Surplus Target and Corporation Tax

Rachel Reeves Excerpts

Monday 4th July 2016 Commons Chamber

[Mr Osborne]

We have to be realistic about the economic shock that the referendum result has created, which is acknowledged not just by the Bank Governor but by many independent forecasters—it is reflected in the financial markets. It will have an impact on the public finances, which will partly be cyclical, but also partly structural. In the end, a structural deficit—my hon. Friend, who is a good fiscal conservative, will know this—needs to be addressed through either reduced spending or higher taxes over time. Obviously, as a Conservative, I tend to look at the spending solution rather than the tax one, but that is what happens when there is a structural deficit, as we know to our cost in this country. Let us wait for the OBR to make its assessment in the autumn, then we can collectively decide how to proceed.

[Rachel Reeves (Leeds West) (Lab)]

The OBR says that cuts in corporation tax have so far had no discernible impact on either business investment or growth. Indeed, in the latest forecast, despite cuts to corporation tax, business investment was revised down. I urge the Chancellor to look instead at helping small businesses or investing in infrastructure rather than going ahead with further cuts in corporation tax, which so far seem to have made no difference.

[Mr Osborne]

I am all for supporting small businesses, which is why we have a package of rates relief in the Budget. I am all for making the big transport investments, which this country has, frankly, not done for a generation. That is why I support High Speed 2 and indeed High Speed 3, as well as a new runway in the south-east of England.

The OBR has revised up its economic forecast for business investment when we have introduced corporation tax cuts, so it draws a link between the two. A study on the long-term impact of our corporation tax cuts so far suggests that they have seen an increase in our long-run GDP of 1.3%, which is the equivalent of £24 billion in today’s prices.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 7th June 2016 Commons Chamber

[Mr Osborne]

My hon. Friend raises an important issue. In recent years there has been a focus on economic development in the big cities of the north, but we now want to support the counties and county towns of the north of England. In the area that she represents so well we have the new growth deal for the Preston, South Ribble and Lancashire city deal area. We are looking to devolve more economic powers to counties so that they too can see the benefits of securing economic growth. My door is always open to good, sensible proposals for investment in the counties of the north of England.

[Rachel Reeves (Leeds West) (Lab)]

The Chancellor speaks about investment in transport and in flood defences, both of which are crucial in my city of Leeds. Yet last month the Government cancelled the Leeds trolleybus scheme, and in 2011 flood defences were cancelled in Leeds, which contributed to the flooding we saw in December. Earlier this year the Government announced some money for flood defences, but it was just a fraction of what was cancelled five years ago, so I am surprised by the complacency of the hon. Member for Pudsey (Stuart Andrew), and ask the Government to invest properly in flood defences in our city.

[Mr Osborne]

The hon. Lady is being a little churlish. We committed £6 billion to investment in transport in Humberside and Yorkshire, the area that her constituency is in. Specifically on flood defences, she raised on the Floor of the House very specific schemes that she wanted me to fund. I funded those in the Budget. As she well knows, the future phases do not yet have plans or a price tag, but I have said that in principle we are committed to those as well. If she works with us we will deliver those schemes, which of course were never delivered under a Labour Government.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 19th April 2016 Commons Chamber

[Harriett Baldwin]

It is wonderful to hear during Export Week about Colt and Lewmar, and their fantastic work exporting overseas. It is a key priority of the Government to continue to encourage more firms to export. In fact, we have ambitious aims to have another 100,000 businesses exporting over the life of this Parliament.

[Rachel Reeves (Leeds West) (Lab)]

The current account deficit is at a post-war high of more than 5% of GDP, and 44% of our exports go to the European Union. It took Canada seven years to negotiate a free trade agreement with the European Union. Does the Minister agree that the last thing that exporters need, and the last thing that the one in 10 jobs that depend on our exports to the EU need, is the uncertainty that the referendum is bringing—and, indeed, that Brexit would bring—to them and to those jobs?

[Harriett Baldwin]

The last time I looked, I thought it was also Labour policy to have such a referendum, but I agree with the hon. Lady that it is very important that she and others get out the message about the value of exports and the importance for manufacturing of the UK’s membership of the single market. That is why I shall vote in the same way as her on 23 June.

Finance (No. 2) Bill

Rachel Reeves Excerpts

Monday 11th April 2016 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

In 2010, the Chancellor promised us a new growth model based on higher savings, investment and exports. However, notwithstanding what we have just heard from the hon. Member for Somerton and Frome (David Warburton), those fundamentals, which underpin the economy and are the backdrop to the Bill, are not going as well as we might have hoped. Our national savings ratio has hit an all-time low of 3.3%. In the latest figures, investment has been revised down, with a staggering £87 billion wiped off forecast business investment since last November, and public investment is falling as well. Our export performance has deteriorated further, with the gap between the Chancellor’s 2020 target for a trillion pounds-worth of exports and the OBR’s expectations now widening to £357 billion. That is before we factor in the calamity that the Government have allowed to unfold in our steel industry or the enormous risks to our economy created by putting our membership of the European Union in question. Indeed, just a few weeks after the Budget statement, we have seen even more bad news about not only steel, but the manufacturing sector in general and the worst balance of payments figures that the country has seen since the second world war, with the deficit in the fourth quarter of 2015 reaching a staggering 7%.

All that has an impact on living standards. On top of the downward revisions that we saw in November, expected earnings have been revised down in the forecasts for every single year of this Parliament. Looking at the deterioration in expected earnings since the Budget just after the general election, the OBR forecasts that the average UK worker will be £823 a year worse off by the final year of this Parliament. Following the downward revisions, the total loss over the course of this Parliament is £2,000, the impact of which will be felt most by those on low and modest incomes. Indeed, because the national living wage is linked to average earnings, somebody on the minimum wage will be £600 a year worse off than when the Government originally announced it. In less than a year, the average worker will be £2,000 worse off over the course of this Parliament and somebody on the minimum wage will be £600 a year worse off compared with what the Government originally announced.

Against that background, one might think that a Chancellor who once proclaimed that we were “all in this together” would want to use the Budget and this Finance Bill to target help towards ordinary working families and the low-paid. Instead, we have a package of measures before us that disproportionately benefit the better-off, rather than those who most need support. Let me give three examples. First, fewer than one in five taxpayers will gain from the £2 billion cut in higher rate income tax in clause 2. Those who will gain will also receive the largest benefit from the expensive and poorly targeted increase in the personal allowance in clause 3. The 4.6 million lowest-earning workers in the country will receive no benefit at all from either change. At a time when the earnings of those on middle and low incomes are being squeezed and public finances remain extremely tight, raising the threshold at which people start paying the higher rate of income tax is the wrong priority.

Secondly, the cut in capital gains tax in clause 72 will cost taxpayers more than £2.7 billion over the next five years, but directly benefit only a tiny minority. Just 130,000 individuals will share the gains, the majority being higher rate taxpayers. Around half of capital gains tax is paid by just 5,000 individuals who will therefore receive a windfall and get the bulk of the advantage, so the benefits of this tax break will be pocketed by a relatively fortunate few. Again, that is not the right priority when the living standards of ordinary people are being squeezed and when our public finances are so stretched.

