Oral Answers to Questions

Debate between Vince Cable and Sheila Gilmore

Thursday 20th November 2014 Commons Chamber

[Vince Cable]

As the hon. Gentleman knows, Parliament has spoken and we respect its views on the subject. All I would say is that the Federation of Small Businesses commissioned a study that pointed in a very different direction from the one he is describing. Of course, there has been extensive consultation with all the different parties on this issue.

[Sheila Gilmore (Edinburgh East) (Lab)]

T7. The Secretary of State has frequently said that he wants fairness for people on zero-hours contracts. Will he now, even at this stage, reconsider the amendments he opposed in this House this week, which would have given greater protection to people on zero-hours contracts, including care workers?

Jobs and Work

Debate between Vince Cable and Sheila Gilmore

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.

Amendment of the Law

Debate between Vince Cable and Sheila Gilmore

Thursday 20th March 2014 Commons Chamber

[Vince Cable]

The hon. Gentleman poses an issue that I am coming on to immediately, which is why we are a poorer country. There are people who have saved and have annuities, and there are many middle-income occupational pensioners who will take advantage of that. The central economic question raised is this: why are we a poorer country and how has that affected our living standards?

The question goes back to the financial crisis, which occurred when the right hon. Gentleman and his colleagues were in government. The Chancellor reminded us yesterday of the brutal fact that the British banking collapse and rescue was the biggest in the world. It was the biggest collapse in our history, going back not just decades but centuries, and it has done enormous harm. It has made the country poorer. The immediate after-effects of the collapse were to reduce output in this country by 7.5%, which is more than in the great depression. Not surprisingly, that has affected living standards in a radical way. It has impaired our capacity to recover from the damage inflicted on the banking system. It has required our country and the United States, but particularly here, under the right hon. Gentleman’s Government and the coalition Government, to resort to very unorthodox monetary policy. That has had a major impact on savings—which the Chancellor is now trying to remedy—asset prices and other factors. Opposition Members are surprised and indignant when they tell us that people are poorer than they were before the financial crisis. What are they comparing it with?

[Sheila Gilmore (Edinburgh East) (Lab)]

The Secretary of State seems to be avoiding the fact that people are poorer not since the financial crisis, but since 2010. Changes to tax credits, benefits uprating and so on have, for the lowest paid workers, more than outweighed any advantage gained from raising the tax threshold.

[Vince Cable]

The distributional analysis, which I am sure the hon. Lady has studied, suggests that the biggest impact of this shock has been on the highest 10%. That may be surprising, but that is what has happened.

[Sheila Gilmore]

rose—

[Vince Cable]

Let me just take apart particular aspects of the argument that has been put forward: how it relates to jobs, production and earnings. Let me start with jobs.

[Sheila Gilmore]

rose—

[Vince Cable]

I have taken an intervention.

Let me start with employment. What could well have happened, as a result of the financial crisis and its aftermath, was mass unemployment of the kind we had in the 1930s. We could very easily have got up to 20% unemployment, but we did not. We now have the lowest unemployment of any major country except Germany—lower than France and Sweden. This is partly a reflection of Government policy, but it is mainly a reflection of the common sense and flexibility of British workers, who accepted that in this crisis it was most important to be in work. We are now seeing the success of employment policy in the fact that we have had an enormous growth in employment, with 1.25 million net of public sector job losses and a gross increase of 1.75 million. Roughly five private sector jobs have been created for every one lost in the public sector. These are predominantly, in fact overwhelmingly, full-time jobs. The Opposition’s argument has been, “Well, okay, there are lots of jobs but they are part time,” but last year, in 2013, there were 460,000 new jobs, of which 430,000—95%—were full-time jobs.

Job Insecurity

Debate between Vince Cable and Sheila Gilmore

Wednesday 5th February 2014 Commons Chamber

[Vince Cable]

The hon. Lady is right, and it is one of the major casualties of the banking crisis that SME lending dried up. We are taking action on that through the business bank and in other ways. Restoring credit to the SMEs through the banking sector is a critical objective and it is a constraint on growth.

