(9 years, 9 months ago)
Commons ChamberWhen I was in Brussels a few months ago—I do not recall the exact date—I was actively pursuing the issue of speeding up state aid clearance and I have certainly actively raised trade policy issues. We support the principle of the European Commission acting—if evidence can be acquired. As the hon. Gentleman will know, getting anti-dumping action and countervailing duty action by the Commission is not easy. Proof has to be established, but we are pressing where unfair practices can be established.
I thank the right hon. Gentleman for charting and laying out the facts of the decline in steel production in the UK. I have heard from a reputable source that Ravenscraig in Scotland could have been saved by being bought by a rival, but to prevent competition from other areas of the UK at the time, British Steel chose to end production at Ravenscraig. Will he look into the veracity of that statement and perhaps report back at some other time that Ravenscraig was deliberately sabotaged and ended for purposes related to other places?
I recall that when I lived in Scotland, Ravenscraig was still producing as an integrated producer. I do not know the history of why it was closed, and I doubt the conspiracy theory. I suspect that the industry was under a great deal of pressure. The simple point to make is that the industry has been contracting over three to four decades, both under British Steel—some Labour Members might remember the name of Mr MacGregor—and subsequently under privatisation, so it was not ideological.
Before I finish the point about the historic trends, let me say that the decline in employment has been far more dramatic and far more brutal than the decline in output. It is worth recalling that, back in 1980, 155,000 people were working in the industry, and there are now 20,000. We are down to little above a 10th of the total labour force. There were two major spasms when this occurred. One was between 1979 and 1981, when the industry halved in manpower—a very difficult phase. Then, during the period of the last Government, the level of employment halved again after 1997. The question we now face is whether we can avoid another spasm of contraction as a result of the difficulties faced by several leading producers, particularly Tata.
(10 years, 9 months ago)
Commons ChamberOf course, if there is illegal abuse of the minimum wage, it needs to be investigated and prosecuted, and we will do that. If the hon. Lady gives me the facts I will ensure that the matter is followed up.
I want to round up on the broad issue of the level of employment. The trend is clear: employment is growing rapidly, unemployment is falling and all parts of the UK are now benefiting. Even among particular groups of the population with past experiences of unemployment —for example, lone parents, disabled people and over-65s—employment is now at pre-recession levels. The overall story in the labour market is a positive one, but there are still large pockets of serious structural unemployment and people who want full-time employment —we acknowledge that—and that is why the recovery still has to be made sustainable.
The hon. Member for Darlington (Jenny Chapman) raises a very important point. We might be talking about a circumvention of the law or a loophole. Will the Secretary of State ensure that people on the minimum wage are not being scammed or skimmed by agencies and losing part of their vital weekly wage because of some of these schemes? It would be obscene if that was happening.
It is not clear to me from the intervention whether we are talking about avoidance or evasion. I need to be clear before we take action, so if either the hon. Gentleman or the hon. Member for Darlington (Jenny Chapman), or both, give me the details, I will deal with the issue.
(10 years, 9 months ago)
Commons ChamberI have given way a number of times, and I should now like to finish what I have to say.
Along with the element of its remit that relates to the impact on employment, one of the key concepts in the work of the Low Pay Commission is what it calls the “bite”. That terrible bit of jargon refers to the relationship between the minimum wage and the median. It may be technical, but it is very important, because the closer the minimum wage gets to the median, the more likely it is that a big increase will displace employment. When the minimum wage was first introduced in 1999, it was about 46% of the median; now it is 53%, and there have been successive increases.
The median wage is falling.
It did fall slightly last year—just slightly. However, the minimum wage is now significantly above that level.
That is a major issue for young workers and for apprenticeships. For young workers, particularly those aged 16 and 17, the so-called bite is close to 80%, which means that any significant increase in the minimum wage would have the unfortunate effect of displacing most of them from the labour force. That is a factor that has weighed very heavily with the Low Pay Commission when it has made its recommendations.
I have already said in the House on several occasions that the Government are now engaged in a public conversation about how we deal with zero-hours contract abuses. I think the hon. Gentleman has to be careful as the research that has been carried out suggests that very large numbers of people on zero-hours contracts like that model, but we must deal with the abuses, of course.
It would be remiss of me not to take at least one intervention from the Scottish nationalists, so I will do so.
May I put in the right hon. Gentleman’s mind the words of Paul Krugman earlier this week? He spoke about unemployment insurance and how when money is in the hands of the poorest in society, that creates demand, which in turn creates jobs. The corollary of that is that the higher the minimum wage, the more money is put in people’s pockets and the more it circulates, and we return to a system, as in the 1950s, when inequality is reduced, rather than the situation now, when inequality is equivalent to what it was in the 1920s.
Of course an increase in wages among other things increases demand, and that is one factor that has to be taken into account. That leads me on to the next point I want to make, which is how this year I have approached the issue of the mandate of the Low Pay Commission. Opposition Members have been questioning that and saying, “Why don’t you change the way we look at it?” I have done that, while respecting its independence. I have said the Government want a faster increase in the minimum wage, reflecting the fact we now have a real recovery, and in order to achieve that the LPC should look at a wider range of factors governing low pay. They include the fact that at the national economy level, the Governor of the Bank of England has now said that if unemployment falls to 7%, he would want there to be some tightening of monetary policy, as the environment will have changed. We would want to see what impact that will have on the cost of employment, which has been cushioned by the Chancellor’s decision to bring in the employment allowance—£2,000 for the first employee—as it significantly changes the cost of employment. We also need to look at the impact it would have on the Government, because there is an interaction with tax credits, tax yields and corporate taxation. There is the impact on take-home pay, too, and therefore we have to factor in our tax policy.
