Jobs and Work

Vince Cable Excerpts

Wednesday 11th June 2014 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

It is a pleasure to respond to the Opposition amendment, and to introduce a debate on the general topic of jobs and the world of work on what is a very good day for jobs. I was struck by the fact that, in something over half an hour, the shadow Secretary of State—the hon. Member for Streatham (Mr Umunna)—did not make even a passing reference to today’s unemployment figures.

I shall take a three-pronged approach to this debate. I shall deal first with the creation of jobs. Job creation depends on enterprise and business, and a key element of the Queen’s Speech is support for business through the small business Bill, which covers issues such as access to finance, Government procurement, prompt payment and, of course, pubs.

Secondly, I shall make it clear that as our economy recovers—and the recovery is now very firmly embedded —we want to ensure that that recovery is translated into higher-paid jobs and more secure employment. The small business Bill contains measures relating to zero-hours contracts and the minimum wage. It will also ensure that people have decent pensions when they retire, which is another thing that the shadow Secretary of State did not mention. Over a long period, for demographic and economic reasons and as a result of policy failures, there has been a gradual decline in the defined-benefit system, but my right hon. Friend the Secretary of State for Work and Pensions and my hon. Friend the Member for Thornbury and Yate (Steve Webb), the Pensions Minister, are reconstructing a sensible, durable environment for pensioners.

Thirdly, I shall talk about the issue of trust in business. One of the blows to our economy, and many other western economies, during the financial crisis has been a loss of trust. The Bill contains a serious of measures—to which the shadow Secretary of State did not refer—relating to transparency of ownership and the duty of directors, which will be important to the reconstruction of that trust.

Let me begin, however, by commenting on the Opposition amendment. I try to be polite, but the amendment is not exactly bulging with creative policy initiatives. It contains only one recommendation, which relates to a

“target to raise the National Minimum Wage faster than average earnings”.

The shadow Secretary of State seems to be telling me to do what I am already doing, which is giving guidance to the Low Pay Commission so that it can do exactly that; but I am not entirely sure what the Opposition’s policy is. Is the target to be mandated? If so, that undermines the autonomy of the Low Pay Commission. If not, what the shadow Secretary of State recommends is exactly what we are doing at present, which is giving forward guidance.

I should like to clarify another point. Two or three weeks ago, the Opposition had another policy on the national minimum wage, namely that it should be indexed to earnings. There is no reference to that in the amendment. Is it still the Opposition’s policy? I suspect that, when they did the sums, they discovered that indexing the minimum wage in that way would make it lower than it is now, and quietly dropped it, but may I ask what is the current status of the proposal?

In the amendment, the shadow Secretary of State sensibly acknowledges that the Low Pay Commission must

“take account of shocks to the economy.”

However, he does not mention whether the commission should take account of the impact on employment. That has been at the heart of its work. If it is indeed to take account of the impact on employment, why—as my hon. Friend the Member for City of Chester (Stephen Mosley) asked earlier—are the shadow Secretary of State and his colleagues now promoting the idea of higher taxes on employers through national insurance? If this is to be the major theme of the Opposition’s attack on the Queen’s Speech, their approach will require a great deal more clarity and a great deal more consistency.

Let me now say something about today’s figures, because they are important, even if the shadow Secretary of State did not think it worth his while to talk about them.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Secretary of State give way?

[Vince Cable]

May I finish this point first? As the hon. Lady knows, I am happy to take interventions.

In the last quarter, 340,000 new jobs have been created; 780,000 have been created in the last year, and 2 million have been created since the Government came to office. The level of unemployment is now 6.6%, and is one of the lowest in the developed world. We are approaching German levels, and our figure is significantly better than those in almost all the other European countries. We have 600,000 job vacancies, and if the shadow Secretary of State goes around the country talking to businesses, as I do, he will know that the talk is increasingly of job shortages rather than unemployment. In many key categories— those aged 65 and over, women, disabled people, and lone parents—more people are in work than before the recession began. Of course there are serious unemployment problems among young people —we acknowledge that—but youth unemployment is 100,000 down over the year, while long-term unemployment is down by 108,000.