The Chancellor would no doubt protest that that is a price worth paying for the entrepreneurial energy that the capital gains tax cut will unleash, but the official documents reveal that the OBR has made no upward revisions to its forecasts for investment, productivity or growth as a result of the measure, which will cost £2.7 billion. Indeed, the most likely impact of the move will be to increase the incentive to avoid tax by converting income to capital gains. Perhaps the Chancellor has been taking advice from the Prime Minister, who seems to have enjoyed the benefit of some careful tax planning. But, again, I would argue that with squeezed family finances and tight public finances, this is neither fair nor fiscally responsible.

Thirdly, as part of his Budget the Chancellor has chosen to increase the amount any individual can contribute to a tax-free savings account to £20,000 a year, as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) mentioned. I welcome action to make it easier for ordinary workers and families to save, but we have to ask whether this approach should be the priority when most of our constituents are lucky to earn £20,000 a year and have anything left to save at all. In my constituency, average earnings are just under £20,000 a year, and many people would struggle to put anything aside, let alone take advantage of a £20,000 individual savings account limit. In the latest year for which detailed data are available, the average ISA subscription was less than £4,000 in the year. Fewer than one in 10 people who contributed to an ISA were able to save the maximum amount of just over £15,000, with a disproportionate number of those who did so having incomes above £150,000 a year. The trends of recent years suggest that as the Government have focused on raising the annual limit for ISAs, the total amount of cash put into ISAs has increased sharply even as the total number of people contributing to an ISA has fallen. In other words, this is moving ISAs away from their original purpose as a platform to support broad-based saving and investment, and increasing their use as a way to minimise tax liabilities for those with large amounts of cash to move around. That is having the wrong effects and the wrong people are benefiting. I support ISAs and tax-free savings, but only if they are there to support those people who need to save. What we are seeing is a falling savings ratio, with the most wealthy people being incentivised to save. We need to help those people on more modest incomes to put something aside for their future.

This Finance Bill, like those before it under this Chancellor, contains a long list of clauses ostensibly aimed at reducing tax evasion and avoidance. Anything that genuinely advances that end is to be welcomed, but we will judge the Government’s achievements not on the number of clauses in their Bills, but on the real progress made towards closing the tax gap and ensuring that everyone pays their share. I urge the Government to do more, by supporting, not blocking, measures in the European Parliament that strive to meet that objective.

The truth is that HMRC’s own figures show that the tax gap fell by £4 billion over the last five years of a Labour Government but has risen by £1 billion under the current Chancellor. The consequences of this Government’s refusal to take the necessary action on UK Crown dependencies—[Interruption.] I am happy to take an intervention instead of having the Minister muttering from a sedentary position.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

I wonder whether the hon. Lady would like to comment on the percentage tax gap.

[Rachel Reeves]

If the Minister is so concerned about the tax gap, why did his Tory MEPs block measures in the European Parliament to crack down on tax avoidance and why did the Prime Minister write to Herman Van Rompuy in 2013 asking for trusts to be excluded. As I say, instead of looking at the number of clauses in a Bill, we should judge the Government by their record, by their actions and by what is happening to the tax gap. Under Labour the tax gap narrowed but under the Tories it is widening. They need to make much more effort to ensure that people at the top and big corporations pay their fair share of tax, but that is not happening under a Conservative Administration.

I hope that I have demonstrated that this Finance Bill prioritises tax breaks for the wealthy at the same time as pulling vital support from the vulnerable and disadvantaged. The shadow Chief Secretary to the Treasury cited the Resolution Foundation. It has calculated that the tax and benefit measures already taken by this Chancellor since the election will cut the incomes of the poorest 30% by £565 a year, while increasing those of the richest 30% by £280 a year—and that is before we factor in the impact of any further cuts to social security needed to meet the Government’s welfare cap and fill the multi-billion-pound fiscal hole following their U-turn over personal independence payments.

During a sitting of the Treasury Committee I pressed the Chancellor on all of this, particularly the changes to disability benefits. All he would say was that he had “no plans” for further raids on the fragile finances of disabled people, low-paid workers or children living in poverty, but that gives very little reassurance to those who rely on social security because they are sick or disabled and cannot work, or because they are in low-paid work and struggle to make ends meet; nor does it reassure families bringing up children in poverty that the Government will not once again hit their family finances.

Perhaps even more problematic than the measures in the Bill are the measures that are missing from it. The House will remember that this was supposed to be the Finance Bill that reformed our unfair system of pensions tax relief. We spend £34 billion on pensions tax relief and 14% of that benefit goes to people earning more than £150,000 a year, even though they represent a tiny proportion of all taxpayers. Just 10% of the benefit from the relief goes to those in the bottom half of the income distribution. That is why I argued for a 33% flat rate of pensions tax relief, which would be fiscally neutral but fairer to families on ordinary incomes and those who are trying hard to put something aside for the future. It would also give a strong incentive to save by, in effect, providing a simple two-for-one offer: for every £2 people put into a pension, the Government would add another £1. At a time when wealth inequalities are widening, our savings rate is plummeting and the costs of an ageing society are increasing, that measure would provide a powerful incentive to save for millions more people and definitely help more people than a £20,000 ISA limit.

The Bill was also an opportunity for the Government to admit they had made a mistake and to reverse the Chancellor’s expensive and poorly targeted cuts to inheritance tax, due to be phased in from next year. The Treasury’s own leaked analysis confirms that the policy will

“most likely benefit high income and wealthier households”

concentrated in London and the south-east of England. It also states that

“there are not strong economic arguments”

for the cut, which will

“push up house prices and possibly rents”

and

“make it more difficult for younger households to buy a house.”

Yet that is a priority of this Government. Meanwhile, the overall cost is set to rise to almost £1 billion a year as the policy is introduced. I believe that the money could be much better used to help ordinary families who struggle to stay in work when their children are young by, for example, creating a universal childcare entitlement for children aged two. That would be a more prudent use of funds when family finances are stretched and so are our public finances.

I remember being shadow Chief Secretary to the Treasury in 2012, when we had what we dubbed the “omnishambles Budget”. This Budget has unravelled even faster than the 2012 Budget, with the flagship measure—changes to disability benefits—dropped and the changes to pensions tax relief dropped before they were even announced. The flagship measure in the 2012 Budget—the cut in the top rate of tax from 50p to 45p —stayed, but the flagship measure in this year’s Budget was dropped.

I believe that the Chancellor wanted to reform pensions tax relief, but could not do so because Tory MPs protested too loudly. Instead, at the last minute he decided to raid the disability budget, but then—after that was announced—recognised that it did not really fit with his rhetoric of, “We’re all in it together.” That is why the Budget has unravelled so quickly, but most important—well, not the most important—it is why the political prospects of the Chancellor have unravelled so quickly as well. The highest price for this Budget will be paid by ordinary taxpayers, working families and future generations. That is why I and my colleagues will vote against the Bill this evening. It represents the wrong priorities for our country.

--- Later in debate ---

[Caroline Flint (Don Valley) (Lab)]

I have no doubt that the support of the hon. Member for Macclesfield (David Rutley) for greater productivity and skills is heartfelt, but sadly, as my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has outlined, this Finance Bill falls far short of meeting the needs of people on low or even average incomes in this country and helping them to do better for themselves and their families.

It is interesting that the Second Reading of the Finance Bill, which should be the centrepiece of today’s discussions, has been knocked off track somewhat by the disclosures in the Panama papers. Given that we have a major Finance Bill before the House, it is absolutely right that we consider whether it really addresses the central issue of fair taxation and how it can clamp down on tax avoidance and evasion.

