Working People’s Finances: Government Policy

Simon Clarke Excerpts

Tuesday 21st September 2021 Commons Chamber

[The Chief Secretary to the Treasury (Mr Simon Clarke)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“welcomes the £400 billion package of support the Government has put in place to protect jobs, incomes and livelihoods throughout this covid-19 pandemic, including a temporary cut to VAT, generous cash grants for businesses, a business rates holiday, and the furlough scheme which protected 11 million people at its peak; notes the launching of the Plan For Jobs to help people back into work and gain the right skills to succeed in the jobs of tomorrow through schemes such as Kickstart for young people, Restart for the long-term unemployed, the Lifetime Skills Guarantee and additional funding for apprenticeships, traineeships and work coaches; further notes the measures taken by the Government to keep costs down for working people, such as introducing and increasing the National Living Wage in 2016 so that a full-time worker is £4,000 a year better off than before, doubling personal tax thresholds giving individuals an extra £1,200 per year, protecting local taxpayers from excessive council tax increases, introducing an energy price cap which protects 15 million households by around £100 a year, and freezing fuel duty for 11 consecutive years which has saved drivers £1,600 compared to 2010; and believes that this plan is working, as evidenced by unemployment forecast to be 2 million lower than previously expected, job vacancies at record highs, household incomes protected, consumer confidence back to pre-covid-19 pandemic levels, and GDP recovering rapidly, with the IMF forecasting the UK to have the highest growth in the G7 this year.”.

It is a pleasure to be back at the Dispatch Box and to have the opportunity to respond to the hon. Member for Houghton and Sunderland South (Bridget Phillipson). I thank her for her kind words on my appointment. It is great that the north-east has two representatives in the debate, and I am delighted that the north-east economy is in robust shape, contrary to what we just heard.

In the last 18 months, safeguarding working people’s finances has been the Government’s defining mission, and we have succeeded in that task. Just today, the OECD economic outlook says that it expects the UK to see the fastest growth in the G7 both this year and next. The IMF has described the UK’s policy response as “aggressive” and as one of the

“best examples of co-ordinated action globally”,

helping to mitigate the damage wreaked by the pandemic, and

“holding down unemployment and insolvencies.”

[Catherine West (Hornsey and Wood Green) (Lab)]

The Chief Secretary begins his speech by talking about growth, which everyone in the Chamber would like to see, but what impact is there on struggling businesses from the clobbering increase in national insurance? That will have an impact on not just individuals but employers and the workplace.

[Mr Clarke]

We are clear that the right thing to do as we emerge from the pandemic, in which we have spent £400 billion on providing a comprehensive response, is ensure that our NHS is ready to deal with the backlog of cases that has inevitably arisen as well as providing a long-term fix for social care in a broad-based solution, bringing together a progressive tax rise in which the wealthiest pay more and business plays a fair role. I am confident that that is the right thing to do at this time.

Let me remind the House once more of the sheer scale of what this Government have been doing and of our support for the economy. The £400 billion I referenced a moment ago is spending that has been devoted to safeguarding jobs and incomes the length and breadth of the UK. It is spending that has given millions of people financial certainty through a very difficult 18 months.

The furlough scheme has protected 11.6 million jobs—that is equivalent to a third of the entire workforce—and it has paid out £68.5 billion to employers. The self-employment income support scheme has provided £27 billion to almost 3 million people. Businesses have been kept afloat thanks to loan schemes worth £79 billion, in addition to cash grants, VAT cuts and business rates relief, while the most vulnerable have been supported by a temporary uplift to welfare payments. HM Treasury’s own distributional analysis shows that our interventions have supported the poorest working households most as a proportion of income. That list is far from exhaustive, but it shows how the Government have met an extraordinary crisis with an extraordinary package of measures.

[Kim Johnson (Liverpool, Riverside) (Lab)]

In your constituency of Middlesbrough South and East Cleveland—

[Kim Johnson]

In the Minister’s constituency of Middlesbrough South and East Cleveland, the child poverty rate is 24.7%, smashing the national average of 19.1%, and up nearly 10% over the past six years. Can the Minister tell us exactly how he intends to justify his own Government’s decisions to hit the pockets of the most vulnerable families and disadvantaged people he represents?

[Mr Clarke]

I am incredibly proud to be part of the extraordinary transformation of Teesside’s economy, which is taking incredible shape under the work of our Mayor, Ben Houchen. Of course, that was reflected in the fact that the Tees Valley voted by 73% to re-elect our Conservative Mayor just this May. Why was that? It happened because of jobs and growth, and hope and pride in place—all the things that this Government are committed to delivering, and all the things that a Conservative Government are doing after years in which Labour neglected areas such as Teesside and left us with no plan, no options and no future.

