Living Standards

Debate between Rachel Reeves and Nick Gibb

Wednesday 4th September 2013 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House believes that the Government is failing to turn things around for the UK’s hard working families; notes that this has been the slowest economic recovery on record, and that the Government is out of touch with the difficulties faced by ordinary families; recognises that average earnings are almost £1,500 a year lower in real terms than they were in 2010; notes in addition that tax and benefit changes since 2010 are costing families an average of £891 in 2013-14 according to the Institute for Fiscal Studies; further notes that the Government is making hard-working families pay more than their share to bring down the deficit while cutting income tax by an average of £100,000 for the 13,000 people with incomes over £1 million; and calls on the Government to ensure that the recovery is strengthened, sustainable and its benefits fairly shared by getting more people into work, bringing forward capital investment, as recommended by the IMF, introducing a compulsory jobs guarantee, backing fair taxes by reintroducing a 10p rate of income tax, paid for by a mansion tax on houses worth over £2 million, taking action on rip-off rail fares and soaring energy bills, standing up for families in the private rented sector, reforming the pensions industry, curbing payday lenders and implementing long-term reforms to banking, infrastructure planning and the skills system.

During the 2010 election campaign, the Conservative party made the rather bold claim that it would strive to

“see an economy where not just our standard of living, but everyone’s quality of life, rises steadily and sustainably”.

Looking back more than three years on, time has served that particular Tory manifesto pledge disastrously, as it has so many others. It is no wonder that people are feeling let down. Today, average earnings are almost £1,500 a year lower than they were when that pledge was made.

Since the end of 2010, the UK has seen the biggest fall in workers’ income of any country in the G7. Prices have risen faster in the UK than in any other major economy. It is another broken promise from this out-of-touch Prime Minister.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

Does the shadow Chief Secretary accept Labour’s responsibility for its catastrophic stewardship of the public finances, which left this country with a budget deficit in excess of 11% of GDP?

[Rachel Reeves]

As the hon. Gentleman knows, there was a global financial crisis that hit every country in the world, and all countries are now dealing with the aftermath. As the Office for Budget Responsibility and the Institute for Fiscal Studies have said, budget deficit reduction has now stalled, not because the Government have not cut public services or put up taxes for ordinary people but because unemployment remains too high and economic growth too weak to get the deficit down.

This Prime Minister is ripping up the record books when it comes to overseeing falling wages for ordinary workers. Average wages have been falling behind prices for 37 of the 38 months of David Cameron’s prime ministership. Which month is the odd one out? It is April of this year, when the bankers reaped the rewards of deferring their bonus until George Osborne’s cut to the top rate of tax was implemented. That tax cut resulted in 13,000 people with an income of more than £1 million receiving a tax cut worth on average £107,000. That is four times average earnings in this country.

The rest, ordinary people, will be on average £6,660 worse off by the end of the Parliament. That is enough to have paid for the family weekly shop for more than a year and a half. Although he has said repeatedly, “We’re all in this together” and “Those with the broadest shoulders should bear the greatest burden”, how can families trust this out-of-touch Prime Minister, who has prioritised millionaires over millions of working people?

Public Service Pensions Bill

Debate between Rachel Reeves and Nick Gibb

Monday 29th October 2012 Commons Chamber

[Rachel Reeves]

That is simply not true. There are 800,000 part-time public service workers earning less than £15,000 a year, 90% of them women, and their pension contributions will rise by, in some cases, 50% or more because their full-time equivalent salary takes them above the minimum salary threshold.

Instead of building on our reforms, the Government have ripped them up. They have made it much harder to make progress by seeking to impose, prior to any negotiations, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. The “cap and share” arrangements agreed and established by the last Labour Government provided the mechanism for delivering the adjustments as needed, but the current Government chose to undermine that agreement and instead announced a 3% increase in contributions in the October spending review without any discussion or negotiation with employers or employees.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

As the hon. Lady is discussing the previous Labour Government’s reforms, will she say whether she accepts any responsibility on behalf of the Labour party for the decimation of private sector defined-benefit pensions as a consequence of the disastrous decision in the 1997 Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) to end the repayment of dividend tax credits?

[Rachel Reeves]

If that was such a disastrous thing, why have this Government not reversed it or made any efforts to do something about it? They have no intention of doing so.

The contribution increases in this Bill were based on no assessment of the future funding needs of public sector pensions and were simply a tax on public service workers who were already facing a pay freeze and redundancy risks. The increases came long before Lord Hutton had published his final report. He warned that excessive increases could hit lower-paid workers hard and result in a counter-productive increase in opt-out rates. He has said that although it is for Ministers to decide by how much contributions should rise,

“there must also be a careful examination of the implications of any possible increase in opt out rates in these schemes as well.”

But the Government chose to plough on, not mindful of the increase in opt-out rates and with little regard for the consequences.

The Government promised that lower-paid workers would be protected from excessive and unaffordable increases, but the reality is that as many as 800,000 part- time workers earning less than £15,000 a year are already paying higher contributions. As I said, for many of them the contributions are 50% higher, because their full-time equivalent salary takes them over the minimum threshold. That approach had nothing to do with long-term reform and everything to do with a cash grab by the Treasury, which made it much harder to deliver progress on the real reform we needed, because the Government acted arbitrarily before Lord Hutton reported and lost the trust of public service workers.

In addition to imposing that hike in contributions, the Government used their June 2010 Budget unilaterally to change the indexation of pensions from RPI to CPI. On average and over time, public service workers will be 11% worse off in retirement as a result. According to analysis published last week by the Pensions Policy Institute, this is a bigger hit than the extra contributions, the raised retirement age and all the other changes to pensions put together. Independent experts, such as the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face. As pensioners worry about the hikes in energy bills this winter and expected steep increases in food prices, we should be particularly mindful of the challenges that retired people face in meeting ever-rising costs.

Again, those changes were imposed on public service workers without any negotiation or discussion. Lord Hutton stated:

“If these reforms have any chance of succeeding then people need to know that they are being treated fairly.  We have seen…the anger that has been triggered on the state pension when older women feel the finishing line is being put back at the last minute with very little time to adjust. So there should be full and proper consultation and discussion with the trades unions. That is how we do things in Britain—the public would take a very dim view of any government that fails to honour this basic requirement. We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back.”

I regret to say that the Government did not follow that advice. Sometimes it seems that they are turning the clock back to the conflicts and divisions of the 1980s, and perhaps that was exactly their objective. Their aggressive and provocative approach to these serious and sensitive issues resulted in months of stalemated negotiations and several days of strike action, which resulted in closed schools, cancelled operations, and disrupted lives for families and businesses across the country.