The shadow Minister’s conclusion was a good issue to embark on, and I just wish that he had spent more than two minutes and the last line of the motion on it. There is a real issue about how the recovery will be sustained. There are deep problems, including the lack of trained people and the rebuilding of supply chains. I would love to have a long debate with him about the industrial strategy, how we extend it, and what a Labour Government would do to reinforce it. I do not know whether the shadow Chancellor will come up with some more money, but I would be delighted to hear that it would have that kind of support. But the shadow Minister dismissed it as an afterthought in the last two minutes of a half hour speech, and I was, frankly, rather disappointed by that.

The shadow Minister chose to focus on jobs, and they are of course central. I want to address the issues of employment and employment conditions—

[Sheila Gilmore (Edinburgh East) (Lab)]

I thank the Secretary of State for giving way before he moves on to the next section of his speech, because I would like him to correct the possible misinterpretation of the IFS report that he has given. While matters might be beginning to turn round sooner than it thought last year, its general conclusion was that

“there is little reason to expect a strong recovery in living standards over the next few years…real earnings are not expected to return to their 2009-10 levels until 2018-19.”

[Vince Cable]

That is correct. I was merely referring to the point at which things start to turn around and improve. The IFS, like everyone else, underestimated the strength and speed of the recovery. Of course, its forecasts, like everyone else’s, may have to be revised upwards.

I have been responding to debates from my current position for the best part of four years, and I have seen the Opposition’s jobs argument go through four or five iterations. When we first started, the argument from the Opposition was that the attempt to deal with the fiscal crisis would result in mass unemployment. That now looks positively silly today, but if they go back to their speeches in 2010, that was their prediction. We now have the highest level of employment ever—30 million. We have 1.3 million more people in employment than in 2010. The jobless—unemployed—total has fallen not just in relative terms, but in absolute terms by 650,000 to 7.1 %. Of course, there are regional variations. I accept that there are particularly serious problems in the north-east, which is the only part of the UK that has double-digit unemployment.

It is worth contrasting the overall picture with some other countries that had a far less serious experience of the financial crisis than we did. Sweden has 8% unemployment. The unemployment rate in Canada, which everybody thinks is a wonderful economy—we recruited our central banker from there—is higher than in the UK. In the eurozone, even including Germany and Austria, it is 12%. Our unemployment position is significantly better than that of most other western countries.

Zero-hours Contracts

Debate between Vince Cable and Sheila Gilmore

Wednesday 16th October 2013 Commons Chamber

[Vince Cable]

That depends on what the hon. Gentleman means. I think he is merely saying what is obvious, although it may need restating—that we are dealing in the wake of the financial crisis with very weak labour markets, and not just in the UK. This has had impacts on wages and on the nature of contracts. The question for the Government and legislators is whether the problems around zero-hours contracts are the symptom or the cause. The hon. Gentleman is right that the problem interacts quite powerfully with the minimum wage issue. I have made it clear that I want the Low Pay Commission to look at the minimum wage in a more positive way, but it is, of course, an independent commission and it is not my job to tell or prescribe to it how the minimum wage could evolve. I want to respect the institution that the hon. Gentleman and his Government set up.

[Sheila Gilmore (Edinburgh East) (Lab)]

Let me take the right hon. Gentleman back to his earlier point when he was, as ever, berating Labour for not taking action. Has he not chosen his own priorities? If he thinks that the previous Government were dilatory on the issue, why has he not taken it up sooner? Other legislation, including to take away people’s employment rights, has been passed, so he has had time to do this if he wanted to.

