Youth Unemployment and Bank Bonuses

Debate between Tom Blenkinsop and Rachel Reeves

Monday 23rd January 2012 Commons Chamber

[Rachel Reeves]

The Leader of the Opposition has said that the knighthood for Fred Goodwin was not warranted, but I do not remember hearing Conservative Members saying that he should not get a knighthood when it was awarded.

Bank bonuses were taxed at 50% in the last year of the Labour Government. That brought in £3.5 billion, which was used to help to support families and to support young people back into work. Unlike Labour, which introduced a tax on bank bonuses, the Government are introducing a tax cut for banks this year. That tax cut is unwarranted and unjustified as unemployment and youth unemployment continue to rise.

The Opposition proposal is simple. While banks are still not doing their job—they are not supporting jobs or growth—the Government must step in to ensure that resources are put to better use. A 50% tax on bank bonuses above £25,000 would, on a cautious estimate, raise enough revenue to support the creation of 100,000 jobs for young people.

We know that such a measure would work because it has worked before. Labour’s 2010 bank bonus tax raised £3.5 billion, according the OBR. The future jobs fund, which was created by the previous Labour Government, supported more than 100,000 people back into work. That is a record of which Labour Members are proud. By contrast, the Government have chosen a tax cut for the banks and a belated, half-hearted and ineffective response to rising youth joblessness.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

My hon. Friend is making an excellent speech on Labour’s proposal to create 100,000 jobs for the young from a bankers’ bonus tax. The north-east is bucking the national trend in manufacturing, which is in the doldrums in the rest of the nation, but 7,000 private sector jobs were lost in the past three months of 2011, whereas 4,000 public sector jobs were lost. Given that clear disparity, what does my hon. Friend make of the Prime Minister’s rhetoric on the creation of private sector jobs?

[Rachel Reeves]

My hon. Friend speaks passionately about his region of the north-east, and I know he does a huge amount of work for businesses, young people and families in his constituency.

The reality is that northern towns and cities are paying a particularly high price for this Government’s policies. In my city of Leeds, the local authority is losing more than 25% of its grant over the next four years. As a result, more people are losing their jobs and fewer services can be provided. It is people in the poorest areas who are paying the highest price for this Government’s policies.