[Sheila Gilmore]

Does the Secretary of State share my concern about the growing gap between the unemployment figures and the claimant count? More than 2 million people are still unemployed. It is clear that many of those people are not receiving benefits of any kind, and they seem to have disappeared from the statistics. Is the Secretary of State, perhaps in partnership with his colleagues, trying to find out why that is and what we can do to help those people?

[Vince Cable]

I have been quoting the figures from the International Labour Organisation, which provides the international accepted definition, and they include the people whom the hon. Lady has described. Of course, many people are self-employed, and many of those are potential entrepreneurs. I am sure that she would not want to diminish their contribution.

Opposition Members often say “The job figures are fine as far as they go, but are those jobs full time?” As a result of the strengthening of the labour market within the last year, three quarters of all new jobs have been full-time. Moreover, some interesting information has emerged during the last few weeks. People who are doing part-time work, which is often criticised, have been questioned to establish how many of them wish to do full-time work. The current figure is about 20%, and it is useful to compare that with the figures for the European Union as a whole, for France and for southern Europe, which are 30%, 40% and 60% respectively. The underlying trends in the labour market—not just the top-line figures—are significantly healthier in this country than they are in almost every other part of the European Union.

[Fiona O’Donnell (East Lothian) (Lab)]

The Secretary of State has not yet mentioned young unemployed people. I know that he is always keen to look for ways in which the Liberal Democrats are making a difference in government. Will he tell us about his leader’s youth contract, which, it was claimed, would help 160,000 young people into work by incentivising employers? How many young people have benefited so far?

[Vince Cable]

The fact that youth unemployment has fallen by 100,000 in the last year is significantly owing to the youth contract, as is the advance in apprenticeships—and the shadow Secretary of State’s comments on apprenticeships were an absolute travesty. We know that there has been a big increase in terms of both quantity and quality, and, of course, the support given to employers so that they can take on young people has been an important and extremely positive element of the youth contract.

[Mr Steve Reed (Croydon North) (Lab)]

One of the problems is that all too often under this Government work simply does not pay enough. Does the Secretary of State accept any responsibility for the fact that since the Government came to power, the number of working people claiming housing benefit in Croydon has increased by 1,100%?

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[Vince Cable]

Quite a lot of those people have moved from unemployment to work, which explains the change in the definition. However, we want to ensure that people are in work and are properly paid in work, rather than being dependent on benefits.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

What are the Government doing to deal with the fact that people under 25 are four times more likely to be unemployed than those over 25? He has talked about youth unemployment, but that group really is not benefiting from any of the Government’s policies.

[Vince Cable]

The hon. Lady makes a valid point. I know that in her constituency there is a particular problem with graduate unemployment, which we have discussed. Youth unemployment is a long-standing problem. It was very substantial even before we got into this major recession and financial crisis. We need to deal with it in a variety of ways: job training, apprenticeships and by providing a better-working market.

[Mark Pawsey (Rugby) (Con)]

I ran a business before coming into this place and the Secretary of State will know that what businesses need is confidence that they will be rewarded for making the right decisions. That will encourage businesses to take on more people and deal with many of the issues raised by the Labour party. This Government have given businesses confidence and that is why we are seeing significant reductions in unemployment.

[Vince Cable]

That is why I started my speech by saying that the most important thing we are doing is encouraging small businesses to grow. That is where the jobs come from. That is what I am keen to get to, but as the Opposition amendment was couched solely in terms of the second element of the Bill, that is what I am now trying to address.

[Several hon. Members]

rose—

[Vince Cable]

I will take two more interventions and then move on.

[Charlie Elphicke]

Does my right hon. Friend agree that the Opposition’s stance, which is to pick out any poor statistic or position, highlights that they are completely in denial about the recovery’s strength? It exposes their lack of any vision to secure economic growth for this country.

