I beg to move,
That this House believes that the Government is out of touch and does not understand the impact of its policies, including the Autumn Statement, on children, parents, women and hard-working families; and further believes that these policies have resulted in a squeeze on households’ living standards.
I speak for many in the House when I say that I feel a debt to the hon. Member for Morecambe and Lunesdale (David Morris) for his bringing his 10-minute Bill before the House. I had no idea that it was so dangerous to go into a hairdresser’s, and I certainly will not return to one until his Bill becomes law. I do not know if I can speak for the Secretary of State for Work and Pensions too, but it is good to start debates on a note of consensus.
The verdict is now in. It is time to put all the excuses of the past few months—the snow, the cold, the royal wedding, the Japanese earthquake—to one side. We now see the true extent to which the Chancellor has drained the life out of the economy and its recovery. The Government are fundamentally failing to get our economy back on the move, and they demand of working people, parents and children that they should pay the price of the Government’s economic failure.
Yesterday, the Chancellor could no longer hide behind excuses. The Office for Budget Responsibility laid out the truth. Families, pensioners and businesses across the country have known for some time that his plan is hurting, but yesterday they found out that it is not working.
I will give way in a moment.
The Government are now set to put on the national credit card £158 billion more than they planned a year ago—£6,500 for every house in this country. Why? It is because they are planning to put on the dole another 250,000 people over the next year or two. They are bringing down the number of people in jobs by 300,000, and they have put up the benefits bill—that sign of welfare waste—by an incredible £29 billion over the forecast period.
Once upon a time, the Chancellor told us that we were all in this together. Not any more—it is back to the economics of, “You are on your own.”
I will give way in a moment. There are not too many speakers on the Treasury Bench today, so there will be plenty of time for interventions.
Let us consider what the Chancellor’s proposals mean for jobs. The OBR now predicts that unemployment will rise next year, and unemployment forecasts for the years ahead are up year after year until 2015. The Government say that there is no alternative, because they still believe that unemployment is a price worth paying. Unemployment is bad this year, but it will be worse in the years ahead: the OBR said yesterday that it will rise up to 8.7%, while youth unemployment already stands at over 1 million. The brutal price that our young people are paying for the Government’s failure to get people back to work is now clear to hon. Members across the House. Those young people will be at the sharp end of rising unemployment in the years ahead. I will give way to the hon. Member for Devizes (Claire Perry), who will perhaps tell me how the Government can do more to get down youth unemployment in her constituency.
The Chancellor said yesterday that he is putting £158 billion more on the national credit card—£8 billion more borrowing than I and my right hon. Friend the Member for Edinburgh South West (Mr Darling) set out. The Government are set to borrow £37 billion more than we set out in the Budget before the election. The tragedy is that 7,700 people in the hon. Lady’s constituency will see their tax credits cut next year to pay for the failure of those on her Front Bench to get this country back to work.
I will give way in a moment.
There have been announcements in the past few days, not, sadly, from the Secretary of State for Work and Pensions, but from the Deputy Prime Minister, who announced the youth contract, which is set to be so successful that the OBR said yesterday that it cannot count on its getting any extra people into jobs. All that we have had this week from the Minister for unemployment is a decision to blame the figures—it is all down to the statistics, not his failure to get people back to work.
Long-term unemployment among young people is going through the roof—it is up 83% this year alone—but another jobs crisis is emerging up and down the country among our most experienced workers. Among the over-50s, long-term unemployment is more than 110,000—up 20% since the start of the year. People with experience to offer, who have worked hard and paid in all their lives, deserve better than to be thrown on the scrap heap.
The right hon. Gentleman’s premise is that the Opposition would not have borrowed more money, but that is fundamentally false, as the reality is that they would have borrowed billions more to deal with the eurozone crisis. In addition, interest rates would have been higher, costing home owners more money on their mortgages.
I know that the hon. Gentleman takes these matters seriously, and that he will feel bad about the fact that 10,000 families in his constituency are seeing cuts to their tax credits to pay for the failure of his Front Bench to get people back to work. He is such an assiduous attender of these debates that he will know as well as I do that the OBR’s analysis of our last Budget showed that we were set to borrow £37 billion less than the Chancellor set out to the House yesterday. He should explain that to the 10,000 families in his constituency who are seeing a cut in tax credits.
The right hon. Gentleman is being generous, as ever, in giving way. I remind him, however, that there is obviously a split between him and the shadow Chief Secretary to the Treasury, because on yesterday’s BBC programme “The Daily Politics”, she was asked this specifically:
“If you had been writing the autumn statement, borrowing would have been higher? Yes or no.”
Her answer was yes.
We do happen to believe that further action is needed to get people back to work, because we are now seeing the costs of the right hon. Gentleman’s Government over the past year and a half. We have now seen the Chancellor set out £158 billion of extra borrowing because he has drained the recovery of growth and put the benefits bill up over the course of this Parliament by £24 billion. That is the only part of his budget that is growing.