[Vince Cable]

To help us move on from this point, let me say that I am the first Business Secretary out of the last seven or eight—I cannot remember exactly when the issue first came to the surface—who is actually taking action on the issue. Action will emerge from the consultation. We recognise that there is a problem and we recognise that there are some abusive situations, but we also recognise some positive things about zero-hours contracts, which I shall come to in a moment. We have determined to take action, and I am the first Secretary of State to have done so for a long time, after a whole series of Labour predecessors who, for whatever reason, decided not to.

--- Later in debate ---

[Vince Cable]

I will finish my list of points.

Another group is students, some of whom are looking for work experience, and most of whom want to be in a flexible arrangement that reflects the fact that their timetable varies. Another group—a very important one—is people with family and caring responsibilities. For someone in that position, the most important attraction of a job is to be able to say no when work is offered, without facing disciplinary procedures, and to be on a contract that explicitly acknowledges that work can be declined.

[Sheila Gilmore]

Does the Secretary of State not realise that there is a huge difference between someone who wants to work part-time and to know what part-time hours they have, and a situation where they do not know and have no control over the hours they work? The notion that it is easy for people on such contracts to say, “I won’t take those hours because they do not suit my child care arrangements this week” is not the reality that many people are facing.

[Vince Cable]

I am going on to explain some of the problems and, sometimes, abuses that we encounter, some of which are of the kind that the hon. Lady describes. I am trying to set out both sides of the argument. The arguments are quite complex, and the more we dig into the evidence, the more it becomes clear that there is not a simple black-and-white approach to these problems. Let me take her challenge. Clearly, there are abusive situations, and I will go through some of the most obvious ones.

The first was mentioned by the shadow Secretary of State: exclusivity arrangements, where people are bound into a contract with one employer and are not offered any hours, but cannot take employment from someone else. At first sight, that is a very unsatisfactory arrangement. We discovered that that kind of arrangement operated, for example, with the staff at Buckingham palace. When we pursued it, we discovered that one reason is security vetting, as the arrangement prevents people from being able to pop in and out of different firms. I do not know whether that is the justification in the case of Buckingham palace; there is some complexity to the argument. In general terms, however, I would accept that exclusivity is a very, very undesirable practice.

Royal Mail

Debate between Vince Cable and Sheila Gilmore

Wednesday 10th July 2013 Commons Chamber

[Vince Cable]

The previous Government’s capitulation on their Bill was one of their less glorious episodes. We have maintained the best principles of that effort and have carried it one step further. We are now implementing it, and it has all the positive features described by my hon. Friend.

[Sheila Gilmore (Edinburgh East) (Lab)]

The emphasis that the Secretary of State has placed on what a future Labour Government would do in terms of privatisation suggests that the timing of this privatisation has as much to do with getting it through before the next general election as with getting the best price.

[Vince Cable]

I think the hon. Lady has a poor memory, although she might remember that this was the first major Bill that this Government introduced—a fact that I recall because I introduced it.

Oral Answers to Questions

Debate between Vince Cable and Sheila Gilmore

Thursday 13th June 2013 Commons Chamber

[Vince Cable]

I am grateful to the hon. Gentleman for acknowledging the progress we have made. Our first priority is to ensure that the institution makes good use of the £3 billion of Government capital that is now being deployed alongside private capital. We are making good progress in that respect—something in the order of £700 million has been committed. He raised the matter of a wider scope for the bank. He anticipates the answer; we would have to go back to the European Commission and seek state aid approval. I do not currently have any plans to do that.

[Sheila Gilmore (Edinburgh East) (Lab)]

17. What the timetable is for the establishment of the business bank.

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

The business bank will tackle long-standing market failures in the provision of finance to small and medium-sized businesses. I expect the business bank to be fully operational in 2014, subject to EU state aid approval. Its programmes are being operated from the Department for Business, Innovation and Skills as an interim arrangement to help businesses straight away, including the £300 million investment programme launched in April.

[Sheila Gilmore]

I thank the Secretary of State for that answer, but in December 2012 he told this House that the business bank was already established. In fact, as he has just said, it is really operating with a re-named group of civil servants from his own Department. What assurance do we have that it will become a bank by 2014, or ever?