[Vince Cable]

I was going to go on shortly to what is underpinning labour market growth, which is strong and balanced economic growth. I will come back to that.

[Gordon Birtwistle (Burnley) (LD)]

Is the Secretary of State as disappointed as I am by the constant deriding of manufacturing and the growth in the economy by the shadow Secretary of State, who, every time he gets up, runs the economy down? Is that the right way to give confidence to businesses to drag us out of the recession that Labour left behind?

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[Vince Cable]

I will take more interventions later, if hon. Members will let me make a little progress. That intervention prompts me to remind the House where we are with the economy. We are the strongest growing of the major G7 countries. Major forecasts by the IMF and the OECD suggest that this year growth will be between 2.7% and 3.5%, which is quite exceptional in current circumstances, with the trend continuing in 2015.

What is more important is the fact that that has been achieved in a balanced way. In the last three quarters, manufacturing has been growing faster than the economy as a whole. Business investment, which was seriously depressed through the recession, is now experiencing double-digit growth on an annualised basis. I was taken aback when the hon. Member for Streatham started to tell me about the industrial strategy. I was in the House for the 13 years of the last Labour Government. Throughout that period, any suggestion that we have the kind of industrial strategy that we are now leading was regarded with utter ridicule by—

[Mr Umunna]

Will the Secretary of State give way?

[Vince Cable]

I will in a moment. The hon. Gentleman has reminded us of some genuinely useful things that were left by my predecessor, including the Automotive Council. Of course no money or long-term investment was attached. We are now doing work with the high-value manufacturing sector through the Catapult centres. There has been a billion-pound co-investment in new automotive propulsion systems. That did not exist. However, some things left by my predecessor were useful. They were small, but they did contribute to what is now a valued industrial strategy supported on both sides of industry. I am glad that the Opposition have bought into it, albeit rather belatedly.

[Mr Umunna]

I am sorry, but that is rather ridiculous coming from a BIS Secretary who in opposition argued for the abolition of his own Department. Now he is trying to pose as a great industrial activist.

[Vince Cable]

My Department is now very different. It now includes universities, science and many other things. In one period during the last Labour Government—the hon. Gentleman may remember it; I think that the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) was the Minister who started the change—there were about 186 different systems of industrial support, the cumulative effect of which was largely negative because we had large-scale deindustrialisation. We are pursuing the strategy in a much more concerted way, in partnership with business and on a long-term basis. That is what we are achieving.

[Sammy Wilson (East Antrim) (DUP)]

The right hon. Gentleman talks about how the policy is seeking to grow the economy in a balanced way, but does he accept that many regions of the UK are not growing at the same rate as the south-east of England, for example? Places such as Northern Ireland are suffering from that. Why in the Queen’s Speech is there no reference, for example, to the devolution of corporation tax to the Northern Ireland Executive, which would help them to grow the economy in Northern Ireland by more than is happening at present?

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[Vince Cable]

I accept the point that there are regional differences in the pace at which the recovery is happening. As it happens, of the four nations in the UK, Scotland and Wales are growing more rapidly than the UK average. However, Northern Ireland is not. I know that there is a debate about corporation tax. I do not think that is the central issue. The problem in Northern Ireland, as the hon. Gentleman well knows, is that two major banks are bad banks and are seriously contracting lending to small business. I am trying to work with the Northern Ireland authorities to assist with that.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

The right hon. Gentleman has not so far given the figures on zero-hours contracts. He will know that the Office for National Statistics has said that 1.4 million people are on those contracts, but the Government say that only 250,000 are. What is the reason for the difference?

[Vince Cable]

I was going to talk about zero-hours contracts later, but since the right hon. Gentleman has asked me the question, I will try to explain. There are very different estimates of zero-hours contracts. The ONS gives very different figures from other surveys. They range from roughly 2% to 4% of all jobs. It is worth mentioning this in passing. The shadow Secretary of State has been quite modest about his own contribution. He has been in correspondence with the statistical authority, which rebuked him for being misleading in terms of the trend in zero-hours contracts. It is a significant problem, and in a few moments, I will come to how we want to address it.