As I have found before, the right hon. Gentleman does not like history. The fact is that a note was left saying, “There’s no money left,” and that had consequences. This country is living and breathing the consequences of how Labour managed the budget. We are in deficit, which is why we talk about it so often, and it is about time the Labour party recognised the consequences of the way in which it managed this country’s finances.
Perhaps the hon. Lady’s memory of history is suddenly faltering, because she should surely remember that in the Chancellor’s emergency Budget, borrowing turned out to be £20 billion less than my right hon. Friend the Member for Edinburgh South West projected when he was Chancellor. Unlike his, the Conservatives’ borrowing forecasts have come in £158 billion higher than originally projected. That means thousands of pounds more for every household in this country—and of course, the price of the consequences is being paid by the hon. Lady’s constituents. More than 7,000 families in her constituency are now seeing their tax credits cut to pay the higher bills of higher unemployment.
Can we turn from history to current affairs? One of the key messages from the Government was that they were going to make work pay. Following from my right hon. Friend’s argument about how additional spending is being generated because of the failure of their policies, would he comment on the fact that in-work benefits for working households, such as housing benefit for those in work, have risen by 42% since the general election, as 115,000 more households have been forced on to in-work benefits?
That underlines an extremely important point, and I hope that in the Secretary of State’s response he will say a little more about how he reconciles the “Budget” that we heard yesterday with his own honourable intention to ensure that work pays. Right now, in my constituency, I have working parents, especially women, coming to me and saying that they are now giving up work—because the Government are cutting benefits, meaning that it is no longer economic to work. Surely that cannot be right.
Does the shadow Minister not find it strange that the Government argue that if we were to borrow to stimulate the economy the money markets would go mad and put up interest rates, yet the markets seem to have no problem in lending us money to pay for unemployment?
May I take the shadow Secretary of State back to the subject of youth unemployment? Doubtless the previous Government did some very good things in that area—they did some very bad things as well—but does he admit that the present situation was not created overnight? When Labour left office there was an upward trend in unemployment—[Interruption.] For youth unemployment, there was an upward trend from 2004. Does he accept that under Labour the number of children brought up in workless families hit record levels and the gap between the best performing and the worst performing schools widened? What he is saying is political knockabout, but this is a long-term issue, which deserves to be treated seriously.
I am afraid that the hon. Gentleman is simply wrong. Youth unemployment was coming down before the election; it has now gone through the roof, since his party took office. It is now up through the 1 million mark for the first time. Long-term youth unemployment in this country is up 83% since the start of the year. He would surely admit that that is a badge of shame for this Government, and demands much more urgent action from them.
Does the Opposition spokesman agree that his authority to talk about this subject would be heightened if it were not for the fact that during the previous 10 years, before his party lost office, youth unemployment rose to a quarter of a million—and that was during a boom? His authority to talk about this is hugely reduced by that track record.
Youth unemployment came down to record lows under the Labour Government. It was coming down before the election, because we chose to act. Now the key back-to-work scheme for young people has been taken off the shelf for the past year and a half. What is the result? Youth unemployment in the hon. Gentleman’s constituency is going up. He should explain that to young people in his constituency, and he should apologise to them. The back-to-work scheme set out by the Deputy Prime Minister last week is not even planned to come into place until next April. That shows how much his party cares about getting young people back to work.
I shall give way in a moment.
The weakness in the jobs market is not abstract; it shows up in people’s pay packets. That is exactly what the Office for Budget Responsibility confirmed yesterday. Earnings, it says, are now set to fall throughout the rest of this Parliament. By 2016 wages will be no higher than they were in 2001—£1,400 below their pre-crash peak—yet prices are not falling; they are rising. Prices are going up over the course of this Parliament. Wages are falling and prices are rising. That double whammy is now hurting families all over this country.
Not long ago, the Governor of the Bank of England said that we in this country now confront the worst squeeze on living standards since the 1920s. Yesterday, the Institute for Fiscal Studies said that the squeeze was “unprecedented”. This is the biggest fall in household income since records began. With our nation’s family budgets under such pressure, we would have thought that the Government would step in to help. Not a bit of it. Instead, working families are being asked to pick up the pieces.
The right hon. Gentleman is making a very important point—that a big squeeze on living standards started under his party’s Government. It is continuing under the coalition. As the forecasts make clear, a big element in that is energy and fuel prices. Does he have any proposals that the Government could adopt to tackle that problem?
We do think that Government should be doing more in the energy market to help to bring down prices. The right hon. Gentleman will, I know, feel strongly about that, because of the 6,500 families in his constituency who are now seeing cuts in tax credits.
When wages are falling and prices are rising, people would expect the Government to do more to help, but what we now have is a budget set out yesterday that tightens the squeeze on working families. Last Friday the Deputy Prime Minister blustered his way through an interview on the radio and said, once again:
“We will not balance the books…on the backs of the poorest”.
That is an old line, and today it rings pretty hollow, because that is exactly what the Government are doing.
Yesterday, the Government rejected any new tax on bankers’ bonuses. Instead, it is children, women and working parents who are picking up the tab for the Government’s failure to get people back to work.