I have therefore asked the LPC to look at this problem in a much more holistic way. I do not know what it will conclude, and I will be respectful of its independent advice, but that is the way we are approaching this and we do now recognise that in a recovering economy low-paid workers should derive benefits, and that is how we are approaching this matter.
(11 years, 7 months ago)
Commons ChamberI am delighted to speak in support of the Budget and thank the shadow Chancellor for 35 minutes of pantomime. More worryingly for me, I occasionally read in the newspapers that we agree with each other; I am not sure whether he regards that as a bigger slander than I do. I have been trying to find out what it is that I am supposed to agree with and to understand what actually is his plan B. A quick search revealed seven different variants of plan B. In fact, that is almost certainly an understatement, because the shadow Chancellor has had more positions on the economy than there are positions in the “Kama Sutra”.
Let me run through some of the variations that we have heard from the shadow Chancellor over the past couple of years. He started with the big stimulus to the economy that was going to come from the bankers’ bonus tax, which would have imposed a £2 billion tax on a tax base—a bonus pool—of £1.6 billion. He had not realised that, since his time in charge of the City, the bonus pool had shrunk from £14 billion.
The shadow Chancellor then moved on to the five-point plan, which was mostly pretty sensible. It included apprenticeships, which we are already doing on a much bigger scale. He also wanted, I think, £200 million for the regional growth fund. Well, we have given it billions, not hundreds of millions. He then moved on to the reallocation of the money from the 4G auction sale, but it had already been allocated—I have already spent quite a lot of it.
We have now moved on to trying to understand what plan B actually means today. As far as I can fit it together, it consists of several elements, including a big stimulus from a value added tax cut, stopping Government spending cuts and, somehow out of the alchemy, reducing borrowing. I have tried to work out how this plan was created and am struck by its similarity to the economic strategy being developed by Nigel Farage, although I may be doing the UK Independence party a disservice.
The shadow Chancellor and I have a serious interest in economics. Before we discuss how to deal with this crisis, we have to try to understand how it originated. I think that most serious economists, whether they are in the Keynesian tradition or not, would acknowledge that this is not a cyclical recession. It is what is now called a balance sheet recession, and in order to understand how that happened we need to understand why the balance sheet got so big in the first place and why private sector deleveraging is now happening on such a massive and damaging scale.
This is an uncomfortable set of questions for the shadow Chancellor because, among other things, he has to explain the following. Why was it that in the 50 quarters of growth without inflation, nobody noticed the massive asset bubble in residential and commercial property, which has since burst? He has to explain why households in the UK, which have become heavily over-leveraged, managed in that period to acquire the highest level of personal debt in relation to income of any country in the developed world. He has to explain why a medium-sized bank in Scotland was encouraged and actively supported by his Government in trying to become the biggest bank in the world on the basis of dodgy acquisitions and gambling in its casino operations. He also has to explain why, when his former boss commissioned an excellent study on the banking system in 2000, which explained why there was a cartel operating that was squeezing the life out of small business, his Government did absolutely nothing about it.
We have a major economic crisis caused by balance sheet deleveraging, arising out of a major financial crisis. One would have thought that those on the left would want to talk about a crisis of financial capitalism, but they do not want to talk about it at all. In fact, the shadow Chancellor has a striking resemblance to the lead character in “Fawlty Towers”. Colleagues may remember the episode in which he goes around with great indignation, wanting to have an animated conversation about Germany, but nobody wants to talk about the war. The shadow Chancellor wants to talk about the economic crisis, but not the financial collapse that he presided over.
The right hon. Gentleman has talked about an asset bubble. What is the Chancellor’s mortgage scheme, other than the hope of an asset bubble to get him out of trouble? What growth or capacity would that add to the economy? The problems of this economy will not be answered by yet another asset bubble. What are the Government trying to do? All that their scheme will do is create another asset bubble.
There are two elements to the Chancellor’s housing package. The first is the development of the FirstBuy scheme, which will provide £3.5 billion for shared ownership. That has been widely welcomed because it will increase the demand for housing and get the housing market going. The other, more ambitious scheme is a form of insurance for mortgages, which has been very successfully applied in Canada, for example, where it prevented a collapse of the market of the kind that occurred here and introduced greater stability. The Chancellor is now consulting on how that scheme should be designed, which is absolutely right.
My colleague is absolutely right. He reminds us of two things that the Government have done. One is the freezing of petrol duty. The other is the allowance for remote communities, which he ably represents, as does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).
Does the Secretary of State agree that the rural fuel derogation should be increased? A 5p cut is not enough; we really need a 10p cut. I am sure that the hon. Member for Argyll and Bute (Mr Reid) would agree with me.
I am sure that we would have free petrol in a perfect world.
Let me deal with some of the points of economic substance that have been raised. The first was about job creation. It is true that in the last set of figures there was a very small increase in unemployment. However, that happened against the context of the last three months, in which 130,000 new jobs were created, vacancies rose and redundancies fell. In this Parliament, we have created 1.25 million new private sector jobs. It is difficult to understand why, if the economy is performing as badly as the shadow Chancellor claims, a large number of new private sector companies are creating jobs in that way. There are regions of the country, such as the west midlands, that in the boom periods saw a decline in private sector employment. That is now being comprehensively reversed.
The question put by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) is apposite: why does the Labour party think that 600,000 jobs are being predicted by the OBR in the coming year? We got the ludicrous answer that it has something to do with immigration, but immigration is about the supply of labour, not the demand. Where is the demand coming from, other than a favourable business environment that encourages small companies to establish and grow jobs?
My constituents in the outer Hebrides want to know what the service will look like for customers in the Hebrides, and for my postal workers, after these measures.
As I reminded hon. Members a few moments ago, customers in the Hebrides have experienced a decline. We are going to turn that around, and I shall explain the process and investment by which we will do that.