay rises in the public sector. Instead, we should see how we can increase pay in the private sector.

[Tom Blenkinsop]

Again, my hon. Friend makes an excellent point, and it would be good to see the Minister thank and congratulate north-east England: although in the rest of the country the manufacturing economy is in the doldrums, the north-east is bucking that trend. Workers in the steel and chemical processing industries would undoubtedly be affected by any reduction in public sector pay.

[Phil Wilson]

My hon. Friend is absolutely right, and those workers will soon be joined by workers in the train building sector, in the factory in Newton Aycliffe. As I understand, the north-east exports more manufacturing goods than it imports.

The private sector has a major role to play, and we need an increase in private sector jobs. At the moment, however, 67,000 public sector jobs have been lost in north-east England, and unemployment has risen to 11.6%. Where are the private sector jobs? How can we say that the public sector is crowding out private sector jobs when unemployment is rising and there is no growth to make up for the loss of 67,000 public sector jobs? Figures from the third quarter of last year show that the number of private sector jobs in the UK increased by only 5,000. Many regions such as the north-east are losing out.

I am very worried about what will happen. There is a big pay differential between the south-east and the rest of the country. The differential between regions other than the south-east is minor; it is only 1% or 2%, depending on what goods we compare. We talk about social mobility, and about people getting on and wanting to move to different parts of the country; how will that be possible if pay rates are so different across the country?

Also, we will not create regions as we know them; we will create silos. If people work in the public sector in the north-east, that is where they will have to work, because if they want to move to south-east England or somewhere else, they probably will not be able to afford to buy a house there. There is great difficulty with that at the moment. Let us not forget that in London, where there is London weighting, there is a big problem with recruitment in the public sector as well.

The proposal is a knee-jerk reaction that has not been thought through. I know that the Chancellor of the Exchequer has said that this will not be regional pay as perhaps it was outlined in the past, and that it will be based on zones or localities. That may be so, and it may have been tried out in the Courts Service; let us say that it has been tried there. The fundamental point is that the previous Government did not want to implement it anywhere else, because they knew about the inherent contradictions involved in doing that.

North-east England is a great place to live. I have lived there all my life. I see it as a region of the country with a great identity. I do not want it to become a silo, such that if people work there in the public sector, they cannot work anywhere else. I do not want public sector workers in north-east England to have to face extended periods of austerity because they happen to be working in the wrong part of the country.

We need to look at the private sector. I want private sector jobs to come to the north-east of England, and I want those private sector jobs to have good pay rates. This week and over the weekend, every party has been going on about high pay among senior executives. Okay, let us consider that, but let us also consider low pay in the private sector and not just in the public sector, because private sector workers make up the majority of workers in the country. The answer to the problem is not regional pay or localised pay—it is a living wage for all our people.

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[Miss Smith]

The best possibility of dealing with the overall economic impact will be when facts and data have been received. That is the point of the process that the Chancellor has laid out.

To move on to the content that we need to get through, hon. Members should be in no doubt about how important the public sector is and about the fact that the Government share that view and the desire for all parts of the economy to do well in the coming years. However, fiscal consolidation is a vital precondition for growth and part of the sustainable foundation that will let all sectors and all parts of industry do well and do what they need to. It is also part of achieving even growth across the country. It is right that public sector pay restraint should play a part in that fiscal consolidation. Public servants do a crucial job in delivering the high-quality services that we all look for, and it is right that we continue to offer the kind of rewards that attract the most skilled people to the public sector. However, it is incontrovertible that public sector wages on average continue to compare extremely generously to those of private sector workers. The Institute of Fiscal Studies, which has already featured in the debate, suggested that there is on average a 7.5% premium to working in the public sector over comparable jobs in the private sector. That makes a strong case for public sector pay bill restraint.

I want to discuss the rationale for the policy suggestion that has been made and the Chancellor’s effort to seek views on how it can be carried out. We must ensure that public sector pay is set at the right level for each labour market in the long term. I want to make it clear again that the proposals are not about generating savings, but about supporting economic growth by ensuring that wages are set at the level in individual localities. Indeed, a significant reason for the disparity between public and private sector pay is due, as I have mentioned, to the difference between pay that is set locally and pay that is set nationally. Typically, private sector pay is more subject to the rates paid by local competitors, the local cost of living and perhaps, in some cases, local turnover rates. However, public sector pay is usually set on a one-size-fits-all basis nationally. Accordingly, public sector workers can often be paid more than private sector workers in similar jobs in the same area. That has potentially damaging consequences for the economy. For example, private sector businesses, perhaps such as the one that my hon. Friend the Member for Montgomeryshire once ran, which are looking for staff to help them to set up or grow, need to compete with much higher public sector wages in the same area. That is the ultimate crowding-out argument within the debate.