My right hon. Friend is making the case extremely well about the unfairness of what the Government announced in the autumn statement about targeting those on lower and middle incomes instead of targeting the bankers and the bonuses—a move that was successful under Labour and should be repeated by the present Government. He was asked about prices, and I am sure that he will soon say something about cutting VAT as an effective way of helping hard-pressed families through reduced prices.
I will indeed come on to that topic in a moment, but I first want to talk about the impact on children of yesterday’s Budget. We knew before yesterday’s Budget that all the gains made in reducing child poverty over the last decade were set to be wiped out by the decisions of just the last year. Once upon a time the Prime Minister told us he would not increase child poverty. That was the rhetoric, but today the Institute for Fiscal Studies has given us the reality. It has already said that almost one in four children will be in poverty by the end of the decade, thanks to this Government. That was before the attack on working families in yesterday’s Budget. A generation of children will not thank this Government because hundreds of thousands more of them are now destined to grow up poor.
Then we had yesterday’s Budget, reversing any improvement in child tax credit for the poorest, and robbing 5.5 million families of £110 per child. There will now be 13 cuts to children’s benefits beginning in March, which next year will take out £2.5 billion in benefits for children. That is almost eight times the level of benefit cuts this year. Almost £12 billion is coming out of children’s benefits over the course of this Parliament; that is £1.5 billion more than is coming off our nation’s bankers. I therefore have to ask this question: what kind of Government take more off children than they take off bankers?
Does the right hon. Gentleman not recall that in his Government’s 13 years in office between 1997 and 2010 they increased personal tax allowances by only £2,400, whereas in only 18 months we have increased people’s earnings by raising those allowances by £1,800, and we will go further by the end of this Parliament by raising the figure to £10,000? Is that not a major contribution to addressing lower pay?
No, because what comes with that is the biggest raid ever on the benefits of children and families. Let us consider the bill that will be paid by families under yesterday’s announcements. An average family on the minimum wage with two kids will lose £320 a year as a result of the changes made yesterday. They would only ever gain £120 a year through the increases in tax thresholds to which the hon. Gentleman referred. Overwhelmingly, poorer families and children in this country are now getting poorer as a result of his Government’s Budget.
No wonder Save the Children said yesterday:
“For many families the scrapped £110 increase in Child Tax Credit could mean the difference between putting food on the table for their children or having them go hungry.”
The Child Poverty Action Group said:
“Britain’s poorest families have been abandoned today and left to face the worst…the government has actively decided to let child poverty rise.”
Those on the Treasury Bench should be ashamed of themselves; they should be ashamed of what they have done to children in this country. Labour will be the party that stands up for a fair deal for working parents.
The scale of the cuts to children’s benefits is not the only story. There is more. Let us consider the cuts to working tax credits for working families. Working families are already in line for seven big cuts to their tax credits next year. That was going to lose them more than £1.7 billion, but that was not enough for the Chancellor, so yesterday they got an eighth cut to their working tax credits. They will now lose almost £2 billion next year. That is almost double the cuts they received last year.
Some 2 million families in our country now face a double hit, with the cuts to child tax credits and the freezing of the working tax credit. There is therefore a great deal of extra squeeze that will hit working families, but I want to flag up one cut in particular. It is the subject of a Westminster Hall debate secured by my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), and I want the Secretary of State to reflect on it further, as I think it will have consequences that he would not intend. One of the changes he will make next year is to increase the number of hours a working couple must work in order to get tax credits. At present, they can qualify for tax credits if they work 16 hours a week. From next April, they will need to work 24 hours a week. At present, however, companies are not handing out extra shifts. Many families that will be affected work in the retail sector. If anything, big retailers are cutting back on their employees’ hours, not increasing them. A family that is on the minimum wage for 16 hours a week might bring in just over £5,000. Working tax credits and child tax credit might increase their take-home pay to about £11,000. If they cannot get an extra shift, all of that working tax credit will be gone. Those families may well find themselves better off on jobseeker’s allowance.
We must not create a situation in which cuts to tax credits mean families are better off on benefits than in work. I am sure that is not the Secretary of State’s intention, and I urge him to look at this matter in more detail before those cuts bite in April next year.
I am trying to follow the right hon. Gentleman’s reasoning. I think he has argued so far that people out of work should not face cuts and that people in work should not face cuts, so who should?
The Pensions Minister should reflect on the following point. When we add together the cuts to children’s benefits and the cuts to families’ working tax credits, the total is £20 billion over the course of this Parliament. That is twice the amount of money his party is taking off the country’s bankers. Surely he would reflect on the wisdom of taking more off children and working parents than off bankers? I think he should reflect on that further.
Order. The hon. Member for Devizes (Claire Perry) is pushing her luck today. She has already intervened, and I do not mind her rising to seek to do so again, but continually to stand up and barrack is not the way forward. She has a great future in this House, and I am sure she wants to protect it.