Let me move on to the underlying question in relation to zero-hours contracts and to what the Opposition are trying to say about living standards. What has always surprised me in these debates is that people are surprised that living standards fell in the wake of the financial crisis. Let me rehearse some basic facts. In the 2008-09 crisis, the British economy contracted by over 7%—more than any other major economy. It was the worst shock to our country—worse than in the 1930s. It was only after the first world war that we had a comparable hit to our economy. It was an enormous disruption, with massive implications for people’s jobs and living standards. It did happen under the last Government. It was not entirely their mistake, but it was on their watch and they had a substantial responsibility for it.

That contraction of output inevitably translated into people’s living standards, and median wages in real terms contracted by about 7% as a result of the crisis. That has been the impact on living standards. It is clear. What is different from previous recessions is that the people at the bottom end of the scale have been protected by two things: first, the minimum wage—there is cross-party consensus on that, which I welcome—and, secondly, tax policies that led us to lift large numbers of low earners out of tax altogether.

Let us look at what the combination of those factors has meant and the work of the Institute for Fiscal Studies. It makes the point that the contraction in real take-home pay for people in the bottom 10% was 2.5%. For the people in the middle, it was 6% and for the people in the top 10%, it was 8.7%. That was an essentially progressive response to a major economic crisis. Of course there are still major inequalities of income and wealth. We acknowledge that, but that relates to the top 1%, rather than the top 10%.

How do we strengthen the minimum wage system, which my colleagues and I fully buy into? We decided earlier this year to increase the minimum wage faster than inflation—a 3% increase, the biggest cash increase since before the recession. The Low Pay Commission has issued guidance to secure improvements to the real minimum wage. We accept that one of the main challenges—which the last Government did absolutely nothing about—was enforcement. We inherited a system in which the maximum fine per company was £5,000. Under this legislation, we will strengthen it to £20,000 per worker—a big step up in taking seriously sanctions in respect of the minimum wage. We now have a naming and shaming regime in place, and 30 companies have been named since it was initiated a few months ago, and as a result of much more active intervention by Her Majesty’s Revenue and Customs, we have increased by a factor of 38% the amount of arrears identified and paid to employees. All the things that the shadow Secretary of State is calling for are now being done.

Let me address the specific issue of zero-hours contacts. It is a problem, but let us get it into perspective. Although there are wide variations in the estimated number of zero-hours contracts, we are talking probably about between 2% and 4% of jobs. Of course we do not want people in that type of employment to be disadvantaged, but many take up such employment voluntarily, and particularly for students and older workers, it is an attractive system. For some, however, it is exploitative and as a result of our consultation—one of the biggest that the Government have undertaken, with over 36,000 people responding—it was very clear that there were some points on which action needed to be taken, and we are going to take action on exclusivity.

[Geraint Davies]

Does the Secretary of State accept in principle that if the Government converted a £20,000 a year job into two £10,000 a year jobs, with the higher tax threshold, he would be moving from tax payment to zero tax payment, and that this inflexibility and zero-hours and part-time work are contributing massively towards the increasing debt we face under his Government?

[Vince Cable]

That is attributing a slightly sinister train of argument to employers, which is not the case. There are many industries that have flexible working arrangements—and zero-hours contracts are only one form of flexible working—which the work force accept. The shadow Secretary of State talked proudly about his membership of Unite. I engage with the car trade unions, which accept that zero-hours contracts have quite an important part to play in the flexible working in the automobile industry.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

In the Government’s response to the debate that we held on zero-hours contracts last October, the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), said that it was perfectly reasonable for Opposition Members to ask whether the consultation would also address problems with short-time working and agency working. What conclusions did the consultation come to on those aspects of employment practice?