I want to refer briefly to the system of zonal pay in the Courts Service, which has been mentioned. It demonstrates that it is possible for pay to be responsive to local labour markets within a national bargaining framework. Of course, those zones did not simply conform to regional boundaries, but took into account the local economy by, for example, putting Norwich, Exeter and Newcastle in the same zone. The debate has a misnomer at its heart. In the autumn statement, the Chancellor announced local pay, not regional pay, so we are not talking about something that might take effect at the level of Wales. We are talking about something that may, depending on what the experts say, happen at a lower level.

[Phil Wilson]

How local is local?

[Miss Smith]

I will just have to repeat myself on this point: depending on what the experts say, it will be at a more local level. That is what I, for one, look forward to from those experts, as, no doubt, do all those people who like facts.

The Government are not setting out detailed and prescriptive proposals. The hon. Member for Sedgefield (Phil Wilson) would no doubt like me to give a quote, but I shall not give him that pleasure this morning. Public sector work forces have a variety of pay structures, as has been mentioned. The Chancellor has therefore written to the independent pay review bodies to ask them to consider how to make public sector pay more responsive to local labour markets. They will report back with interim findings by July. That will include union evidence, to answer the question of the hon. Member for Bishop Auckland (Helen Goodman). I shall be absolutely clear about who will be included in the scope of the relevant body: it will be the NHS, excluding doctors and dentists—again, to respond to a point made by the hon. Lady—and it will include teachers, prison officers and the senior civil service. To respond to the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), it will not include the police, who, as he knows, will be subject to the Winsor review.

The Minister for the Cabinet Office will co-ordinate and assist Secretaries of State in exploring how local, market-facing pay could be introduced in civil service Departments. As to the devolved Administrations, public sector pay in devolved areas is a matter for them, except for those areas where workers are covered by a national pay review body. That said, we are keen to see local market-facing pay introduced across the UK, and we urge all devolved Administrations to consider issuing separate remits for the relevant pay review bodies within devolved areas.

The hon. Member for Carmarthen East and Dinefwr asked me about an impact assessment on how the approach taken in the Courts Service turned out. Very speedily, I can offer him a couple of points about what happened across that experience. First, staff adoption was at 97% over a year later. Secondly and more broadly, analysis conducted after the reforms showed that the majority of locations had a healthy turnover and that the Ministry of Justice was able to recruit and retain staff throughout the country. He also asked me about the Office for Budget Responsibility costs of the public sector work force. If he would let me have that question in writing, in more detail, so that I can answer him as accurately as I can, I would be happy to do so; but I must finish a couple of other points in a very short time.

Public sector pay restraint and reforms to local pay policy are a key step to supporting local economic recovery and growth. Indeed, supporting regional private sector growth has been at the heart of the Government’s growth strategy. Hon. Members may want to consider, for example, the £30 billion of investment in infrastructure projects across the UK set out in the autumn statement, enterprise zones and the regional growth fund. We need to look at the aims and the areas and communities that are dependent so far on the public sector to support them in making the transition to private sector-led growth and prosperity.

Hon. Members have rightly talked about the need for fairness. As we all know, many families face difficult prospects. That is why the Government have taken practical steps to provide support, including—as the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) will welcome—having gained more from a tax on bankers every year than the previous Government did in a single year. She will also welcome the protections for the lowest paid during the public sector pay freeze, the deferring of January’s scheduled fuel duty increase and the decisions that have lifted more than 1 million out of income tax altogether.

The Government have already taken considerable action to achieve strong, sustainable and balanced growth that is more evenly shared across the country. By moving towards local public sector pay, we can ensure that we have high-quality public services across the UK and do not crowd out private sector recovery.