Peak unemployment is now forecast by the Office for Budget Responsibility as being substantially lower than initially expected. All the evidence now points to a rebounding labour market. Just last week, the Office for National Statistics reported that vacancies are at a record high, while the headline unemployment rate has fallen for seven consecutive months and now stands at 4.6%.

[Kirsty Blackman (Aberdeen North) (SNP)]

I am a bit concerned that the Minister has not actually read the motion on the Order Paper. This is about people who are in work. I absolutely agree that people have been kept in work as a result of the schemes that are being scrapped—that is the case—but the thing is that if people are not being paid the living wage and are not being paid enough money to actually live on, they are going to continue to be in poverty no matter whether or not they are in work.

[Mr Clarke]

I can assure the hon. Lady that I have read the motion closely, which is of course why I am celebrating the fact that the ONS estimates that underlying regular wage growth is between 3.6% and 5.1%. It is why I am so proud that we are the Government who introduced the national living wage, which has of course meant more money in the pockets of working people. So this is exactly about bearing down on the cost of living and about supporting families throughout a really difficult time. That is what we have managed to do and what we will continue to do.

[John Cryer (Leyton and Wanstead) (Lab)]

The vast majority of people among my constituents who have written to me about the cut in universal credit are in work, some of them doing two or three jobs, yet many of them are going to be pushed into poverty by the cut the Minister is defending now.

[Mr Clarke]

The hon. Gentleman needs to bear it in mind that we are of course dealing here with a product, in universal credit, that has a number of different components. The change to which he is alluding affects the standard allowance, but the majority of households on universal credit of course receive many additional elements—for example, 58% receive additional support for housing costs and 38% receive the child element—and many households on UC will also have access to additional sources of income, such as child benefit. This comes before we come to all the things we have built into the system over recent years to make universal credit more generous. That includes, for example, the £1,000-a-year increase to the work allowance, which was announced in 2018 and is worth £630 to working parents and people with disabilities, and of course we have changed the taper rate so people get to keep more of the money they earn as their earnings increase. This is a very carefully calibrated system, and let us not forget that this is far better, frankly, than the legacy programme we inherited from the last Labour Government, which of course, as we know, did not incentivise work, did not properly support people and was a failure, so I am afraid I will not take lessons on universal credit from the hon. Gentleman.

[Several hon. Members rose—]

[Mr Clarke]

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

[Miriam Cates]

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

[Mr Clarke]

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

[Alex Cunningham]

rose—

--- Later in debate ---

[Jack Dromey]

rose—

[Mr Clarke]

I give way to the hon. Member for Stockton North (Alex Cunningham).

[Alex Cunningham]

As a fellow Tees Member of Parliament, the Minister will be aware that at the height, just a few weeks ago, there were 12,000 more unemployed people across the Tees Valley than there were in March last year. How does he reconcile that with talking up the Tees Valley employment situation?

[Mr Clarke]

I do so quite readily when I look at the extraordinary potential of our local economy. We have all the new jobs coming in at the Teesworks site, the former Redcar steelworks site. We have the hope and potential of green industry, which the hon. Member champions, as I do, with all the jobs in carbon capture, utilisation and storage as well as hydrogen. There is the new GE Renewable Energy factory, which will employ 2,500 people. Its construction starts incredibly soon, and it will be fully operational by 2023. Those are the reasons for hope and optimism. Of course, I will never apologise for talking up Teesside, just as we should never apologise for talking up the UK economy. We have done an extraordinary thing in this country: we have got through the pandemic—we have weathered the storm—and now we can move on to the recovery.

[Jack Dromey]

Three out of the 10 most deprived constituencies in England are in Birmingham and 42% of children in Birmingham are growing up in poverty, yet the Government are hitting Birmingham hard with the £1,000 a year cut to universal credit and the national insurance rise on top of the cost of living going up and soaring energy costs, with supermarket costs up, childcare costs up and rents up. Can I ask the right hon. Member this question: have the Government carried out any impact assessment of the consequences of their actions on Brummies, not least because the simple bleak reality is that tens of thousands face a tough Christmas and a bleak new year?

[Mr Clarke]

I thank the hon. Gentleman for his question, which basically re-summarised the speech we heard from the shadow Minister. I can confirm that HMT’s distributional analysis has shown that, as a proportion of income, our interventions have supported the poorest working households the most. Of course I recognise the challenges—I represent a constituency that has many challenges—but the number of children in absolute poverty, to which he alluded a moment ago, is lower than it was when Labour left office in 2009-10, both before and after housing costs are considered. These are incredibly important achievements, and we should never lose sight of them. In short, we took decisive action, and that action has worked.

