The Economy and Living Standards

Sheila Gilmore Excerpts

Thursday 12th June 2014 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I found the reference in the Queen’s Speech to the Government continuing

“to build a stronger economy and a fairer society”

absolutely incredible. It assumes that we already have a stronger economy and a fairer society, and we patently do not. We have had the worst economic recovery in 100 years. After three years where the economy flatlined, the recovery is still very fragile. We need 1.6% growth each quarter to catch up to the growth we had at the end of 2010.

What is growth based on? Once again, we are seeing the start of a housing bubble, driven by the Government’s policies, and an increase in household debt, which was up to £2.9 billion in March this year. The Tories’ 2010 manifesto stated:

“A sustainable recovery must be driven by growth in exports”.

Absolutely. Who would disagree with that? But the Government have not enabled that to happen. The trade figures remain in the red—by £22.4 billion in quarter 4 last year, which is equivalent to 5.4% of GDP. By their own measures, the Government are failing. Related to that, UK productivity is the second lowest in the G7 and 20% lower than the G7 average. That is the widest gap since 1992 and reflects a massive fall in non-financial investment.

Small businesses, which I have been campaigning for and championing since I entered the House three years ago and which employ nearly half the work force, are still feeling the pinch. The Federation of Small Businesses survey shows that access to finance and late payments are still the two biggest issues, with £30.2 billion owed to them in late payments. Although I recognise that the Government have finally responded to the issues that my inquiry into late payments identified last year and taken up some of my recommendations, it is likely that the measures will relate only to the public sector. That is not good enough and does not go far enough. We need to ensure that the Government are standing up to big businesses and doing the right thing. If they do not, we will.

Then, of course, we had the Government’s arrogance about what they would do about public borrowing. They claimed that they would clear the deficit by 2015, but we are not even halfway there yet, and they are still borrowing £190 billion more than they planned.

Associated with the fragile recovery are the effects of unemployment and employment. The unemployment rate is above pre-recession levels, and employment rates are below pre-recession levels. I still have major issues with how the figures are distorted by the inappropriate sanctioning that is a policy in the Department for Work and Pensions.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend share my concern—it was one of the points I wanted to raise with the Chancellor when I was attempting to intervene on him—that more than 1 million people who are unemployed do not appear on the claimant count of which he is so proud? They represent more than 47% of the total number of the unemployed. There appears to be no knowledge of what is happening with these individuals and why they are finding it so difficult to get jobs. It clearly cannot be benefits dependency, because they are not on benefits.

[Debbie Abrahams]

Absolutely. My hon. Friend highlights another issue with how information on claimants and people not receiving payments is being missed. We should be doing as much as we can to expose those issues.

I mentioned the employment rate still being below pre-recession levels. The jobs that have been created since 2010 tend to be insecure, part time, low paid and on zero-hours contracts. The number of people on short-term contracts has increased twentyfold since 2010 to 1.65 million, 655,000 of them involuntary. Increases in the number of temporary jobs account for more than half the rise in employment. Nearly one in five, or 1.46 million people, work part time because they cannot get full-time work. That is the highest underemployment since 1992. Four out of five new jobs, and one in three of those in Oldham, pay below the living wage.

Another issue is the geographical spread of the so-called recovery. Since 2010, 79% of new jobs have been created in London, with another 10% in nine urban centres outside London.

In the limited time available, I want to talk about the inequalities this Government are presiding over. All those employment and unemployment effects are happening at a time when the Government have made specific policy decisions on increasing the top rate of tax for people with incomes of more £150,000, but average wages are down £1,600 a year. The analysis by the Institute for Fiscal Studies shows that the net effect of tax and benefit changes for an average family is a loss of more than £900 since 2010, while bank bonuses have soared by 83% and top-to-bottom pay ratios in the FTSE 100 stand at 300:1.

We are already seeing the impact in access to food banks: this week’s Oxfam report, “Below the Breadline”, shows that 20,247,042 meals were given to people in food poverty in 2013-14 by the three main food aid providers—a 54% increase on 2012. Another recent Oxfam report, “A Tale of Two Britains”, highlighted the growing gap between rich and poor, with five of the richest families in the UK wealthier than the bottom 20%, or 12.6 million. That follows a raft of other reports—for example, from the Equality Trust.

The gap matters—it really does. It matters because, as overwhelming evidence shows, society as a whole benefits from being fairer and more equal in areas ranging from life expectancy and mental health to educational attainment, social cohesion and social mobility. It is worrying that we are seeing further increases in premature deaths in deprived areas compared with more affluent ones. According to a report published in May, people in Manchester are twice as likely to die early as people in Wokingham, yet as I mentioned in Prime Minister’s questions yesterday, last December the Government scrapped the health inequalities formula that Labour introduced in office to ensure that NHS resources were allocated according to need, and which the analysis proves has been effective.

A fairer, more equal society also benefits our economy. Again, there is overwhelming evidence from a range of sources that inequality causes financial instability, undermines productivity and retards growth.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

It is not at all surprising that Government Members want to talk about the “long-term” economic plan, because that diverts attention from the failure of the short-term, one-Parliament economic plan that we were told about extensively in 2010 and 2011, which they said justified many of the measures taken. Interestingly, it is clear from some of the contributions we have heard since last week, particularly the contribution from the hon. Member for South West Bedfordshire (Andrew Selous), that such economic growth that we have managed to see over the past year appears to have been stimulated by public investment. He talked about railways and a bypass. That sounds like a Labour policy: public investment to create private sector jobs. Actually, it is our economic plan that is being successful.

Does it matter whose economic plans did or did not work? Many people would say, “Oh, get on with it. We have to move forward.” But it is important, and in two particular ways. One way has to do with the fragility that still exists in the economy. I want to mention an issue I raised in an earlier intervention: the growing gap between the unemployment rate and the claimant count. When Government Members talk about falling unemployment in their constituencies, they are actually talking about the claimant count. When they greet anything Opposition Members say with, “By the way, the hon. Member should be aware that unemployment in her constituency has gone down by 20%”, they are talking about the claimant count. Some 47% of those who are unemployed are not in receipt of jobseeker’s allowance. That is 1 million people.

What is happening to those people and to the economy within which this is taking place? A lot of them clearly cannot get jobs, which suggests that this great recovery is not as healthy as the Government claim. Perhaps it differs by geographic area. From the point of view of the economy, this is particularly important, but it is also particularly important for the individuals involved—we must never forget that. Some of them will have a working partner, although not necessarily a very well-off one. They need only relatively small part-time earnings to lose jobseeker’s allowance after six months, because after that they will not qualify for the income-related benefit. Remember that that household has already lost one income, due to losing one of its two jobs, so it has a much reduced income and then it loses £72 a week in jobseeker’s allowance. That household’s buying power and standard of living has dropped catastrophically. What is happening to those people?

Some of those people are in an even more vulnerable position. I will illustrate that with the case of a constituent who came to me who had no income because he had been sanctioned for six months having been declared fit for work. He has a learning disability of a considerable nature and could not cope with the conditionality of jobseeker’s allowance. He just gave up and stopped claiming because he could not cope with it any longer. He was being supported by his parents, who were living on retirement pensions. How many more people are there who have just dropped through the so-called safety net? I think that the Government should be worrying about that, because of what it is telling us both about our economy and about individual cases. I would like the Government to look into that with some urgency.