The Economy

Phil Wilson Excerpts

Tuesday 6th December 2011 Commons Chamber

[Phil Wilson (Sedgefield) (Lab)]

I would like to discuss the part of the autumn statement dealing with local public sector pay and the relationship with local labour markets—in other words, regional pay. As a Member of Parliament for the north-east of England, I know that unemployment in the north-east is 11.6%—the highest in the country—the average wage is just over £19,000 a year, and the average house price is £144,000. A 25% deposit on a mortgage will cost £36,000, and to obtain a mortgage for the remaining 75% someone would need an income of £31,000 a year. A house in the rural north-east costs 8.1 times income, whereas in the urban areas of the north-east it averages 7.3 times income. Average incomes in the north-east are 12% below the national average and are the lowest in England. Given those facts, introducing a regional wage structure in the public sector is the wrong thing to do, because it is short-sighted and it belies the facts on regional pay disparities. If the Chancellor were really serious about pay, he would join me, and many of my colleagues in the north-east of England, in calling for a living wage, not a regional wage.

I do not believe that national pay bargaining in the public sector suppresses pay in the private sector. Although regional pay does exist in the way allowances are paid, for example, for people who work in London and the south-east, the main differential is not between regions, but between London and the south-east and the rest of the country. Pay disparity between the regions is about £2,000, according to Incomes Data Services, and there is very little difference in the cost of living between regions. The largest disparity is between the north-east and London, where the cost of living varies by 10%. The Office for National Statistics states that the cost of living in the remaining regions varies by between 1.5% and 2.8%, depending on the goods compared. However, the wages of commuters in the London commuter belt are higher than those of the people living and working in the commuter towns.

The ONS and IDS believe that the only distinct labour market in the UK is in London and the commuter belt area around the city. Is that not another reason for investing in transport infrastructure projects, which will shrink distances between London and the rest of the UK, rather than encouraging a rush to the bottom in pay rates between the public and private sectors, and between regions?

[Mrs Jenny Chapman (Darlington) (Lab)]

My hon. Friend is making a superb point. I do not know whether he has served on the governing body of a school or on a board of a health trust, but I can tell him that recruiting good, able, ambitious and talented people in the public sector can be a real challenge in the north-east. As someone who lives there, I do not understand why that is, but it seems to be the case. We need to be able to attract those quality people, and enable them to move around the country and pursue their careers as they need to.

[Phil Wilson]

That is absolutely right. If a regional pay structure went ahead, in whatever variety it may take, it would just exacerbate that situation. The regions would become silos, and people would not be able to move around the country.

It is also a myth that there are major variations in the cost of living around the country. The reason why the variation is less explicit outside London is because major retailers have national pricing policies, and internet shopping is having a similar effect in ensuring that the cost of living is more convergent around the UK than it would otherwise seem to be. In addition, major private sector companies—BT, British Gas, Waterstone’s, First Great Western and Santander, to name but a few—have national pay structures, although they have, for example, allowances for workers in London. When the previous Government examined this issue they came out against regional pay bargaining for the following reasons, which were quoted in a Treasury guidance note in 2003. It said:

“At the extreme, local pay in theory could mean devolved pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

That illustrates the point that has just been made by my hon. Friend the Member for Darlington (Mrs Chapman).

The wage disparities do not arise from an overactive public sector displacing private sector jobs; that cannot be so, given that 700,000 public sector jobs are to be lost in the coming years. I want to see a vibrant private sector, with skilled jobs that are well paid and full time, but to achieve that we need growth.

[Angela Smith]

Does my hon. Friend believe for a minute that the Government have thought through the complexities of moving to local pay scales, given that it will inevitably involve consultants in establishing exactly where on the new pay scales the public sector employees will belong?

[Phil Wilson]

My hon. Friend raises an important point. I do not think the Government have thought all these things through; I know they will be looking at them in more detail, but the process seems ideologically led.

One North East was a dynamo for private sector job creation in the north-east. To abolish it was the wrong decision. We need the expertise of the public sector to generate private sector jobs in the area. That is how Hitachi Rail was attracted to Newton Aycliffe in my constituency, creating hundreds of direct private sector jobs and thousands in the supply chain. Hitachi did not come to the north-east because of the public sector, but it did have the help of the public sector. I want more Hitachis coming to the north-east, bringing highly skilled jobs that will deliver good wages. That is how we shall redress wage disparities in the north-east; not by suppressing the wages of a section of the community but by raising the wages of all employees, through investment, training and skills. With that will come good wages, and I call on the Government to promote a living wage, not a regional wage, for the north-east and the rest of the UK.