[Vince Cable]

I do not know whether the hon. Lady is suggesting somehow short-circuiting the whole state aid approval process. The last I heard, the Labour party was committed to the rules of the European Union. If it wants to break them, it should perhaps make that explicit. In the meantime, we operate within the rules and that means we have a team of professional people—they are not civil servants; they are from the financial sector—who are doing an admirable job and are already out in the market with a heavily oversubscribed offering which we hope to see deployed very quickly.

Budget Resolutions and Economic Situation

Debate between Vince Cable and Sheila Gilmore

Thursday 21st March 2013 Commons Chamber

[Vince Cable]

These are proper jobs, as defined by the Office for National Statistics. I honestly do not know why Opposition Members are trying to deny a genuine piece of good news that affects their constituents.

[Sheila Gilmore (Edinburgh East) (Lab)]

I thought that perhaps the Secretary of State would like to hear the answer to the question, which is actually in the report by the Office for Budget Responsibility. Of jobs described as jobs created over the past year, 14% are unpaid work experience or work placements.

[Vince Cable]

I do not understand why the Opposition should be hostile to work experience. All our evidence suggests that people who enjoy work experience go on to stable employment. It is an extraordinary state of denial when we have a successful process of job creation that the Opposition do not want to acknowledge exists.

--- Later in debate ---

[Vince Cable]

My hon. Friend is right, and the details of the Treasury’s proposals on that point are emerging quickly. For the first time in a lifetime, we are now getting serious challenger banks in the UK, such as Aldermore, Metro, Shawbrook and others, which are an important addition. I hope that the Co-op, the Nationwide and other mutuals that are trying to get into this market will also contribute.

[Sheila Gilmore]

Is not the real problem the collapse in demand in the economy, partly caused by the stripping out of the public sector, why people are not borrowing, why banks are not lending and why companies are sitting on big assets that they are not spending?

[Vince Cable]

There is a demand in the economy. When the Government come forward with proposals to stimulate demand, as they did in the housing sector, the Opposition jump up and criticise them.

Oral Answers to Questions

Debate between Vince Cable and Sheila Gilmore

Thursday 21st March 2013 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

T10. The Secretary of State has often told us of his plans to rebalance the economy. Is he as worried as I and many commentators are that a huge plank of the Chancellor’s growth strategy seems to be predicated on a policy that could reinflate the housing bubble?

[Vince Cable]

We certainly would not want to see that happen again. I have to say that I am a little surprised to be given a lecture on this, having seen the housing bubble that developed 10 years ago and got completely out of control and did so much damage. Clearly, the intention of the stimulus announced yesterday is to provide supply as well as demand in the housing market.

Oral Answers to Questions

Debate between Vince Cable and Sheila Gilmore

Thursday 7th February 2013 Commons Chamber

[Vince Cable]

I pay tribute to my hon. Friend for the work she has done through the Working Families charity to promote shared parental leave and on female participation in the finance sector. It is not entirely a problem that women are paying less income tax; raising the tax threshold will help low-paid women in particular to pay less tax, which is one of our objectives. Female participation and promotion and women rising to the top in business are also key objectives of our policy, and that will produce the equality for which my hon. Friend strives.

[Sheila Gilmore (Edinburgh East) (Lab)]

Warm words butter no parsnips. The cost of child care holds women back from entering the work force. Does the Secretary of State regret his decision to support the reduction in child care tax credits and will he now push for that to be reversed?

[Vince Cable]

The Government are supporting women with young children, and families in general, to the tune of about £5 billion through the child care element in tax credit and free early years tuition, which for low-income families has been extended to two-year-olds, as well as tax relief on employers’ schemes. That amounts to very substantial support for child care.

Enterprise and Regulatory Reform Bill

Debate between Vince Cable and Sheila Gilmore

Monday 11th June 2012 Commons Chamber

[Vince Cable]

The Minister of State, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), who has done admirable work in progressing this agenda, tells me that we are indeed planning to do that and that it will appear in that form.