Finally, I want to talk about the impact on women of these Budget changes. The shadow Home Secretary, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), will say more on this in her winding-up speech. She has already set out with clarity and force how the Budget changes made by this Government have, overwhelmingly, hit women harder than men. I would just highlight to Members, and especially those on the Treasury Bench, the comment made yesterday by the hon. Member for Calder Valley (Craig Whittaker). He put it very simply when he said that of course women are paying the price most. At least someone on the Government Benches has the honesty to tell it straight. He was right: women are being hit hardest by these Budget changes, not least through the changes to child care. Some 30,000 women in this country have had to give up work in the last year because they can no longer afford the child care. That is £50 million in lost tax to the Exchequer. What a shambles.
The tragedy in this debate is that there is a different way. We have set out a different way of jump-starting growth and getting people back into work. Yes, it does start with a tax—a fair and sensible tax—on bankers’ bonuses to help get 100,000 young people back to work. What have this Government proposed instead? They have proposed a fund of about one third of the size, paid for not by those with blessings to share, but by children and families who are already feeling the squeeze. That decision alone tells us everything we need to know about who this Government stand for. That decision alone tells us how out of touch this Government have now become, and it is for that decision if no other that I say this House should support our motion.
I am tempted to ask, “Is that it?”, but perhaps I will not.
Yesterday, the Office for Budget Responsibility published its forecasts for the UK economy over the coming years, which painted a very difficult picture: Britain is expected to grow this year by 0.9% and next year by 0.7%; growth is forecast at 2.1% in 2013, 2.7% in 2014, 3% in 2015 and 3% again in 2016. The OBR showed that in 2009-10 borrowing was £156 billion a year. Last year, that fell to £137 billion. This year, the OBR expects it to fall again to £127 billion.
The OBR did not just publish forecasts. It did us a favour, because it looked back and reopened the books on the era of the previous Government, and an important factor emerged. It told us that an even bigger component of the growth that preceded the financial crisis was part of an unsustainable boom, and that the bust was deeper and had an even greater impact on our economy than previously thought, meaning that the effects will last even longer. It said:
“The peak-to-trough fall in output over the recession is now estimated to have been greater than previously thought at 7.1% rather than 6.4%”
That is a huge change to the figures. It found that from near the end of 2010 we were taking a serious hit from rising global food and energy prices.
I want to add a further quotation from the OBR as these matters form the baselines of our debate today:
“Most of the weakness can be explained by an external inflation shock”.
Its third point is that the eurozone crisis is
“likely to have contributed to weaker UK growth and business and consumer confidence.”
I hope they will attach no credibility if they were our forecasts. We set up the OBR—an independent body that Opposition Members accepted—and its forecasts are about as good as we shall get, so we should give it credibility for at least trying to get the forecasts right. That is a damn sight better than the past 12 years of gerrymandered Treasury figures, not one of which had any credibility.
The Secretary of State quotes from the OBR, so he might like to add that it stated that we came out of recession quicker and that growth had increased by the first part of 2010. The OBR made its predictions before the autumn statement. Last year, it made its predictions before the statement. Its predictions were wrong, because the Government’s policies were wrong. Its dire predictions this year were made before this new set of policies.
I am grateful for the intervention, as it allows me to remind the hon. Lady that in looking back at the period in the run-up to and start of the recession the OBR said the depth of boom and bust was greater than was anticipated—by more than 1%. The baseline from which we started, therefore, was much lower, which means, as is seen by the Treasury, that the amount we would have had to borrow would have been more than £100 billion if we had not taken our decisions early on. Labour Members’ posturing about their own position is fundamentally incorrect, and they must recognise that.
The OBR said that the eurozone crisis is
“likely to have contributed to weaker UK growth and business and consumer confidence.”
I know that Labour Members do not like to hear that that is an issue, but it is seen by everybody, not least of which the OBR.
We all welcomed the establishment of the OBR because of the independence it gives. The full quotation from the OBR states that
“an external inflation shock constraining real household consumption”
is the reason for the revision in growth forecasts. How does the Secretary of State think that bearing down further on family incomes will help our economy to grow again?
The reality, as the OBR and the Institute for Fiscal Studies make very clear, is that you cannot borrow your way out of a debt crisis. I know that Opposition Members are indulging in voodoo economics—a fake religion—but almost every economist abroad and at home says that you cannot borrow your way out of a debt crisis.
The answer, very simply, is that, yes, it would be.
Yesterday, there was much jeering about the issue of Europe. The Opposition say one thing one day, move on and then say another. I remind the shadow Chancellor, who is not here today, of something he said in July:
“We need to face up to today’s problems. When you see Italian and Spanish bond spreads you can see the situation is incredibly dangerous”—
and that came from a man who yesterday said that we cannot blame anything on the European crisis. That is absurd, and the Opposition must get their act together over the reasons we are where we are.
I want to make a little progress, but then I will give way.
Whatever we say, in government or in opposition, I fancy that were the previous Chancellor in office he would be saying many of the things that my right hon. Friend the Chancellor said yesterday, because once in government people become strangely rational, and that leads to difficult choices. We can play party games, but I want to run through some of the choices we have had to make. We had to choose whether to invest more in supporting young people, and we chose to invest in the youth contract—about £1 billion over the next three years. That was an absolute priority for us, so we had to tighten two or three other areas to enable us to provide that support. These are tough choices. If we had a pot of money to raid, yes, we might have raided it, but there is none, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) reminded us on leaving office.