Recent events have exposed parallel worlds. In the world of most of Britain’s 29.7 million taxpayers, taxes are deducted automatically. January was the month when 10 million everyday citizens submitted their tax returns. The first week of April is when most of the 22.7 million people who save in an ISA were looking at how they could top it up. That is the world of most of our citizens, the people who work, pay their taxes and follow the rules. They meet the deadlines. They are the people who put into the system and occasionally need to take out of it.

However, there is another world, a shadow world occupied by a group of people, small in number but big in influence, who share another set of characteristics. These are the people who play by a different set of rules. They are wealthy but, not satisfied with just being wealthy, they also want to be tax-free. Being rich is not rich enough. They live across borders, have homes in several countries and bank accounts in others, with businesses nominally located in low or no-tax regimes. That is not because they are busy or simply because they are successful. There is one overriding purpose: to maximise the income sheltered and obscured from tax authorities.

Tax avoidance is not illegal, but the Prime Minister himself has criticised aggressive tax avoidance schemes that subvert the intention of domestic tax laws. To muddy the waters over the past few days, some have suggested that ISAs and helping one’s children are forms of tax avoidance. They are not. To my mind, avoidance is when someone deliberately does something that Parliament never intended. Governments have legislated against particular means of avoidance, attempting to close a specific loophole each time. That kind of patchwork policy making has been described as like plugging holes in a colander, or playing whack-a-mole. The point is that, given the complexity of our tax system, tackling tax avoidance measure by measure is very hard to get right.

The disclosure of tax avoidance schemes regulations introduced by the previous Labour Government in 2004 were key to helping HMRC uncover new information about tax avoidance practices and getting hold of that information earlier. As a result, HMRC learned about schemes that it had never heard of, or ever imagined, and then it could act quickly to shut them down. Those were the first steps in a campaign for transparency. The coalition Government’s co-operation with the OECD’s base erosion and profit shifting measures was to be welcomed, as was their introduction of accelerated payment notices, which I believe have successfully recovered more than £2 billion in unpaid taxes.

This Bill includes a range of measures, including an updated general anti-avoidance rule, the publication of statements of tax strategy and tax planning, and a new asset-based penalty system for large-scale tax evasion, but it is as yet unclear what effect, if any, each measure will have. Even the most intense challenge to tax avoidance by the Government must compete with the ingenuity of legal and accounting experts that the very wealthy and the corporate giants have access to, and the global nature of their enterprises. That is why I want Parliament to tackle one of the strongest weapons in the tax avoider’s armoury: secrecy. If there is one thing that the Panama papers have shown us, it is the urgent need for more transparency.

It is tempting to focus on MPs’ tax returns this week—for the record, my taxable income for 2014-15 was £58,724, on which I paid £12,965.80 in tax—but the income of the largest multinational in one week is more than the combined annual incomes of every Member of Parliament. That is not surprising, and some may say thank goodness, but I want to make sure that, in the midst of all the comments about tax, we do not let multinational companies off the hook.

When Google agreed to pay HMRC £130 million in back taxes, the Chancellor claimed victory. My cross-party colleagues on the Public Accounts Committee and I questioned Google and HMRC. Yet even after a long session, not only was Google’s Europe, middle east and Africa president, Matt Brittin, unclear about his salary, but we remained unclear whether the £130 million represented a good deal. On top of that, I discovered that the Government’s diverted profits tax—the so-called Google tax—does not in fact apply to Google. It is still not certain what revenue the Government hope to gain from this measure. Even if Government estimates of £360 million a year are forthcoming, that is but a drop in the ocean when one begins to look at the operation of these enterprises.

I therefore decided to introduce a ten-minute rule Bill —the Multinational Enterprises (Financial Transparency) Bill. Its purpose is to require large multinational enterprises, which, as of January this year, must provide HMRC with their country-by-country reporting information, to include the same information in their annual returns to Companies House.

[Rachel Reeves]

Will my right hon. Friend give way?

[Caroline Flint]

I will give way to my right hon. Friend—sorry, my hon. Friend.

[Rachel Reeves]

Does my right hon. Friend agree that it is not only taxpayers who lose out when multinationals do not pay their fair share of tax? The other big losers are small businesses, which have to pay tax. This is therefore not a level playing field, because they pay taxes while some of these big multinationals get away with paying nothing or very little.

[Caroline Flint]

My hon. Friend, who should be right honourable, is absolutely right. This proposal is a pro-business measure, because many small and medium-sized enterprises in the UK and around the world have no place to hide when it comes to where they pay their tax and how much tax they pay. Putting information in the public domain would help.

In March, I wrote to the Chancellor about my Bill, urging the Government to support it or to include measures in the Finance Bill. After all, the Chancellor himself told a meeting of European Finance Ministers that he was in favour of public country-by-country reporting, and he tweeted about it afterwards—so I suppose it must be happening. I have not had a reply yet, but I wait in anticipation.

One Treasury Minister—I am not sure whether it was the Exchequer Secretary, who is on the Front Bench today—has since suggested that we could not possibly take such a step unilaterally, for fear that we would be disadvantaged by comparison with our European colleagues. Well, I say that it is time we stepped up. The British people are sick of hearing story after story about big businesses not paying their taxes. To be honest, in the digital age of today and the future, privacy of the kind that these companies have enjoyed will not last. We need Governments who lead on public transparency, instead of relying on exposures caused by whistleblowing or technical mishaps.

To those who argue that greater transparency would disadvantage us internationally, I simply suggest that they look at the settlements that France and Italy are pursuing with Google. Both Governments look set to recover a greater sum in unpaid taxes than we were able to, despite their having a much smaller share of Google’s business than we do.

I also challenge the argument that public country-by-country reporting would damage businesses. The information I propose should be placed in the public domain is information that businesses are required to give HMRC—it is not commercially sensitive. Publication is a straightforward way to persuade companies not only to come clean and to explain their tax planning, but to restore their tarnished reputations. I believe it would deter them from using tax havens and shell companies.

Publication would also send a strong signal to developing countries, which are often short-changed by corporates that have huge undertakings in those countries but that pay little or no tax to support their developing economies. Charities say that developing countries lose more potential revenue each year because of corporate tax dodging than the amount given annually in overseas aid by all richer countries. They calculate that developing countries’ revenue losses are two to five times higher than those of developed countries such as the UK. This simple measure could profoundly help developing countries to prosper and be more self-sufficient.

Aid is vital for poorer nations, but just as important as a hand down is a hand up, and that will not happen unless we force these companies to come clean. As Christian Aid has illustrated, the Democratic Republic of the Congo was deprived of $1.35 billion—twice its health and education budgets combined—owing to the sale of mining contracts to five anonymous Virgin Islands companies. How can a country such as the DRC ever be self-sustaining if it is deprived of vital corporate taxes in that way?

Budget Resolutions and Economic Situation

Rachel Reeves Excerpts

Tuesday 22nd March 2016 Commons Chamber

[Mr Osborne]

I will tell you what is unfair: to saddle the next generation with debts you have no way of paying off. That is what the right hon. Lady did. [Interruption.] That is what she did. I will come on specifically to disability benefits, but let me tell her about fairness and what we have done over the last six years. We have taken action that means 500,000 fewer children are growing up in workless households than when she was at the Treasury, 1 million fewer people are on out-of-work benefits and over 2 million more people are in work than when we came to office. That is the social justice record we on this side of the House are proud of.