[Sheila Gilmore (Edinburgh East) (Lab)]

Following the dialogue that has just taken place, I am left unclear whether the Secretary of State agrees that agency worker regulations are gold-plated. If he thinks that they are gold-plated, in what sense is that the case, and if he does not think so, will he make that statement clearly?

[Vince Cable]

As I said, that case has been strongly made to us by people in the business community. I also said that the directive’s current form in British law was the result of a consensus among the main social partners. Although the CBI has small business membership, it would not consider that area to be its primary function. If there are specific proposals on how some of the gold-plating, if that is what it is, can be alleviated in a sensible and fair way, I am always willing to look at that. I do not have a closed mind on these issues.

[Sheila Gilmore]

I am still left unclear about the meaning of gold-plating, which, in my view, is a phrase that is thrown around this House far too often. In what way does the Secretary of State think that there is gold-plating in this respect?

[Vince Cable]

What small businesses usually mean by gold-plating is that they spend a great deal of time filling in forms, ticking boxes and complying with regulatory measures that impede their business activity. If that is the case in this respect, as in others, we are happy to look at it.

Also in a deregulatory spirit, the heritage measures in the Bill implement commitments to legislation made in the Government’s response to the Penfold review of non-planning consents, which aimed to ensure that non-planning consent regimes operate in the most flexible and simplified way. The measures include bringing greater clarity on what is and what is not protected within listing buildings, and they will enable owners and local planning authorities to enter into voluntary partnership agreements to help them to manage listed buildings more effectively.

The measures that I have outlined are designed to improve the business environment and to help to restore the UK economy to health by laying the foundations for lasting recovery.

Business and the Economy

Debate between Vince Cable and Sheila Gilmore

Monday 14th May 2012 Commons Chamber

[Vince Cable]

Clearly, the previous Government were not responsible for the global meltdown, but they were responsible for building up the largest and most volatile banking sector in the western world, and it was from that that the collapse followed.

To achieve a recovery, we need to build on some of the positive trends that are beginning to emerge. Despite the deep-seated problems of the economy and the slow growth, we have seen 634,000 private sector jobs created in the past two years, which is almost twice as many as have been lost in the public sector. Private sector job growth explains why our unemployment level, although distressingly high and a tragedy for many individuals, is no higher than that in the United States.

[Sheila Gilmore (Edinburgh East) (Lab)]

That figure of 600,000 private sector jobs has been given, on and off, for the past two years. Is it not the truth that the vast bulk of those new jobs were created in the early part of this Government’s term but were clearly related to the financial policies pursued by the previous Government, and that the number of private sector jobs created in the latter part of this Government’s term to date is extremely small?

[Vince Cable]

That is not correct. There has been a sustained improvement in private sector employment.

--- Later in debate ---

[Vince Cable]

I am not here to attack journalists; I am not sure which ones the right hon. Gentleman is referring to. It is certainly true that the Governor of the Bank of England has been absolutely clear from the outset that in order to have long-term stability in banking, these reforms, or something very like them, had to be implemented, as we are now doing.

One area where business success and responsibility coincide is in relation to flexible working. The UK employment framework compares well internationally and has helped to keep unemployment relatively low, despite the extremely difficult economic conditions, but that is not to say it cannot be improved, both for workers and employers. We want a flexible labour market that supports growth and creates employment, and making sure that that happens requires acknowledgement of changes in family life.

Most women now go out to work and men shoulder more of the duties at home. As roles and responsibilities have changed, our lives have become increasingly complex. That is not just true of parents with young children. Many have to combine working with looking after an elderly parent, a sick partner or a grandchild. Extending the right to request flexible working to every employee will make that easier.

[Sheila Gilmore]

I am pleased to hear the Secretary of State endorse the needs of parents and carers. Will he comment on and perhaps put to bed the proposals appearing in the media over this weekend saying that we should restrict maternity leave to no more than six months? For example, The Sunday Times seemed to be full of that proposal yesterday.