[Vince Cable]

I am not sure precisely what the hon. Gentleman is driving at. As he knows, there is an agency workers directive, which we have transposed into British law. It is not terribly popular with many parts of business, but it was agreed between employers and employees. I am not sure what else he is referring to.

[Barbara Keeley]

I want to refer back to the points made about the quality of jobs and whether jobs are full time or part time, and how people feel about that. Will the Secretary of State comment on a recruitment exercise that an agency has just done in my constituency for jobs in a warehouse that start at 3 in the morning, when there is no public transport? A very large number of people were put through a week-long recruitment exercise for that, and only a very small number were offered jobs. They were offered four hours of work a day, starting at 3 or 4 in the morning at a warehouse. People were mandated to attend that training. This is the kind of thing that is happening. Does the Secretary of State think that my constituents want to be offered jobs picking in a warehouse at 3 in the morning when there is no transport and where, instead of offering full-time jobs to fewer people, a larger number of people are being offered four or five hours of work a day? How can people live with that kind of casualisation?

[Vince Cable]

Obviously, I do not know all the details of that case, but it seems a very bad one. It is not clear to me whether it is to do with the employer or the way that the benefits system has impacted on people, but if the hon. Lady writes to me we will get it investigated.

[Charlie Elphicke]

I am a passionate believer in reform of zero-hours contracts, but does the Secretary of State agree that Opposition Members’ comments sit ill with the White Paper that the Labour Government issued that said that Labour

“wishes to retain the flexibility these contracts offer business”?

They then proceeded to do nothing about it for the rest of their time in office.

[Vince Cable]

I thank the hon. Gentleman for reminding us of that. Two of my Labour predecessors investigated this problem and neither of them felt there was sufficient cause to change the legislation.

[Ian Paisley (North Antrim) (DUP)]

The figures show that 580 more people are employed in my constituency now than this time last year, which is positive news for the area. However, what conversations is the Secretary of State having with the devolved Administrations to ensure unemployment continues to be tackled, especially for low-wage earners?

[Vince Cable]

Although the situation is improving in Northern Ireland, there are significant unemployment black spots. I want to work with the Northern Ireland devolved authorities to make sure that we deal with them systematically. As the hon. Gentleman knows, this is a long-standing problem in Northern Ireland that goes back long before the recession.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I raised previously allegations concerning a number of UK parcel carriers and minimum wage enforcement. Will the Secretary of State undertake to look at whether the minimum wage is being properly enforced by UK parcel carriers? Apart from the justice issues for the individuals concerned, there is the potential to affect the sustainability of the universal service obligation that Royal Mail is under.

[Vince Cable]

Certainly, if there is abuse of the minimum wage, we will want to know about it and we will investigate it. Liberalisation and the opening of the market was mandated by the European Commission some years ago, and it was implemented by the last Government, and we are now seeing the consequences in terms of pay and conditions.

[Fiona O'Donnell]

Will the Secretary of State remind me—and the Secretary of State for Work and Pensions, while he is sitting at his side—whether he still believes that any of my constituents on jobseeker’s allowance who turn down a zero-hours contract job offer should then be subject to sanctions?

[Vince Cable]

The same sanctions apply to all forms of employment.

[Richard Graham (Gloucester) (Con)]

My right hon. Friend has taken several questions on zero-hours contracts, but may I ask him a slightly different question? One of the most interesting statistics that has come out today is from the south-west Manufacturing Advisory Service, which serves as a leading indicator: 49% of all small and medium-sized enterprises manufacturing in the south-west have said they expect to employ more people over the next six months. Does my right hon. Friend agree that when we look at the forward leading indicators—whether for zero-hours or full-time employment in a great industry like aerospace in the corridor between Bristol and Cheltenham or other manufacturing industries around my constituency of Gloucester—we see there are huge indications of really positive jobs growth in really good growth industries?