Unemployment is therefore a huge challenge for us—it is why we set up the Work programme. None the less, the OBR estimates that private sector employment will rise by 1.7 million by 2016, largely offsetting the forecast reduction in public sector employment.
I will give way in a moment. I promised I would give way to the hon. Member for Sefton Central (Bill Esterson), too.
The growth plan proposes £6.3 billion of additional infrastructure, £1 billion for new regulated industries and moves, with the Association of British Insurers, to target a further £20 billion of extra investment.
I do not agree with the hon. Gentleman. I am talking about choices. I remember a great deal of debate, even in the Select Committee, about whether the working-age unemployed would see their benefits reduced. Everybody said it would happen; newspapers predicted it. In fact, my right hon. Friend the Chancellor has stuck to increasing them by CPI at 5.2%—just one good example of making a choice about who would be affected most direly by any change or any reduction. That was a bold choice and one on which we should congratulate him.
I am grateful to the Secretary of State and I am following his argument closely. Further to the intervention from my hon. Friend, the right hon. Gentleman will no doubt have seen the analysis from the Institute for Fiscal Studies this morning. If it is true that the Government are not hitting the poorest families harder, why has the IFS said that for 2012-13 the poorest three deciles in this country are being hit three times harder than the overall average?
According to the findings of the IFS and of the Treasury, the top decile pays a huge amount more in relative terms than anybody else. [Interruption]. Hon. Members should listen. Taking account of uprating, about 80% of households with children will see their tax credit awards rise at least in line with earnings next year. Members can pluck little bits out, but when they average it across, they will see that there have been some choices.
I am quite prepared to recognise that the pressure on the bottom deciles will always be tougher and harder because of where they spend their money. That is not the issue. The issue is, within the bounds of what we could afford, what were we trying to protect? The decisions we took and the changes we made, which I will come to in a moment, mean that we have protected the most vulnerable as well as we could and better than the Opposition would have done, had they been in power.
I am grateful to the Secretary of State. He is being most generous. The IFS was pretty clear this morning. It said that the richest decile would see an impact of just over 0.5%. The poorest decile would see an impact of minus 1.6%. So it is clear that the poorer families in this country are being hit much, much harder than the richer ones.
I am sorry, those are not the figures that I have. The figures on the chart that I am looking at show that the richest decile has a greater proportion of its income taken, even in relative terms. Yes, I accept that, relatively, those in the bottom three deciles do quite badly in many senses, but the right hon. Gentleman should look at the Treasury figures, which show that the wealthiest decile do worse than anybody else, in absolute and in relative terms.
I am going to move on.
The commitments made by the Chancellor in the previous Budget have to be taken into consideration, along with the ones that I have mentioned. The new offer on child care comes on top of our expansion of free nursery education for all three and four-year-olds. We are already set on a path of far-reaching reform in our welfare system, getting work incentives back in order and delivering a system that people finally understand. We will do this through the universal credit, which will in two years rebalance any of the out-of-work incentives that got out of balance, so that work pays.
The Opposition had 13 years to make the kind of changes that we are making. We have already got them under way. They will take about 350,000 children and more than 500,000 adults out of poverty. Some £7.2 billion has been invested in the fairness premium, including the pupil premium, to support the poorest in the early years and at every stage in their education. We have invested in 4,200 new health visitors.
Almost none of those changes is taken into consideration in the rather narrow way of measuring who is in poverty and who is not in poverty, particularly child poverty. This is an important point. I spoke earlier about the money and the effort that we are putting in for the poorest. The wide range of steps that we have taken is, on balance, positive. None of those has been taken into account because it is not possible at this stage to calculate the effect, but I want to do that and we ought to do so.
The right hon. Gentleman’s heart is in the right place, but his head is in the clouds. We can argue over definitions and data, but let me read to him the response of the chief executive of Citizens Advice, who says:
“The Chancellor has broken the promise he made in last year’s Budget to protect families on the lowest incomes from the impact of last year’s harsh cuts by increasing child tax credits above inflation, leaving them now with no protection at all… Make no mistake, this—
“means children in the poorest homes are at risk of going cold and hungry to pay for the new schemes the Chancellor has announced today”.
Why do the poorest in society have to pay for the schemes that were announced yesterday? The right hon. Gentleman’s heart is in the right place, but he has not thought this through.
It is not just the poorest who are paying. Everyone will have to bear a proportion, because everybody is going to pay for this. Yesterday the Opposition claimed that the shocks that caused inflation are not relevant, yet today they stand there and tell us that it is all down to inflation. They need to make up their minds which case they want to mount first.
I will indeed. The point I was making was that, as the universal credit comes forward in the next two years, it will do huge amounts to ensure that the incentives to return to work are improved. Secondly—and this relates to complaints from Opposition Members about the tax credit—it will reset the baseline so that those incentives will be increased and improved. Had we remained in the same position as the previous Government with their tax credits, there would be no way back for us now.