I am also proud that the work continues, and in this Budget we are taking further steps to build a stronger society. There is money and reform to improve our nation’s schools. There is action to reduce sugar intake and give our children better healthcare. There is support for the savings of low-income families. There is more help and housing for homeless people. There are personal allowance increases that will lift another 1 million of the low-paid out of income tax altogether, and there is an increased minimum wage ahead of the introduction of the first ever national living wage in just two weeks’ time. Those are all in the Budget we will debate today—all the actions of a compassionate, one nation Conservative Government determined to deliver both social justice and economic security.

[Rachel Reeves (Leeds West) (Lab)]

The new Secretary of State for Work and Pensions said yesterday, in his first statement, that the Government would not be making any further cuts to welfare during this Parliament, but later on he said that there were “no plans” to make further cuts to welfare during this Parliament. Will the Chancellor now confirm, for the sake of disabled people and others, that there will be no further cuts to the welfare budget in this Parliament?

[Mr Osborne]

Yesterday, my right hon. Friend the Secretary of State gave exactly the Government’s position, which is that,

“we have no further plans to make welfare savings beyond the very substantial savings legislated for by Parliament two weeks ago, which we will…now focus on implementing.”—[Official Report, 21 March 2016; Vol. 607, c. 1268.]

I will now address the specific issue of welfare savings and disability, but I should have thought that the hon. Lady, when she got to her feet, might have thanked the Government for delivering the flood defence schemes that she asked for for her city, and which were in the Budget statement a week ago.

Let me turn to the disability benefits. We are proud that this Government are providing more support to the most disabled people. It was very clear that while the reforms proposed to personal independence payments two weeks ago drew on the work of an independent review, they did not command support. We have listened, and they will not go ahead. Even if they had, this Government are spending more on disabled people than the previous Labour Government ever did.

People have asked what this means for future support for disabled people, for our welfare cap and for the numbers in the Budget. Let me directly address all three points.

--- Later in debate ---

[Rachel Reeves (Leeds West) (Lab)]

The Budget was a story of missed targets for the Chancellor and missed opportunities for our country and, like the Budget of 2012, it is rapidly turning into a total mess. I am pleased to see some of the U-turns, but much more is needed.

I associate myself with the remarks of my hon. Friend the Member for Hartlepool (Mr Wright), the Chair of the Business, Innovation and Skills Committee. He spoke powerfully about the importance of rebalancing our economy. That is greatly needed, especially after some of the numbers we saw in the Budget last week. As a result of the lower productivity, the lower exports and the other things my hon. Friend spoke about, economic growth has been revised down for every single year of this Parliament. A staggering £71 billion has been knocked off our tax revenues. As a result, the Government are now set to borrow an extra £38 billion over the next five years. That is why, after breaking his promise to clear the deficit in the last Parliament, the Chancellor has now broken his pledge to bring the debt down as a share of GDP in this Parliament as well.

[Mr Stewart Jackson (Peterborough) (Con)]

Would the hon. Lady’s argument not have a lot more weight and credibility had her party—as she well knows because of her position on the Front Bench—not opposed every single one of the £83 billion-worth of welfare cuts that had to be made in the wake of the 2010 fiscal inheritance?

[Rachel Reeves]

I wonder whether the hon. Gentleman still thinks we should go ahead with the cuts to personal independence payments. It certainly sounds like it from those remarks.

Let me deal with the specific issues surrounding personal independence payments and the impact that this Government have had on disabled people. While the fiasco is unfolding around us, let us remember the broader points. This is a Government—the Chancellor, the Prime Minister, the former Secretary of State for Work and Pensions and the current Secretary of State for Work and Pensions—who forced through the bedroom tax, affecting 500,000 people, the majority of them disabled, by about £700 a year. This is the Government who forced through the closure of the independent living fund. This is the Government who forced through cuts to employment and support allowance only last summer, affecting 500,000 people and worth about £30 a week or £1,500 a year. The U-turn on personal independence payments, although welcome, deals with only a fraction of the damage and the pain that the Government have caused to disabled people in all our constituencies.

Let us be clear what this U-turn means. The new Secretary of State for Work and Pensions came to the Chamber yesterday and said that the Government are not going back to the welfare bill and to disabled people for further cuts. But in the course of yesterday’s statement, that was watered down a little. The Government now have “no plans” to come back to the welfare budget and disability benefits. That is reminiscent of when they had no plans to increase VAT and all the other things they had no plans to do, until they did them and until they hurt the people who least need to be hurt.

When the Chief Secretary winds up the debate this evening, I would like to hear whether there are no plans, or whether the Government can guarantee that there will be no further cuts to the welfare budget or to the benefits of disabled people. We know that there is a black hole of £4.4 billion in the public finances. If it is not the wealthy and not disabled people, who is going to pay the price? Are there going to be further cuts to education, health, defence and our police? Will there be further increases in taxes—on VAT and taxes for ordinary working people? Something has to give and we need some answers about the black hole in the Budget that we are voting on, although we do not know what it means. What does it mean for all those different groups of people?

As the Chair of the Office for Budget Responsibility told us at the Treasury Committee meeting this morning, the issue is not just that there is a £4.4 billion black hole in the social security budget, but that the Government have failed to meet their welfare cap. They are going to fail in every year of this Parliament, by a staggering £20 billion—£20 billion more on social security spending in this Parliament than the Government set out, a further black hole in their public finances. Why did they get into this mess in the first place? It is because they wanted to cut taxes for the wealthiest in society. They wanted to cut capital gains tax, increase the threshold before people started paying the 40p rate of tax, and increase the ISA limit from £15,000 to £20,000 so that we can all save the full £20,000 a year tax free. That is great for those who have the money, but most of our constituents are lucky to earn £20,000 a year, let alone put it away in savings. That is why the Government raided the social security budget yet again to give tax cuts to their friends, the wealthiest and the most privileged in our society.

Last week’s Budget could have been different. For example, the Government could have put more money into infrastructure investment. In my constituency, we are paying a heavy price for the floods on 26 December. The Chancellor said earlier that I should have welcomed the money for flood defences, but in 2011 the Government cancelled a flood defence scheme in Leeds worth £135 million. Last week, they announced £35 million for Leeds. Well, I am sorry for not thanking the Chancellor, but an offer of £35 million rather than £135 million is not really worth the thanks, and the businesses in my constituency will pay a heavy price if the rains come again.

[Rachael Maskell (York Central) (Lab/Co-op)]

I was with the Environment Agency just last night, and it told me it will not have sufficient funds to put in place measures—particularly catchment management measures —to prevent future flooding.

[Rachel Reeves]

Last week, the Government announced £150 million for York, Calder Valley, Leeds and Cumbria. However, as I said, the scheme that was cancelled in Leeds was worth £135 million, and that £150 million is for flood defences, flood resilience and flood maintenance. Yet again, the Government are short-changing people who need them to step up to the mark, as our volunteers in York and Leeds and across the north of England did when the rains fell, the rivers rose and buildings—houses and businesses—were flooded.

Last week’s Budget could have been different. It could have been a different Budget for disabled people. It could have been a Budget that helped ordinary working people and the most vulnerable in our society. It could have been a Budget that put money into the northern powerhouse and the infrastructure that we need. However, it was a different Budget, because this Government have different priorities. That is why we need a Labour Government on the side of ordinary working people and the most vulnerable in our society.