There is no evidence that regional pay will rebalance the economy. Driving down wages will only exacerbate economic disparities, not resolve them. Driving down relative wage costs and taking money out of the economy is as bad for the private sector in areas such as the north-east as it is for the public sector. That is why I make a special plea, not for the public sector but for all employees in the north-east of England, whatever they do and wherever they work.

Public sector employees face a two-year pay freeze and then two years with only a 1% increase. It has been estimated that between 2010 and 2015 public sector workers will see their incomes decrease by 14%. Average pay in the north-east is just over £19,000. How low do the Government want it to be? The policy is wrong, and I believe it is ideologically led. The answer is a living wage, not a regional wage.

Northern Rock

Phil Wilson Excerpts

Monday 21st November 2011 Commons Chamber

[Mr Hoban]

My hon. Friend is absolutely right. We want to see new competitors in the market—people who can challenge the incumbents and offer a better service, better rates and better products—and that is to the advantage of consumers. That is a trend we are seeing across the banking sector as a whole, with new entrants coming into the market, and we should be encouraging it so that we have a more competitive financial services marketplace with better outcomes for consumers, whether they are business or personal.

[Phil Wilson (Sedgefield) (Lab)]

Will the Government do an impact assessment of the effect on jobs in the voluntary sector if the Northern Rock Foundation closes after 2013?

[Mr Hoban]

I recognise the importance of the Northern Rock Foundation and I think we all appreciate the excellent work it does in the north-east, but following the denationalisation of Northern Rock it needs to think about how it will continue its work and how it will work with Virgin Money and Virgin Money Giving to continue its activities across the north-east in the future.

Bank Bonuses

Phil Wilson Excerpts

Tuesday 11th January 2011 Commons Chamber

[Mr Osborne]

Two hundred and fifty thousand people or thereabouts are eligible for the 50p rate, which came into effect in April. As I have said, other taxes, too—such as employers’ national insurance—are levied on bonuses, and in the Finance Bill, which we have published in draft, we have taken specific measures, on which we will seek to legislate later this year, to deal with some of the avoidance practices in the financial sector that were allowed to proliferate under the previous Government.

[Phil Wilson (Sedgefield) (Lab)]

In October 2009 the Chancellor said that high street banks should be banned from paying bonuses above about £2,000 in cash. Is that his policy today as well?

Oral Answers to Questions

Phil Wilson Excerpts

Tuesday 21st December 2010 Commons Chamber

[Danny Alexander]

I am bound to say that that is yet another example of a saving that is necessary to tackle the terrible inheritance left by the previous Government, which Opposition Members now seem to be opposing. They also oppose every single cut, yet do not recognise that the consequence of such an approach would be to put this country back in the economic mess that they caused.

[Phil Wilson (Sedgefield) (Lab)]

7. What recent steps he has taken to reduce bonuses paid by banks to their staff.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Government have taken decisive action to tackle unacceptable bank bonuses. The Financial Services Authority has revised its remuneration code and new rules will be in place by 1 January 2011. In addition, the Government have introduced a levy that incentivises less risky banking activities, and we will continue to investigate the cost and benefits of a financial activities tax. In combination, those and other measures will ensure that remuneration is consistent with effective risk management.

[Phil Wilson]

The Minister will be aware that the Business Secretary has said that a big argument is going on in Government about the banks. He says that he wants a very tough approach but

“our Conservative friends don’t want to do that”.

Is the Business Secretary right?

[Mr Hoban]

The Government are totally united about the fact that we want banks to play their full role in the economic recovery by lending to businesses and recognising their wider social responsibilities.

Comprehensive Spending Review

Phil Wilson Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

There are details in the book we have published today, and we will set out more details in the coming days. Also, we are, of course, waiting for Andrew Dilnot’s report into social care. We have tried to address a long-established problem that we are all aware of in our constituencies: the wall that is sometimes there between the health service and the local authority. Given the challenging nature of the settlement, I was conscious that social care might be affected, which is why I found the additional £2 billion for it.

[Phil Wilson (Sedgefield) (Lab)]

The Chancellor said in his statement that he would like the country to be able to afford new rolling stock. Can he say what that means for the intercity express programme, considering both that if it does go ahead it will create hundreds of jobs in my constituency and thousands more in the north-east of England, and that no public sector money will be required until after the next election?

[Mr Osborne]

I am very aware of that project. If the hon. Gentleman will bear with me, the Secretary of State for Transport will make an announcement on it shortly.