I am well aware that the Secretary of State has great hopes for the universal credit to incentivise people into paid employment, but does he accept that the cumulative effect of last year’s Budget and spending review, this year’s Budget and yesterday’s statement is that the incentives to work for low-paid employees have been worsened as a result of the reduction in support for child care costs through the tax credit, the cut in child benefit, the freezing of the lone parent and couples element of tax credits and the fact that it is all set against a rise in living costs that families cannot afford to meet?
Seen over the whole period of this Parliament, and taking into account things such as lifting the tax allowances, the commitment of the coalition to lift them further before the end of the Parliament, and a whole variety of the points that I have already laid out, I do not agree with the hon. Lady. When Opposition Members look back, they will realise that the introduction of the universal credit will result in positive work incentives and we will get people back to work, as we are already doing.
I have already mentioned some of the things that have been introduced in the past year and a half, and yesterday the Chancellor also announced reforms to support working families which no Opposition Member has taken into consideration. We have deferred the fuel duty increase planned for January and cancelled the inflation increase planned for August 2012. The tax on petrol will be a full 10p lower than it would have been without our action in the Budget this autumn, and that means that families will save £144 on filling up the average family car by the end of next year. Fuel and the cost of driving are a very big driver of poverty and we are doing something about it. We are also regulating the rise in fares on national rail, the London tube and London buses, and we have already offered councils the resources for another year’s freeze in council tax, which I hope they all take up. Our plans to raise personal tax allowances will pull over 1 million people out of tax altogether, which is a big incentive for people to go back to work. When the Opposition complain about changes to working tax credits, they should remember their punitive decision to abolish the 10p starting rate of tax. They did not care what happened to the poorest in society.
I agree with my hon. Friend. The reality is that we are raising people out of tax, while what the Labour Government did by getting rid of the 10p starting rate was to drop more people into higher rates of tax. It was really dismissive, very regressive and attacked the poorest.
I was going to come on to that. Had interest rates gone up and had we been paying more for our borrowing, we would all—including those paying mortgages—be poorer.
This debate about living standards is important. Of course, those standards are very tight, and I make no bones about the challenge that we face, but let us not forget where we came from. Let me take the House back to 2007, when personal debt had rocketed to about £1.3 trillion and we had the highest structural deficit in the whole of the G7. That was before the recession began. That is a completely unsustainable picture, and it required very painful readjustment. As my colleagues know, the problem was that we entered the recession ill prepared for the consequences. When Labour Members ratcheted up spending by a massive degree, they simply postponed the inevitable. After all, the IFS forecast for the period 2008-2011 was that living standards would fall by 1.6%. This was a case of a fall in living standards postponed, with pain pushed on to future generations. People do not have to take my word for it—the IFS said:
“Much of the impact of the…recession on UK living standards was not felt until after the economy had stopped contracting, but that…pain was most definitely delayed rather than avoided”.
Does my right hon. Friend agree that adopting the Opposition’s proposals would just delay that pain further for future generations, and that this debate would be irresponsible in the extreme if we did not think about the living standards of our children and grandchildren?
I will give way in a minute. [Interruption.] Relax—I will give way. The point is that there is a choice: we can either let this thing slide, with higher interest rates and all that goes with that, and let our children pick up the debt and the deficit, or we can deal with this ourselves and give our kids at least a fair chance.
Of course living standards are under a squeeze—we know that—but that is something we utterly regret. Nobody wants to stand here and say that that is the purpose of what we do—it is not—but it is part of what we are having to do, and we need to get living standards up again as fast as we can. The forecasts from the Office for Budget Responsibility show that that will be the case. If Labour Members were being realistic, they would accept that no matter who was in power, standing here, they would have to deal with exactly the same problem.
The Secretary of State and the hon. Member for Devizes (Claire Perry) talk about the children of the future, but I would like to bring their attention back to the children of today. Is the Secretary of State aware of recent Government figures that show that the number of children in need this past year has risen by 3,600, with squeezed living standards putting vulnerable families further at risk and pushing more cost on to the state?
The children of today are also, more than likely, the children of the future, so we do not want to split hairs about this. Children are children, and as they become adults we do not want them to have to pick up the debt and the deficit that we leave behind. It is all about taking difficult decisions, being honest about what those decisions are, and recognising that if we do not take them now, we will have them forced on us by other people.
May I remind my right hon. Friend of the record of the previous Government, which included imposing a 100% rise in council tax on my constituents, upping the pension rate by a pathetic 75p for our old-age pensioners, and ratcheting up fuel prices? How did that help children and families across our country?
I find it absolutely incomprehensible that the Secretary of State is able to discard the real pain that is now being suffered by children because of his Government’s bizarre choices based on the argument that they are going to become adults and will then have to pay further down the line. Is he really equating the possibility of a child losing its home, its school, its friends, its family, its support system, and watching its parents having to give up work because they cannot afford child care, with what is going to happen further down the road? That is bizarre.