[Vince Cable]

That proposal is not in the enterprise and regulatory reform Bill. We are committing to extending flexibility at work in a way that avoids unnecessary costs for companies and delivers real economic benefits. Research from the CBI, for example, found that 63% of firms offering flexible working reported lower staff turnover, saving on recruitment and training costs.

Amendment of the Law

Debate between Vince Cable and Sheila Gilmore

Thursday 22nd March 2012 Commons Chamber

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

The central issue on which this Budget—and, indeed, the coalition Government—will be judged is how we cope with the fallout from the massive financial collapse and the destruction of wealth, with the loss of approximately 10% of our national income, and put the economy back on a sustainable path.

The shadow Chancellor made some very kind and considerate remarks, and I thank him for his concern about my personal finances. Perhaps I can take him back to a toe-curling interview he gave a few days ago, when he described his two-decade relationship with his former boss, mentor, guide and friend as “unbelievably debilitating”. That is relevant to this debate, because it gets to the heart of the problem of who is responsible for the legacy that we are having to manage. We inherited not merely a large fiscal deficit, but the largest in the G20 and the largest amount of household indebtedness of any developed country.

We inherited an economy in which the share of the banking sector—the banking assets—had doubled in Labour’s period of government, to become the largest of any major economy, and in which, simultaneously, the share of manufacturing had contracted by almost a half, from 18% to 10%. We have heard a long speech about equality and fairness, but we also inherited an economy in which, throughout Labour’s period of government, the share of income of the top 1% and the top 10% of the population inexorably rose, and in which wealth became progressively more unequal.

[Sheila Gilmore (Edinburgh East) (Lab)]

rose—

[Vince Cable]

I will take the intervention in a moment.

A narrative has developed in which one man was responsible for this fiasco, but it was a genuine team effort, and the shadow Chancellor was an absolutely key member of that team. Being lectured now on how to manage an economy is a little bit like being given a talk on seamanship by the captain of the Costa Concordia—another believer in light-touch steering.

[Vince Cable]

It was actually on the back of an uncontrolled housing boom. Personal indebtedness as a share of people’s incomes doubled in the period of the last Government. Of course the process of deregulation beforehand did not help, but the core increase—the fundamental problem of indebtedness—arose when the shadow Chancellor was a key decision maker in that Government.

I want to talk about the Government’s basic economic strategy, but before I do, I want to address the issue of unfairness and distribution. There were two allegations. One was that the policies have had a damaging effect on the so-called squeezed middle; the other was about the millionaires. Let me deal with each in turn. On the squeezed middle, if hon. Members look at the distribution charts, they will see that the squeezed middle has been squeezed a great deal less than the squeezed top. The major cash impact of the Budget was on low and middle-income families, as a result of lifting the threshold to over £9,200, with £220 for more than 20 million taxpayers. That was right, not just because of the fairness involved, but because it gives a significant economic stimulus, and at the margin—the 1 million people being lifted out of tax—it is a major incentive to work. The policy also contrasts favourably with the strategy that the Labour Government adopted in office—which we discussed many times—of using tax credits. By increasing tax allowances in the way we have, we are giving people the freedom to choose how to spend their own money, not taking it from them and then giving it back to them, through a complex, means-tested system, with high marginal rates of withdrawal.

[Sheila Gilmore]

Is the Secretary of State disappointed that he lost the battle to rescind the cuts to working tax credit for couples working 16 hours, given that they do not benefit at all from raising the tax threshold, because they already do not pay tax? Did he lose that battle or did he not fight it?

[Vince Cable]

The shift from a system based on tax credits to one based on tax allowances obviously benefits the middle and low-income population as a whole. The impact on particular groups depends on a variety of things, including the minimum wage, which we have just uprated, and the complex interaction of tax and tax credits.