Finance Bill

Phil Wilson Excerpts

Tuesday 6th July 2010 Commons Chamber

[Mr Byrne]

Absolutely. Jim O’Neill is a very respected economist, he is chief economist at Goldman Sachs, and his opinion was echoed by the chief economist at the British Chambers of Commerce. So this is not a narrow perspective from any one particular corner of the business community. This view is widely shared.

[Phil Wilson (Sedgefield) (Lab)]

We have to accept that the Prime Minister has kept one promise. He said that the cuts would affect the north-east of England the most, and that has been proved to be true. The Government have cancelled a new hospital, abolished One NorthEast and stopped nearly 100 Building Schools for the Future projects, which would have created many construction jobs in the private sector. Is it not a shame that the Prime Minister did not keep the other promise, which was that cuts would not affect the front line?

[Mr Byrne]

My hon. Friend is absolutely right. Like so many words that we heard during the election from those now in government, those ones turned out to be rather empty.

Perhaps we would not be quite so worried about what we have heard from the Chief Secretary this afternoon if we did not know that the risk of failure for this Budget was so great. The Office for Budget Responsibility, which is supposed to know, has said that there is just a 40% chance of the Chancellor hitting his growth forecast for next year, yet the VAT increase in the Bill will tax consumption so hard that we will be forced to rely on a history-making burst of exports and business investment. Last week we heard that just once since 1966 have we had the kind of rise in investment and exports on which the Chancellor will be banking in each of the next three years. The House would therefore be right to ask what measures exist in the Finance Bill to help. On close inspection, there appears to be no help at all for exporters, yet the Chancellor needs Britain’s exporters to grow their trade abroad by £100 billion for his plan to come true. That is the equivalent of our trade with America rising threefold, our trade with China rising by 20 times or our trade with India rising by 40 times. It is fair to say that that is not a bet that any of us would take.

--- Later in debate ---

[Helen Jones]

In a moment—I will make a little progress first.

Something interesting is happening on the Government Benches. We used to hear from the Con bit of the Con-Dem alliance simple, open hostility to the public sector and the welfare state. Now, most of them are becoming a little more sophisticated and wrapping it up a little better. The Chancellor says constantly, “The things I’m having to do are dreadful. I don’t really want to make these cuts. However, if I could cut benefits more, it wouldn’t be so bad.” It is an interesting exercise in shifting the blame. The implication is that responsibility lies not with the Government’s decisions, but with those in receipt of benefits.

[Phil Wilson]

In the March Budget, the then Chancellor offered reform of housing benefit that would have saved about £250 million a year. This Government have brought in cuts of £1.8 billion. That is not reform; it is an ideological cut in welfare, which will hit some of the poorest people in this country. That proves that these are cuts of choice—they did not have to make them to cut the deficit.

[Helen Jones]

My hon. Friend is absolutely right, and I shall talk about the effect after giving way to the hon. Gentleman.

--- Later in debate ---

[Mr Lammy]

The hon. Gentleman paints a fantasy picture of history, and takes the banks out of context. I will return to that in a few moments.

[Phil Wilson]

I agree with 100% of what my right hon. Friend is saying. Back in the 1990s, 11% of young people were out of work; in the 1980s, the figure was 12%. As a proportion of the work force, the unemployment rate was much higher than it is now, and 40% of those people had been out of work for 12 months or more. That figure too is much higher than the figure today. In my own constituency the unemployment is just over 1,000, but at the height of the recessions in the 1980s it was 5,500. The main reason for the difference between what we have experienced over the last year and what we experienced then is what the Labour Government did to ensure that ordinary people up and down the country did not suffer.

[Mr Lammy]

My hon. Friend is absolutely right. That is why Members on the Government Benches should be reminded that employment in my constituency was running at 20% in the recession of the 1980s and at 28% shortly before we cane to power in 1997, and that although my constituency now has the highest unemployment rate in London, it is currently running at 9%. I say “currently” because it will surely rise as a result of this Finance Bill. The consequences—the social consequences —of what we are debating today, and what we will vote on in a few hours’ time, will be so significant that it is hard to put words to them, but they will be real and stark.