--- Later in debate ---

[Rachel Reeves]

Many Labour Members have asked about the £4.4 billion black hole. Will the Chief Secretary to the Treasury please confirm whether that £4.4 billion will be plugged by further cuts to welfare, tax increases, spending cuts or more borrowing? It has to be one. Which is it?

[Greg Hands]

It is always good to hear from the shadow shadow Treasury team. I can tell the hon. Lady that more will be outlined in the course of this year in the autumn statement. However, we remain on course—[Interruption.]

Budget Changes

Rachel Reeves Excerpts

Monday 21st March 2016 Commons Chamber

[Mr Gauke]

My hon. Friend has a point. We have had assurances about not playing politics once or twice before from the shadow Chancellor. I am not sure he has always delivered on that.

[Rachel Reeves (Leeds West) (Lab)]

Last week’s Budget makes the 2012 omnishambles Budget look like a model of good policy making. Can the Financial Secretary confirm that the Red Book is still the basis for the Budget and, if it is, that the £4.4 billion cut to disability benefits still stands?

[Mr Gauke]

What is very clear from the plans that we have set out is that by the end of this Parliament we are on course to deliver a budget surplus that would have never happened if we had followed Labour’s plans.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 1st March 2016 Commons Chamber

[Greg Hands]

I thank my hon. Friend for his support for our budget reduction efforts. I have had no such discussions so far, nor any submissions from those on the Opposition Front Bench. I have, however, received a submission from Ed Balls’s former head of policy, Karim Palant, who said of the shadow Chancellor’s changing position on the charter:

“This kind of chaos less than a month into the job is the kind of blow even significant political figures struggle to recover from.”

[Rachel Reeves (Leeds West) (Lab)]

I agree that we need to reduce the debt and the deficit, but with interest rates at record lows and the International Monetary Fund forecasting that public and private investment will fall from 30th to 31st in the OECD league table, should we not be taking advantage of low interest rates to invest in our creaking infrastructure, airport capacity, road and rail, and flood defences?

[Greg Hands]

I welcome the hon. Lady’s support for deficit reduction. It is good to have her back. I must remind her, however, that in the last Parliament she voted against virtually every single deficit reduction measure the Government took. We have a big programme of infrastructure investment worth £100 billion over the course of this Parliament, which includes transport infrastructure and other measures that will help her constituents and people across the country.

Tax Avoidance and Multinational Companies

Rachel Reeves Excerpts

Wednesday 3rd February 2016 Commons Chamber

[John McDonnell]

Of course; I have welcomed that. I have just been saying that I have supported the Chancellor on each piece of legislation that he has introduced to tackle tax avoidance and tax evasion. This deal flies in the face of everything the hon. Gentleman and I have been supporting in the Chamber.

[Rachel Reeves (Leeds West) (Lab)]

Last year Google funnelled £8 billion-worth of royalty payments to Bermuda. Does my hon. Friend believe that the British Government should be doing much more to crack down on tax havens, particularly those that are British overseas territories?

[John McDonnell]

I will address the Bermuda question, so if my hon. Friend waits a few minutes she will hear just how shocking the situation really is.

The Chancellor appears to be missing an opportunity in the EU negotiations to secure a robust international agreement to tackle tax avoidance and tax evasion, which Members across the House have been calling for.

--- Later in debate ---

[Mr Gauke]

The point I am making is that the shadow Chancellor goes around quoting numbers based on profits from sales. To be fair, he went through the methodology carefully in the House today, but that methodology appears to be based on a complete misunderstanding of how the tax system works.

[Rachel Reeves]

I do not misunderstand how the corporation tax system is applied, but without information from HMRC, and without publication of the deal, it is difficult to know exactly how much tax Google should be paying. That is why we are seeking answers. Also, there have been $8 billion of royalty payments to Bermuda. Does the hon. Gentleman really think that that is where the economic activity is and where the value is being added?

[Mr Gauke]

I will deal directly with the issue of transparency in a moment.

On the issue of how our international tax system works, I have explained that it is based on economic activity. However, I would be the first to say that that international tax system needs to be brought into the modern world. That is the very reason why the UK has led the way on the base erosion and profit-shifting process. We should also be aware that there are particular issues with the US tax system, which is failing to tax intellectual property developed in the US in the way that it should.

I gave the example of video games companies. However, I recognise that there are many cases that are much more complex, and where it is not so easy to identify where the economic activity takes place. There is an issue about where multinational companies allocate their profits and where they identify economic activity as taking place. There is a need to address that, which is why we need tax rules that genuinely reflect where economic activity takes place, to ensure that profits are aligned with it. However, that is a very different matter from making big claims about profits from sales and saying that those sales profits have to be taxed where the sales take place. That is the misunderstanding I wish to address.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 19th January 2016 Commons Chamber

[Mr Osborne]

I think that it will help to promote home ownership, because it will mean that there is a more level playing field between an owner-occupier who wants to buy a house, a first-time buying family and a buy-to-let landlord. There is nothing wrong with people investing in property, but there should be a level playing field so that we reverse the decline in home ownership in our country.

[Rachel Reeves (Leeds West) (Lab)]

A long-term economic plan means supporting small businesses across the country. On 26 December, 250 businesses in my constituency that employ 2,500 people were inundated by floodwater. Will the Chancellor take this opportunity to commit to a full flood defence scheme in Leeds so that this sort of disaster cannot happen to businesses in my constituency again?

[Mr Osborne]

I certainly commit to looking personally at what can be done to improve flood defences in Leeds. The Environment Agency and the Government are conducting a review after what was the highest level of rainfall in Yorkshire in modern history. Of course, having committed the additional £2 billion to flood investments, we are able to afford these things. We would not be able to afford any of this sort of thing if we had wrecked the economy like the last Government did.

National Minimum Wage

Rachel Reeves Excerpts

Wednesday 15th January 2014 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House celebrates the 15th anniversary of the introduction of the National Minimum Wage, which falls this year, and the contribution it has made to making work pay, boosting living standards and tackling in-work poverty; notes that, before the National Minimum Wage was established, poverty pay was widespread and that the Conservative Party and many Liberal Democrat hon. Members opposed its introduction; further notes that families are on average £1,600 worse off a year and that the National Minimum Wage is now worth less in real terms than in May 2010; further notes that the Government has not backed up its promise to name and shame firms not paying the minimum wage; calls on the Government to strengthen enforcement of the National Minimum Wage, including by increasing fines for non-payment of the National Minimum Wage and giving local authorities enforcement powers; and further calls on the Government to encourage employers to pay a living wage and take action to restore the value of the National Minimum Wage so that the UK can earn its way out of the cost of living crisis and to help control the cost of social security.

For me, the proudest achievement of the previous Labour Government was the introduction of the national minimum wage. It was important because, as we know, the best way out of poverty is work and because taxpayers should not have to pick up the bill of subsidising bad employers. Making work pay is also vital to getting the social security budget under control and we will not allow the Government to let the national minimum wage wither on the vine.

Fifteen years ago, on 1 April 1999, the national minimum wage took effect. We should and do celebrate the difference it has made to millions of people. We have also called this debate today, at a time of difficulty for so many low-paid workers and with low pay a growing problem across our country, to call on the Government to take action to strengthen the minimum wage, crack down on rogue employers and restore the value that the minimum wage has lost over the past three years. We call on them to do more to build a stronger economy that enables people to earn their way out of the cost of living crisis.