[Vince Cable]

Yes, there are, and that is a very good example. We had an earlier exchange on the aerospace industry. One of the major accomplishments of the industrial strategy is that we now have a partnership stretching between Parliaments, guaranteeing large-scale investment by the Government as well by industry, and that is one of the factors contributing to the confidence that my hon. Friend described.

In my concluding remarks, I want to refer to the specific measures introduced in the small business Bill, which will support small business. Let me say at the outset that I fully accept the shadow Secretary of State’s point that one of the central issues affecting small business is access to bank credit. It remains a very big issue, and it is not difficult to understand why. We had the biggest banking crisis in our history going all the way back to the beginning of the 19th century. We have never had anything on this scale, and Britain was uniquely affected because of the scale of banks in the UK relative to GDP—it is higher, I think, than in any other country except Iceland—and, again, the Labour Government had responsibility at the time. The effect of the bank collapse and the subsequent deleveraging that has taken place, particularly in RBS, have been deeply damaging to business. We understand that and are taking steps to deal with it.

The British Business bank is now playing a significant part. Over the past year, I think there have been net flows of £660 million into the small business sector. That is a mixture of new flows to organisations such as Funding Circle and to the challenger banks, together with the guarantee schemes, which have increased by a factor of 75% since they came under the Business bank.

We are running up a downward-moving escalator, but the Government accept that we have a responsibility to intervene heavily to support like lending in the wake of an extremely damaging banking crisis. That is the context in which we are operating. The Bill will contain a series of measures that will help further. Late payment is a massive issue for small businesses, with something in the order of £30 billion in outstanding payments. The legislation will introduce a requirement on companies to be much more transparent in how they deal with late payments.

We also want to introduce much more competition in banking, to ensure that banks will come forward and lend to small businesses. Within the last year, we have seen the creation of a whole set of new banks, supported by the Business bank. The big obstacle—which I recall describing in the House 15 years ago at the time of the Cruickshank report—is the fact that the four leading banks had a stranglehold over the process through the payments system. We have introduced a new form of regulation of the payments system, opening it up to competition and preventing the kind of stranglehold that the existing banks have. The Bill will enable that to happen. In addition, we want to ensure that we have a proper system of data sharing. The lack of such a system is one of the obstacles to new banks coming in and competing. There are also problems with export finance, but the new Bill will enable us to extend export finance into new areas.

The shadow Secretary of State talked about the small business measures having taken a long time, and we accept that. There has been a massive consultation on pubs, for example. It has gone on for many years—indeed, it started long before this Government came into office—but we are now taking action. There will be a statutory code and an arbitration body. There will also be an option for an independent, market-based rent review. I am sure that we will discuss this legislation extensively, but it does represent action after many years of pressure from the Select Committee and from other Members.

Other business measures will include those relating to public procurement. This Government have opened up public procurement in central Government to small business in a way that has never happened before, but that has not always happened throughout the wider public sector, including local government. The measures that we are introducing in this big Bill will considerably improve practice in public procurement, opening up the rest of the public sector.

[Mr John Spellar (Warley) (Lab)]

The Secretary of State might have had representations from local opticians who had previously provided a service to the Driver and Vehicle Licensing Agency. All their contracts have been taken away from them, bundled up and handed to one big national company, Specsavers. Does not that show that, although the rhetoric might be fine, many Departments are still letting the system down?

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[Vince Cable]

When the right hon. Gentleman looks at the figures, I think that he will find that there has been a substantial increase in the share of small businesses in central Government procurement. I am not a customer of Specsavers, but I will happily investigate the case that he raises.

The criticism from the Opposition and certain outside commentators has been that the legislative programme is light, and that there will not be a great deal for the House to do. In relation to the small business, enterprise and employment Bill, I would simply say be careful what you wish for. It will be one of the major pieces of legislation, and it will get to grips with many detailed, complex issues. It will make a significant difference. We are introducing it against the background of a real, balanced recovery that is having a major effect on employment, and it will reflect the substantial achievements of this Government.

[Several hon. Members]

rose—