Of course, the hon. Lady would be right if that were what I was saying. What I am saying is quite simple: it is that our responsibility right now is to get the economy back in balance so that children do not have to pick up the debts. Let us remember that the deficit that we are dealing with is the pump that fuels the debt, and that debt is the legacy that we will leave them.
Wait a minute—I am trying to answer the hon. Lady. She may not like the answer, but I want to finish it. The reality therefore is, yes, of course, but I think that we have done as much as we can to protect those who are in difficulty.
In answer to the hon. Lady, I should like to list a few things that we have done. Bearing in mind the changes we have made to taxation, more than half of those who will be lifted out of income tax will be women. We are investing an additional £300 million in child care support on top of the £2 billion already being spent. There will be 5,000 mentors to support women entrepreneurs and we are creating the women’s business council to advise Government. There will be up to £2 million to support women to set up and expand businesses in rural areas. We are improving child tax credits this April with a £180 real-terms permanent increase in the child element. Next April, there is an increase of 5.2% and a further £135. We are doubling the number of two-year-old kids who receive 15 hours of free education a week. There is also the £2.5 billion pupil premium. I could go on and on. We are doing huge amounts to try to protect the poorest in society.
The Secretary of State talks about protecting women but he will know that House of Commons Library figures show that women are paying two thirds of the contribution in tax and benefit changes. He also said that the personal allowance increase benefits women more than men. Does he admit that the truth is that the Library figures show that while 13,500 women benefited from the personal allowance increase even though it was compensated for by other cuts, 16,800 men benefited, so in fact women are a minority, even from the personal allowance increase that he parades as a change to help women?
I can look at the Library’s figures and decide whether they or our figures are correct. We will have a look at them. My view is that the figures that we have show that more women than men benefit from that change. We can debate that if the right hon. Lady likes, but at least she is admitting that, one way or the other, a significant number of women benefit dramatically. That is a good starting point.
I want to move to an important subject. Given that this is an Opposition day debate, I had rather hoped––
Before we move from the topic of hard-working women such as those in my constituency, especially those on the lowest incomes, who depend on informal care from grandparents, perhaps my right hon. Friend could share with the House the many things we have done to support grandparents on low incomes.
I am grateful to my hon. Friend who, as ever, talks sense, and I agree with her.
This is an Opposition day debate and I had hoped to hear something about what they would do to fix things. My right hon. Friend the Member for Wokingham (Mr Redwood) asked a very specific question but never received an answer from the right hon. Member for Birmingham, Hodge Hill. We have today had to endure the usual waffle and confusion. On the one hand, the Opposition criticised us yesterday for borrowing too much, but on the other they seem to think that more borrowing is the only way to fix the deficit. The director of the IFS was pretty clear yesterday on the Opposition’s position on borrowing more to spend. He said:
“You would have to believe some pretty surprising things about the way the economy works to think that if you reduce tax by a pound then borrowing would go down rather than up.”
Does the right hon. Gentleman agree with the director?
With respect, that is not a policy; that is just a lot of waffle. In reality, what the right hon. Gentleman has to tell us—[Interruption]—and I will give way to him again or to the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper)—is whether he agrees with the shadow Chief Secretary to the Treasury, who yesterday said that if the Opposition had made the autumn statement, they would be borrowing more.
We think that we could get more people into jobs if we had a temporary cut in VAT to get shoppers back on to the high street; if we cut national insurance for small firms to hire extra workers; if we brought forward infrastructure projects, none of which we saw yesterday; if we cut VAT on home improvements; and if we had a tax on bankers’ bonuses to get 100,000 young people into jobs.
Borrowing, borrowing, borrowing. More borrowing—isn’t it wonderful? Interestingly, the Opposition were supposed to say that they would stick to the original Darling plan, but the measures just laid out involve borrowing way above that, because, as my right hon. Friend the Member for Wokingham has said, if we look at what the Opposition have opposed, out of all that that we have had to do, we find that the bill now stands at some £91 billion extra a year, or £326 billion for the next five years in which they might have been in government.
These are all the spending cuts that the Opposition have opposed; the VAT position—opposed; welfare savings—opposed; in-year spending cuts—opposed; local government reform—opposed; capital spending on education—opposed; two-year public sector pay freeze— opposed; cuts to capital investment allowances—opposed; increasing public sector employee contributions—opposed; Ministry of Justice reform—opposed; police reform— opposed; DEFRA reform—opposed; cuts to the HMRC budget—opposed. That is not a policy; that is a joke.
The truth is that the plan laid out by my right hon. Friend the Member for Edinburgh South West (Mr Darling) would have halved the deficit over four years and, according to the OBR, resulted by the end of this Parliament in borrowing £8 billion less than that which the Chancellor set out yesterday. It would have involved borrowing £37 billion less than the Chancellor over the forecast period. The truth is that he has put borrowing through the roof, because he has put welfare through the roof, because he has put unemployment through the roof.