[Ms Karen Buck (Westminster North) (Lab)]

Social care workers do one of the most important jobs in our society. Does my hon. Friend share my concern that in my borough, Westminster, and, I am sure, in others, social care workers are not even guaranteed the minimum wage as the travelling time between appointments is not counted for the purpose of payment?

[Rachel Reeves]

An investigation by the Low Pay Unit looked at pay rates before the national minimum wage was introduced and back then one worker in a residential care home was paid just £1.66 an hour. I agree that today, too, people working in that sector are too often exploited and that their employers get round the legislation.

The Low Pay Unit considered pay before 1997 in a range of industries. I mentioned residential care but it also came up with other examples, such as a factory worker who was earning just £1.22 an hour in 1997 and a person working in a chip shop in Birmingham who was earning just 80p an hour. That is sheer exploitation. It is poverty pay and it was taxpayers who picked up the bill.

Let us also remember what Government Members said back then. The right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), now Secretary of State for Work and Pensions, said in 1997 that a minimum wage would

“negatively affect, not hundreds of thousands but millions of people.”—[Official Report, 4 July 1997; Vol. 297, c. 526.]

The right hon. Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, said back then that a minimum wage would have to be

“so low as to be utterly irrelevant”

otherwise

“it would price people out of work.”—[Official Report, 17 March 1997; Vol. 292, c. 617.]

The right hon. Member for Sevenoaks (Michael Fallon), now the Minister of State responsible for business and enterprise, said that a minimum wage

“will add costs to British business”.—[Official Report, 11 July 1997; Vol. 297, c. 1240.]

And the right hon. Member for Witney (Mr Cameron), now Prime Minister and then a parliamentary candidate in Stafford, darkly predicted in 1997 that a minimum wage would lead to a rise in unemployment.

[Mark Tami (Alyn and Deeside) (Lab)]

Conservative Members are very keen on calling for us to apologise for things. Does my hon. Friend think that it is time for them to apologise for such comments?

[Rachel Reeves]

It is not just the Tories who should apologise; the Government’s junior coalition partners should apologise, too, because they were worried back then as well about the impact of the minimum wage. In 1994, their then leader attacked Labour’s

“umbilical attachment to a national, high-rate minimum wage”

and said that

“a national minimum would…force many on to the dole”.

The Liberal Democrats went into the 1997 general election with a manifesto commitment not to a national minimum wage but to a

“regionally variable, minimum hourly rate.”

Let us be grateful that they did not get their way. Despite the then Opposition fighting the legislation tooth and nail, line by line, clause by clause, using every trick in the book to slow, frustrate and obstruct its progress, the national minimum wage became law.

[Caroline Dinenage (Gosport) (Con)]

I am grateful to the hon. Lady for her fascinating history lesson. I wonder whether her bit of paper also says that 500,000 people lost their jobs under the previous Labour Government and whether she agrees that the announcement made this morning demonstrates the Government’s absolute commitment to ensuring that no employer will be able to exploit their employees by paying unfair wages.

[Rachel Reeves]

Two million jobs were created under the last Labour Government and employment reached a record high, so I am not sure where the hon. Lady gets her statistics from.

I have quoted the former leader of the Liberal Democrats but, back then, where was the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable)? He was nowhere to be seen in the debates. He was nowhere to be seen on the voting record. On Second Reading and Third Reading, he failed to vote. Apparently, he abstained because he had reservations about a minimum wage. Perhaps he will stand up today to profess his concern for the plight of the low-paid. I am happy to take an intervention from the right hon. Gentleman if he wants to make one.

[Ian Mearns (Gateshead) (Lab)]

Although the Secretary of State for Business, Innovation and Skills had reservations about the minimum wage, many of my neighbours who worked in the security industry on 90p or £1 an hour back then are eternally grateful for the Labour Government’s action in introducing the minimum wage. It made a massive difference to their lifestyle.

[Rachel Reeves]

I thank my hon. Friend for that intervention, which reminds me of a story that my predecessor as MP for Leeds West told me. He saw a job advert in our constituency for a security guard back in the mid-1990s that said, “Pay, 90p an hour. Uniform provided. Bring your own dog.” Those were the sort of jobs that existed back then, but members of this Government opposed the national minimum wage legislation. I look forward to hearing what the Secretary of State for Business, Innovation and Skills has to say later, but people will be entitled to ask him where he was when we abolished the scandal of jobs paying less than £1 an hour and when British workers won the right to be paid a decent minimum wage.

[Grahame M. Morris (Easington) (Lab)]

Notwithstanding the Secretary of State’s reservations about the minimum wage, what does my hon. Friend think about the reservations of ordinary working people about the Government’s plan to give 100% bonuses to bankers at the Royal Bank of Scotland? Will that be well received?

[Rachel Reeves]

Many people earning £6.31 an hour will be shocked and outraged to find out that bankers this year will get bonuses worth more than they earn, but they will be even more shocked to find out that they are the ones who are paying for those bonuses.

[Alex Cunningham (Stockton North) (Lab)]

I am suspicious about a tomato company that is expanding in my constituency. It appears to be replacing Stockton workers with people from overseas and paying them the minimum wage. I am told that those foreign workers are charged accommodation costs, so reducing the value of that wage. The company will not answer my letters. Does my hon. Friend understand my suspicions?

[Rachel Reeves]

I will come to that point shortly because the number of firms that are getting out of paying the minimum wage is incredibly worrying. We suggest increasing the fine to £50,000 for not paying the minimum wage, but there is no point in having such a fine if the legislation is not enforced.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Today’s Glasgow Herald reports that the fine will go up to £20,000 from where it is today. Surely, that is not nearly enough, given that hundreds of thousands of people are not even paid the very minimum wage of £6.31 an hour.

[Rachel Reeves]

At the Labour party conference, my right hon. Friend the Leader of the Opposition called for the fine to be increased to £50,000, and I support that. It is also important that companies that get out of paying the minimum wage are prosecuted, and we are not seeing that under this Government.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

With regard to the advert about the security guard and the dog, I remind my hon. Friend that the RSPCA refused to allow the dog to work, yet the security guard had to do so.

My hon. Friend is running through a list of the abstentions in the vote on the minimum wage. Please do not leave out the separatists in Scotland, who I think were washing their hair that night.

[Rachel Reeves]

I thank my hon. Friend for drawing the attention of the House to the voting record of other Members of Parliament on that night.

Thanks to Labour Members of Parliament and a Labour Government, for the first time in history, in England, Scotland, Wales and Northern Ireland, British workers had a legal floor below which their hourly pay could not fall. Slowly but surely during the following years the rate rose. It was attacked every step of the way by many Government Members and, in 2003, when the Labour Government announced a 16% increase in the minimum wage over two years, the right hon. Member for Twickenham attacked the policy directly, saying that it would set a dangerous precedent.

The result of the minimum wage was to boost the wages of nearly 2 million low- paid workers, two thirds of whom were women. It helped to lift 1 million children out of poverty and every authoritative economic study concluded that it brought no negative employment effects, despite the warnings of Government Members. No wonder that a survey of academic policy experts conducted by the Institute for Government judged the national minimum wage to be the greatest policy success of the past 30 years. It is now a policy supported by the CBI and the TUC, whose nominees work together on the Low Pay Commission. It is seen by the British people as a vital British institution, underpinning basic rights and decency in the way our economy works.