--- Later in debate ---

[Mr Jones]

The hon. Gentleman misunderstands. No one is suggesting that we do not need to reduce the debt: the Labour Government did reduce the debt. I know that during the election the stock in-phrase was “Labour didn’t mend the roof while the sun was shining”. Well, I am sorry, but we did. We actually paid off debt. For example, the 3G licences for mobile phones raised in excess of £20 billion, which went directly to paying off debt. However, we are now in danger of doing what happened in the 1980s with the Thatcher Government: borrowing money not to invest, which we were doing, but to pay unemployment and other benefits. The Government are going to slash welfare benefits, exactly as happened in Canada, and blame the poor. It was not the poor, unemployed or disabled in my constituency who got the debt this high; it was the international bankers and the people who are now to be rewarded by the Budget proposals on corporation tax as part of this stimulus.

[Phil Wilson]

On the 3G licences, is my hon. Friend also aware that we paid back more debt then than all the Governments since 1945 put together?

[Mr Jones]

Yes, we did, and that was the responsible thing to do. My right hon. Friend the shadow Chancellor set out what our Government reductions were going to be.

On the recession, if anyone says we are out of the woods, they should look at the provisional gross domestic product figures: 0.3% growth in the first quarter of this year, and 0.4% growth in the final quarter of 2009. The new Office for Budget Responsibility thinks that the economy will grow by 1.2% in 2010, and by 2.3% in 2011. So the Budget is a great gamble. However, this is not just about what is in the Budget and the Finance Bill, which will take money out of the economy at this crucial time when we need to put money in; the Government are also gambling on the complete and utter nonsense that there are two different economies in the country—the private sector, which is good and which we look up to and say, “It’s a wonderful thing,” and the public sector, which is bad and which we boo whenever we talk about it—and that somehow we can separate the two. I shall return to that point in a minute.

On the proposed deficit reduction, the Government’s fox has been shot by their own Office for Budget Responsibility. Its independent analysis is that Labour’s deficit reduction plan would have more than achieved the target of halving the deficit over four years, from 11.1% in 2009-10 to 5% in 2013-14. The OBR also said that the Labour plan would reduce the structural deficit by nearly three quarters, from 5.2% of GDP in 2010-11 to 1.6% in 2014. The plan as outlined to halve the budget deficit within four years would have met the timetable set out at the recent G20 summit on 27 June 2010. Government Members and commentators say that the previous Government did not have a plan, but they did, and even the Government’s own Office for Budget Responsibility recognise that. That plan, however, is now being crammed into two years, which cannot be done without a cost to jobs.

--- Later in debate ---

[Mr Jones]

My right hon. Friend is right as usual: the Government’s plan has nothing to do with that, but is being used as an excuse for an ideological attack, because what they actually want is a smaller state in this country. I return to the point that the Government’s plan is about saying, “Private sector good; public sector to be sneered at, public sector workers to be denigrated and not valued,” and that if we reduce the size of the state, that will somehow lead to nirvana, at which point we can all go off into the sunset and live happily ever after. However, the Government suddenly announced yesterday that they were basically going to shelve the Building Schools for the Future programme, affecting exactly those jobs that the local construction industry—I met the Civil Engineering Contractors Association a few weeks ago—was relying on to ensure that the recovery continues. Therefore, to argue that we can somehow cut back the public sector without having any effect whatever on the private sector is complete nonsense.

We all know that in regions such as mine in the north-east, as well as those in Northern Ireland and others that have a larger public sector dependency than other areas, the effect of what is outlined in the Budget will be even worse. However, I give hon. Members this warning: we ain’t seen nothing yet, because the Finance Bill will work by salami slicing, which is a technique that the Government are using to slip the news out. The biggest crackdown will come—we all know this—with the public sector spending round in October. That is when the real cuts in both capital budgets and other investments will be made.

[Phil Wilson]

I thank my hon. Friend for giving way again, and he is absolutely right. The Government have an objective of trying to create a big society, but does he agree that if we continue down this road, what they will produce is a little Britain?

[Mr Jones]

Yes, they will, and there is something else that they will do. Interestingly, the hon. Member for Ipswich, who made an excellent maiden speech, talked about prison reform, saying things that he really meant, on an issue to which he is committed. However, he will soon be disabused of that, when he finds that the prison reforms being put through the Ministry of Justice have nothing at all to do with the penal system, and everything to do with budget restraint.

As for the other measures , the VAT increase will have a disproportionate effect on my constituents and those in regions such as mine, because it is, in part, one of the poorest communities. As for the Liberal Democrats—we saw a half-hearted attempt earlier to defend the increase in VAT—the measure will indeed affect the poorest.