It is clear that the world of September 2021 is very different from that of March 2020. The success of our vaccine roll-out means that most restrictions have now been lifted and we are seeing the benefits of our approach. These new circumstances therefore require a new response. We of course believe that the best anti-poverty strategy is a jobs strategy, and the best way to help vulnerable people is to provide them with the opportunities that they need for well-paid work.

[Aaron Bell]

My right hon. Friend is making a powerful speech. He is right about the importance of jobs, and not just well-paid jobs but high skilled jobs. Can he say something about how our plan for jobs is delivering people with skills? We have a limited amount of money to spend and it is better to invest that in people’s skills than endlessly into welfare.

[Mr Clarke]

I absolutely agree: it is very important that we invest in skills. The plan for jobs is not just about getting people into work or keeping them in work; it is about making sure they grow their skills during their working lives, which is why we have a focus on more skills for school leavers and generous apprenticeship hiring incentives. We are also tripling the number of traineeships for 16 to 24-year-olds, and we have the pioneering lifetime skills guarantee. These are all the sorts of things that will make a difference in Staffordshire as they will across the rest of the UK, and we should be incredibly proud of that.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

On the previous intervention about there being a limited amount of money that can only go so far, did the £1.6 billion allocated for a nil rate stamp duty on houses worth up to £500,000 help the poorest, the richest, or a combination of the richest and the housebuilders’ profits?

[Mr Clarke]

The hon. Gentleman asks us to apologise for keeping the housing market moving in the teeth of the pandemic and I make absolutely no apology for that; it was absolutely the right thing to do to make sure we did not see a collapse of that market.

It is important to recognise that supplying, protecting and creating employment opportunities is the right way forward both economically and politically for our country. That is why we have made a deliberate choice to invest in our plan for jobs, which we launched over a year ago to create work opportunities and assist workers to develop the right skills for the future.

Our plan is helping young people—a group disproportionately affected by the pandemic—through the £2 billion kickstart scheme. At lunch, I was talking to the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Mid Sussex (Mims Davies), about the impact of these programmes on young people, creating and fully funding hundreds of thousands of jobs for those at risk of long-term unemployment. I am proud that so far over 63,000 young people have had the chance to begin a kickstart job, with the numbers growing by more than 2,000 every week. Our plan will support more than 1 million unemployed people, many of whom are aged over 50, helping them find work through our three-year-long £2.9 billion restart programme, and providing jobseekers with the personalised, intensive support that will make a real difference to their prospects.

[Katherine Fletcher (South Ribble) (Con)]

On retraining opportunities, may I highlight the lifetime skills guarantee as well? If someone has a job and thinks they can do something better, we can give them £2,000 or £3,000 to help them retrain. That is huge for people in South Ribble who want to go and do something exciting.

[Mr Clarke]

My hon. Friend is right. For the first time, any adult without a level 3 qualification will be fully funded by the Government to access three courses worth £3,600 per person. There are 11 million adults across this country without level 3 qualifications; this policy is directly targeted to support them.

We have invested £2.3 billion to hire and retain work coaches, doubling the number to 27,000, a feat that we have achieved in just eight months, and we are spending over £200 million on providing unemployed people with tailored help with CV writing, interview skills and job search advice. [Interruption.] We have doubled free childcare for working families—we can carry this on all day. This is a comprehensive solution to a very challenging series of problems. The plan for jobs is not about quick fixes; it is about creating sustainable employment so that people can be confident about being able to support themselves over the longer term.

[Matt Western (Warwick and Leamington) (Lab)]

I understand the right hon. Gentleman’s point about job applications and employment but, as we have heard, this debate is about the cost of living. Can the right hon. Gentleman tell the House how much the average family has had to pay in increased petrol costs per year, as well as the average cost of filling up a car?

[Mr Clarke]

This Government have frozen fuel duty for 11 years, so we do not need to take any lessons on that.

It is vital that we keep bearing down on the skills crunch we have been talking about. Our employment strategy is supporting people through a variety of means to gain the knowledge, attributes and qualifications to find work in high-value sectors. Insofar as we achieve that, we will be achieving a much more sustainable, robust economy for the future. Our employment strategy is supporting the finances of people up and down the country, helping them back into work, and helping them earn more and succeed in the jobs of tomorrow.

Meanwhile, Labour offers absolutely no plan to tackle the challenges that the country faces. There is no plan to take the tough decisions on covid; the amounts of money to be raised that are talked about are a fraction of those required to support the demands they are making of the Exchequer. There is no plan to create the high-skilled, high-wage economy, no plan—they voted against it last week—to tackle the NHS backlogs. While we wait for the Opposition to reveal how they would do this, we are taking action.