[Mr David Hanson (Delyn) (Lab)]

rose—

[Susan Elan Jones (Clwyd South) (Lab)]

rose—

[Rachel Reeves]

I give way to my hon. Friend the Member for Clwyd South (Susan Elan Jones).

[Susan Elan Jones]

When Members are a little shy, they should have a little encouragement from the rest of us. I worry that some Government Members are a little shy. They are not usually frightened of defending their party in government. Would they like to do so now, and will my hon. Friend allow them to do so?

[Rachel Reeves]

I have already made the offer to the Secretary of State, but we have not yet heard from him. All Members are welcome to make interventions, but in the meantime I will take an intervention from my right hon. Friend the Member for Delyn (Mr Hanson).

[Mr Hanson]

I confess that I was here when we voted for the minimum wage. I did vote for it, having stayed up most of the night, because I was kept up by the Conservative and Liberal Democrat Members who ensured that we did have to support that with our votes.

Does my hon. Friend accept that the additional spending power given to many millions of people, including in my constituency, which was spent locally, helped to boost jobs in retail, on the high street and in locally produced goods?

[Rachel Reeves]

I congratulate my right hon. Friend on his work in helping to put the national minimum wage on to the statute book. He is absolutely right to suggest that one of the contributions to the cost of living crisis that we see today is that the national minimum wage has not kept pace with the increase in prices during the last few years. The introduction of the minimum wage did indeed help to boost the spending power of workers.

[Julian Smith (Skipton and Ripon) (Con)]

rose—

[Mr Brooks Newmark (Braintree) (Con)]

rose—

[Rachel Reeves]

I am so shocked. We have two interventions from Government Members. I will happily give way to not one, but two Government Members.

[Julian Smith]

As a fellow Yorkshire Member, I thank the hon. Lady for allowing me to intervene. Will she welcome this week’s announcement on inflation at 2%, and will she accept that this, as well as the Government’s phenomenal job creation results, are a key part of the package of getting people better paid in this country?

[Rachel Reeves]

For 41 of the 42 months that the Prime Minister has been in office, prices have risen at a faster rate than wages, and that continues to be the case. The only month that it was not the case was in April last year, when bank bonuses were deferred from March to April to take advantage of the cuts in the top rate of tax from 50p to 45p. [Interruption.] That is the only month in which prices grew at a slower rate than wages, not for ordinary workers, but the privileged few who the hon. Gentleman’s party always supports.

[Mr Newmark]

Will the hon. Lady—[Interruption.]

[Mr Newmark]

I fear that the hon. Lady’s answer might have frightened my colleague away. I promise that I will not run away after she answers me. Will she at least acknowledge that this Government, by raising to £10,000 the level at which tax hits, thereby taking 2.7 million people out of taxation altogether, have indeed helped the low-paid?

[Rachel Reeves]

Work by the Institute for Fiscal Studies has shown that, taking account of all the changes to taxes, tax credits and benefits since the Government came into office, the average worker is now £850 worse off. The hon. Gentleman points to one thing, but the VAT increase means that people are worse off, as do the tax credit changes. Overall, when all those things are added up, people are worse off, not better off. I hope that he will stay a little longer than his colleague to hear a bit more of the debate.

We know that we need to build on the success of the national minimum wage, because today we face a new challenge: getting our economy working for working people and tackling the worst excesses of insecurity and exploitation in our labour market.

[Mel Stride (Central Devon) (Con)]

Further to the point made by my hon. Friend the Member for Braintree (Mr Newmark), does the hon. Lady not accept that the pressure on living standards is a function not just of wages, but of the costs that average families face? Will she thank the Government, as I do, for having frozen council tax during the period we have been in office, unlike her party, which doubled it during its period in office?

[Rachel Reeves]

If the hon. Gentleman looks at what has happened to living standards, he will see that the average worker is £1,600 worse off than they were in 2010. I am surprised that he applauds what the Government are doing—I certainly do not—because workers in his constituency are worse off, not better off, after three and a half years of Conservative government.

[John Robertson (Glasgow North West) (Lab)]

Does my hon. Friend agree that Government Members, after giving up attacking us on the minimum wage, have now moved on to more sinister things, such as workers’ right, zero-hours contracts and a vast increase in the number of people in part-time employment, to mask the fact that people are so much worse off than they ever have been? The outlook for those people now is something we never saw until the Government came to power.

[Rachel Reeves]

I thank my hon. Friend for that intervention. The reality is that under this Government we have seen record numbers of workers on zero-hours contracts, record numbers of people who want to work full time having to work part time, and wages failing to keep up with prices. The average worker is now £1,600 a year worse off and the number of people being paid less than the living wage is up from 3.6 million in 2010 to more than 5 million today. The value of the minimum wage has fallen by 5% over the past three and a half years. For a full-time worker that means a real-terms pay cut of £13 a week.

[Mr David Hamilton (Midlothian) (Lab)]

Is my hon. Friend as surprised as I am that Government Members are not supporting good employers? There are good employers in my constituency who are arguing very clearly that undercutting the minimum wage is affecting their business. They want good employers, not bad ones.

[Rachel Reeves]

I thank my hon. Friend for that intervention. We saw similar things when Labour introduced the national minimum wage in the first place, because in many cases those who benefitted were the good employers who wanted to pay their workers a decent wage and who were being undercut by the cowboys.

[Jim Shannon (Strangford) (DUP)]

I congratulate the Opposition on bringing this matter before the House for consideration—we all have an interest in it. Does the hon. Lady share my concern about those in long-term apprenticeships who are not receiving the minimum wage? That has been brought to my attention on a number of occasions. They are glad to have the experience and a vocation at the end of it, but in my opinion they also deserve the minimum wage, which many of them do not receive.

[Rachel Reeves]

There is an apprentice rate for the minimum wage, which is important, but we need to ensure that more people are doing good-quality apprenticeships so that at the end of them they can get jobs not only at the minimum wage, but above it. My worry is that too many of the current apprenticeships do not offer the decent training that will enable people to get a good-quality job.

[Steve Rotheram (Liverpool, Walton) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that while it was a brave Labour Government who brought in the national minimum wage, they were working in conjunction with the unions, which were pivotal to bringing in the policy? It will be the unions, working together with the Labour Government in 2015, that will introduce a living wage.

[Rachel Reeves]

I thank my hon. Friend for that intervention. Trade unions, including the Union of Construction, Allied Trades and Technicians, of which he is a member, did a huge amount of campaigning for the introduction of the minimum wage and campaign today to ensure that more people are paid a living wage. I will say a little more about what we are willing do in government to ensure that more people are paid a living wage above the national minimum.

[Mr Jim Cunningham (Coventry South) (Lab)]

The freeze in council tax, which was mentioned earlier, looks good on the surface, but councils are not being compensated for it, and they are stacking up a problem for two or three years down the road, when there will be massive cuts to services.

[Rachel Reeves]

My hon. Friend is absolutely right. Many councils, including mine in Leeds and his in Coventry, have been hard hit by the cuts to the local authority grant, which are affecting some of the services that the most vulnerable people rely on.

[Guy Opperman (Hexham) (Con)]

Can we get to the nuts and bolts of policy? Will the hon. Lady give the House an assurance that policies such as the petrol duty freeze and the council tax freeze—[Interruption] I am sorry, but the hon. Member for Rhondda (Chris Bryant) is chuntering so much that it is hard to hear him—would be continued under a Labour Government were they to be elected?