However, let me turn to the point about pensioner income. I find it quite extraordinary to hear the shadow Chancellor expressing such alarm about the impact of the Budget on pensioners. I do not know whether he has looked at the scorecard, but it is clear. In 2012-13, the effect of the increase in the basic state pension and the pension credit minimum income guarantee will be to transfer £1.75 billion to pensioners. The impact of the changes on age-related allowances is £360 million—one fifth of the additional funding going to pensioners as a consequence of this Budget. When we look at the pensioner population, we of course see big differences. There are 5 million pensioners who do not pay tax, many of whom are poor, and who are not, of course, affected by the changes at all. There is a small group of people—frankly, my contemporaries—who have high retirement incomes and considerable asset wealth, and it is right in principle that they should pay a bit more. There is a group in between, as the shadow Chancellor rightly said, of people who are not wealthy and do not have particularly high incomes, but who could be affected to a limited extent, as a result of inflation eroding the value of the allowances—inflation is currently estimated at 2.5%. Those people will benefit enormously from the increase in the basic pension.

Let us just remind ourselves what is happening. We have an increase of £5.30 in the basic state pension for a single person. On top of the increase last year, we are talking about a £10 increase in the basic state pension, as a result of the protections that this Government have introduced. For many years, the pension steadily fell behind earnings as a result of de-linking, and, despite numerous promises, the previous Government did absolutely nothing about the problem. More and more pensioners were sucked into means-testing. This Government have corrected that problem. We have a triple lock system and, as a result of that, and of this Budget, the vast majority of pensioners on low and middle incomes will be considerably better off than they were before.

Executive Pay

Debate between Vince Cable and Sheila Gilmore

Monday 23rd January 2012 Commons Chamber

[Vince Cable]

That is a pithy summary of what I was trying to say, on which, as Mr Speaker ruled, I took rather too long.

[Sheila Gilmore (Edinburgh East) (Lab)]

Apparently, the chief executive of Peacocks took a hefty pay increase just last year when clearly his company must already have been failing. I am sure that all workers facing redundancy from Peacocks would like to know how the Secretary of State’s proposals might assist people in their position in future.

[Vince Cable]

The hon. Lady refers specifically to Peacocks, on which I have been approached by several concerned elected representatives. Having looked at the facts, the Government do not judge that there are any grounds for intervention in the wider public interest, but I have great sympathy for the employees, who are in a very bad position because of bad decisions made in the past by their management.

Higher Education and Student Finance

Debate between Vince Cable and Sheila Gilmore

Tuesday 12th October 2010 Commons Chamber

[Vince Cable]

I genuinely hope, even at this late hour, that that consensus has not broken down. The right hon. Member for Southampton, Itchen was ambiguous in his approach to graduate tax; he referred to it, but he did not commend it. It may be that that is part of a journey—a rather short one—back to some form of consensus on higher education. There have been occasions when the parties in this House contributed greatly to long-term economic thinking. On the pension age and the age of retirement, for example, we came together on very difficult decisions. It has been a struggle to get all three parties to face up to the realities of the costs of higher education, but I have not given up on the Opposition.

[Sheila Gilmore (Edinburgh East) (Lab)]

The Secretary of State has said that before May he did not consider that a huge increase in tuition fees was needed or desirable for the long-term funding of our universities and students. The only thing that appears to have changed in his thinking is his belief that the deficit has to be wiped out very quickly. Why are two or three whole generations of students being asked disproportionately to pay for that deficit? Is he not mixing up the long term, which is what the Browne report was supposed to be about, and the short-term issues relating to how we overcome the deficit?

[Vince Cable]

I know that the hon. Lady did not mean this, but it is often believed that fees are paid by students as they study, but they are not. We are talking about a graduate contribution that extends for a considerable period and that will relate to the ability to pay. She seems to be minimising the substantial financial problem that the Government have inherited, which is severe. I hope that Opposition Members will become a little more serious about the country’s financial problems.