In April we took definitive action, increasing the national living wage by 2.2% to £8.91 an hour, an increase worth more than £345 a year to a full-time worker on the NLW, and at the same time we extended the NLW to those aged 23 and over. Last year we took action to tackle rent costs by boosting the local housing allowance to the 30th percentile of market rates, and we are keeping cash levels at those higher rates going forward. That will cost more than £950 million this year and has meant that more than 1.5 million households benefited from an additional £600 last year compared with before the crisis. We have protected people from excessive council tax increases and given councils £670 million this year to provide families with help with their bills.

[Paula Barker (Liverpool, Wavertree) (Lab)]

Does the right hon. Gentleman not agree that the Government plans for social care reform will force local authorities to increase council tax?

--- Later in debate ---

[Mr Clarke]

We have always been clear, and it has long been the practice, that a proportion of social care bills are met through council tax, and that is the right thing to do. We are saying that, additionally, we need a credible solution to properly fund social care in the long term, so that people can have the dignity in their old age that they deserve. This is a complex and challenging area of policy. While we have stood up and said that we will do the difficult thing and actually increase taxes so that there is enough money for the system not to fall over, Labour simply plays politics with the issue. Voting against what was a progressive, broad-based tax increase to properly fund adult social care was an irresponsible choice, and in their hearts Labour Members must know it.

The new health and social care levy is a £12 billion a year injection into the NHS and social care that will benefit people of all ages and backgrounds. The decision to raise taxes was tough—of course it was; we believe in a low-tax economy—but it was the responsible thing to do given the impact of covid on the country’s finances. Most importantly, that decision was fair: the levy is progressive because those earning more will pay more, and businesses will share the burden.

[Dame Margaret Hodge (Barking) (Lab)]

I congratulate the right hon. Gentleman on his appointment. The point is not whether extra money needs to be raised to fund the NHS or indeed social care; the point is how it is to be raised. National insurance and council tax are regressive, not progressive, taxes, but there are alternatives such as reform of national insurance, looking at assets as well as income, or looking at regional differences. There is a whole raft of options that the Minister and the Government could have considered; why did they not do so? Why have they chosen a regressive system for raising additional money?

[Mr Clarke]

We did look at this, and Treasury analysis showed that lower-income households will be large net beneficiaries from the package announced by the Prime Minister, with the poorest households gaining the most as a proportion of income. This Government are unafraid to make tough choices in order to safeguard the nation’s finances. The difficult decisions that we have made to increase corporation tax rates and temporarily reduce overseas development assistance—which I know will be considered the right decision by my constituents on Teesside—are clear illustrations of our approach on this front.

As a final point, I remind Members that while we have taken extensive action to safeguard workers’ finances during the pandemic, our record of achievement stretches much further back. Indeed, according to official statistics there were 1 million fewer workless households at the end of 2019 than in 2010, while income inequality was lower going into the pandemic than in that year as well. In fact, over the past 11 years successive Conservative Governments have striven to keep the cost of living in check for millions of households.

Let me give the House some examples. Fuel duty has been frozen for 11 years in a row, cumulatively saving the average driver £1,600. The energy price cap has protected 15 million households in the two years since its launch. We have nearly doubled the personal allowance over the last decade, making it the highest basic personal tax allowance of all countries in the G20 and one of the most generous internationally. In combination, our changes to the national living wage, personal allowance and national insurance currently leave a full-time national living wage employee £5,400 better off in cash terms compared with 2010. I am proud of that, and I think all Conservative Members should be. These measures are just part of a record of achievement that has made a real and lasting difference to people’s lives.

[Tulip Siddiq]

The Minister is talking about everything that he is proud of. Is he proud that the childcare system in this country is the third most expensive in the world, and that parents are making the choice between paying childcare costs or paying their rent or mortgage? Does he think that removing the universal credit uplift will help working parents? I notice that he has not said anything about childcare, so would he care to elaborate?

[Mr Clarke]

I would be delighted to. This Government have doubled childcare for working families to 30 hours a week. That is worth £5,000 a year. For working families claiming universal credit, up to 85% of eligible childcare costs are met. That is the right thing to do. We want to keep women in the workforce, and we want to make sure that it is easy for families to adjust to whatever arrangements best suit them to support their children as they grow up.

A plan for jobs, incomes supported, the economy rebounding—this Government have safeguarded the finances of millions of people and, in doing so, set our country on the path to a strong recovery. Working people right across this country are seeing the benefit. We are not just promising a brighter tomorrow; we are delivering positive, tangible change today. Let me stress that we have no plans to alter our course. We will remain relentless in our mission to provide workers in every part of this country with the better prospects, greater security and increased opportunities that they so rightly deserve.