[Rachel Reeves]

I suggest that Government Members look at what we are debating: the national minimum wage. I know they do not want to talk about it, because they did not support it in the first place, but it would be nice if they could talk about its impact on their constituencies. However, I think we may have to wait for another occasion.

We have a Government who opposed the national minimum wage when it was introduced and who are not enforcing the legislation properly today. Thanks to an investigation by the independent Centre for London, we know that as many as 300,000 workers are being paid less than the minimum wage. We have reports of workers having the costs of uniforms, accommodation, transport or training illegally deducted from their pay packets. We have shocking accounts of working conditions for some people in sectors such as elderly care which hurt not only employees but vulnerable people who need a reliable and good-quality service from people who are paid a decent wage. There are stories of legal loopholes being used to bring in migrant workers who are, as my hon. Friend the Member for Stockton North (Alex Cunningham) said, forced to work at exploitative rates of pay that also undercut and undermine the pay and conditions of all workers.

Despite that, the number of enforcement cases opened or registered has fallen in every year of this Tory-led Government, and it is now at less than half the level it was in the last year of the Labour Government. Since this Government came into office, just two prosecutions have been brought for non-payment of the minimum wage. They have repeatedly said that they will name and shame firms that are flouting the legislation, but they have not named a single one.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

My hon. Friend is making a very powerful speech. Does she agree that perhaps one of the reasons the national minimum wage has not been enforced is that Government Members are not 100% committed to it? For example, the hon. Member for South Northamptonshire (Andrea Leadsom) has called for businesses with three employees or fewer to be exempt from the national minimum wage, as well as from regulations on maternity and paternity rights.

[Rachel Reeves]

Not only are Government Members not 100% behind the national minimum wage; they cannot even bring themselves to say “national minimum wage”.

[Charlie Elphicke (Dover) (Con)]

The Government are asking the Low Pay Commission to review the minimum wage with a view to increasing it. Does the hon. Lady welcome that—yes or no?

[Rachel Reeves]

The hon. Gentleman is a little behind the curve. That is what the Low Pay Commission does: that is what we set it up to do.

The failure to enforce the legislation properly has contributed to a worrying rise in in-work poverty. It used to be thought that if someone got a job, put in the hours and put in the effort, they would be paid enough to keep them and their family out of poverty and have a decent standard of living—that was the deal. But today, for the first time since records began, the majority of people in poverty are in work and the majority of children in poverty are brought up in working households. It is just not good enough that in today’s Britain an honest day’s work does not bring in a decent day’s pay.

[Dame Anne Begg (Aberdeen South) (Lab)]

Does my hon. Friend agree that perhaps the best way to make savings in the welfare bill would be to make sure that people are not just in work, but in well-paid work, so that they would not have to depend on welfare?

[Rachel Reeves]

I could not agree more with my hon. Friend. If more people were paid a living wage, if the minimum wage were enforced and if more people who want to work full time were doing so rather than working part time, all those things would help bring down the rising costs of social security.

A Britain where people who are putting in the effort and the hours still cannot make ends meet cannot be right and it is not fair. A Britain where parents who want to spend more time with their family and children but can hardly see them because they have to take on a second job is not right and it is not fair. A Britain where a young worker who wants to go to evening classes to improve their prospects but cannot because they have to take on an extra shift in the evening just to make ends meet is not right and it is not fair. A Britain where a woman cleaning the offices of well-paid executives before they arrive in the morning and who is still at work in the evening serving on the supermarket tills is not right and it is not fair.

This is not just an injustice to those families. It is, as my hon. Friend has said, imposing cost on the rest of us as well, because lower pay means more money spent on tax credits and housing benefit. The bills of in-work poverty are rising faster than this Government can cut people’s entitlements. It also means less tax and national insurance going into the Government’s coffers. If we want to get the costs of social security under control and if we want to put our public finances on a sustainable footing, we need to get our economy working for working people, so that we can all earn our way out of the cost of living crisis that this Government have created.

What solutions do Government Members have to offer? As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) has indicated, the hon. Members for Christchurch (Mr Chope), for Wellingborough (Mr Bone), for Cities of London and Westminster (Mark Field), for Windsor (Adam Afriyie), for Clacton (Mr Carswell) and for Bury North (Mr Nuttall) sponsored a Bill that would have enabled employees to agree with their employers that they should not be paid the minimum wage. The hon. Member for South Northamptonshire (Andrea Leadsom) has said that people working for businesses with three employees or fewer should not have to be paid the minimum wage. The hon. Member for Esher and Walton (Mr Raab) has said that 16 to 21-year-olds should not have to be paid a minimum wage. The hon. Member for Shipley (Philip Davies) has said that disabled workers should not have to be paid the minimum wage. Shame on them and shame on the Conservative party. It is the same old story from the same old nasty Tories. Their only answer to our economic problems is to cut taxes for the richest and cut pay for the poorest.

[Andy Sawford (Corby) (Lab/Co-op)]

The push to stop a minimum wage for 16 to 21-year-olds is appalling at a time when the Government have made life so difficult for that group of people in our society through their changes to the education maintenance allowance and the increase in tuition fees, which the Liberal Democrats, of course, promised would not happen. It is absolutely wrong and we must fight it.

[Rachel Reeves]

I could not agree more with my hon. Friend. With almost 1 million young people out of work—250,000 of them for more than a year—hitting them further by saying that they should not be entitled to a minimum wage is doubly unfair, cruel and callous.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Is not a further point that there are many threats to wages in rural communities in particular—where the cost of living is higher—not least as a result of this Government’s shameful decision to abolish the Agricultural Wages Board, which protected the pay of many low-paid people?

[Rachel Reeves]

I thank my hon. Friend for that intervention and for his work on these issues as a shadow Environment, Food and Rural Affairs Minister.

Labour Members know that a strengthened minimum wage and practical policies to promote the living wage are essential to building a recovery that works for working people and to securing rising standards of living for the future. That means stronger penalties and effective enforcement against rogue employers who flout the minimum wage. It means plans to restore the value of the minimum wage, which has been lost over the past three and a half years. It means the Government doing their bit to support the campaign for a living wage by setting an example with their own employees and contracts, as Labour councils are doing up and down this country, and it means the Government sharing the savings to the Treasury with employers who commit to paying the living wage, as we will do with our Make Work Pay contracts.

The national minimum wage is one of Labour’s proudest achievements. It was opposed by the Tories every step of the way, while their coalition partners tried to water it down and frustrate its purpose, and the current Business Secretary sat on his hands. That is why we cannot trust the Tories or their Liberal Democrat supporters to protect the minimum wage, why we cannot trust the Tories to enforce or strengthen it, and why we cannot trust them to deal with the cost of living crisis.

It therefore again falls to Labour to protect and strengthen the national minimum wage by increasing fines for those who exploit workers; investigating rogue employers and enforcing the law properly; restoring the value of the national minimum wage and catching up the lost ground of the past three years; and encouraging employers who can do so to go further and to pay the living wage.

I suspect that when the Secretary of State gets to his feet, he will tell us how he now supports the minimum wage and wants it to be increased and to be enforced better. If that is his way of apologising for his past sins, so be it, but I must warn him and his Government that we will be watching. Working people who are struggling to earn a living and to survive the cost of living crisis need more than warm words and liberal promises; they need action, and only a Labour Government will deliver that.