The reality is that the OBR yesterday told us categorically that the position in which the Labour Government left us was significantly worse than anybody expected. It also said that unless we had taken the decisions that we took last year, we would be borrowing more than £100 billion in each year of this Parliament. On top of that, the Labour party’s measures would have resulted in even worse, but at least we had a little honesty from the shadow Chief Secretary to the Treasury, who said that borrowing would rise because she would borrow more. Given the economic situation, the Treasury estimates that such measures would cost far more—on the back of the OBR figures.
We now know what the Government at the time were doing, and what the Opposition today are about. They are determined to put hard-won interest rates, which we have held down, at risk. Last April, under Labour, our interest rates were higher than Italy’s; 18 months later, we are the only major western country to have seen its credit rating improve. Italy’s interest rates are now about three times ours, despite it having a lower deficit—actually, almost half the deficit that the previous Government left us. So, while the rest of Europe is under intense pressure, the UK remains a safe haven and the Labour Opposition are completely confused.
Yesterday the shadow Chancellor insisted that low interest rates were the sign of an economy in trouble. That is the same man who, back in 2004, described long-term interest rates as
“the simplest measure of monetary and fiscal policy credibility”.
Let me lay out the facts to make things simple for the Opposition before I give way. A 1% rise in our market interest rates would add £10 billion to mortgage bills; the average family with a mortgage would have to pay £1,000 more every year; the cost of business loans would increase by £7 billion; taxpayers would be forced to find an extra £21 billion in debt interest payments—and the ex-Chief Secretary to the Treasury has the front, the absolute front, to talk about squeezing living standards. If the Opposition had their way, living standards would collapse.
Does the Secretary of State not recall that at the time of the general election Britain’s national debt was significantly lower than that of Italy, France, Japan and the United States? The reason Italy faces its economic problems is that its national debt is much higher than that which this Government inherited from the Labour Government.
It is well worth reflecting on the fact that the previous Government’s debt cannot be detached from their deficit. In case the hon. Gentleman does not understand it, I will explain that what they did was ratchet up spending before the recession began. We had the largest structural deficit of any G7 country before the recession began.
No, the hon. Gentleman can sit down. It is no good. He is not going to play games over the difference between the deficit and the debt. The reality is that Labour cannot weasel out of it. It left us with a tragedy that we are having to put right, which is why we will oppose the motion.
I am grateful to be called to speak in the debate. The Government’s failure in economic policy is having a profound effect on our nation, but it is also having a disproportionate impact on regions such as the north-east and the poorest in our society. I have every sympathy for the squeezed middle, and many of my constituents are part of it, but I have much greater sympathy for the people who are the battered base in our economy, the very poorest in our society, who the Government’s policies are attacking the worst.
In March the Government launched their much-heralded “The Plan for Growth”. In the foreword, the Business Secretary and his new friend the Chancellor stated:
“This Plan for Growth is an urgent call for action. Britain has lost ground in the world’s economy, and needs to catch up. If we do not act now, jobs will be lost, our country will become poorer and we will find it difficult to afford the public services we all want. If we do not wake up to the world around us, our standard of living will fall, not rise.”
Does my hon. Friend agree that one area where we are missing an opportunity for growth is green growth, and that yesterday the Government finally shed any claim to be the greenest Government ever by threatening investment in green technologies and green jobs?
I am grateful to my hon. Friend for her comments, which are absolutely true. Certainly, companies in the north-east that have invested heavily in plant to develop photovoltaic cells for household generation and microgeneration have had the base of their work cut away by the Government’s slashing of input tariffs, which will have a disastrous effect on them.
The warning from the Business Secretary and his new friend the Chancellor was a call to action—fine words, but we all know that actions speak much louder. In my constituency and in the wider north-east the impact of the Government’s failure has been, and will be, enormous. Even before their economic sabotage, the Local Knowledge public sector employment survey predicted more than 287,000 public sector job losses in the north-east alone. As a consequence of the Chancellor’s statement yesterday, that figure will probably be higher. The Government claim that we are all in this together, but they know, as they knew before embarking on their failed economic experiment, that it will be the poorest and most vulnerable regions and people who will pay the greatest relative cost.
I could not agree more. If we want an economic race to the bottom, that is exactly the sort of policy to follow.
In September 2010 the BBC published a report that demonstrated clearly which regions would suffer most. Spending cuts were “to hit north harder”, it reported. BBC-commissioned research showed that industrial areas in the north-east and the midlands are least resilient to economic shocks. It showed that Middlesbrough is ranked as the most vulnerable, followed by Mansfield in Nottinghamshire, and Stoke-on-Trent. The Experian research suggests how England’s regions may cope or not cope with further public sector cuts. The study looked at the ability of each local authority area to withstand sudden changes in the economy, and a clear north-south divide is evident in the research. Elmbridge and Waverley in Surrey and St Albans in Hertfordshire are the most resilient places, and places such as those I mentioned are the least resilient.
Clearly, the changes in working tax credit and child tax credit will also affect people, and those who are not on the poverty line but are close to it will be pushed towards it. Does the hon. Gentleman believe that the Government’s changes in working tax credit and child tax credit will have a harsh impact on those people who can least afford it?
That is exactly the case, and the impact will be felt more greatly in the regions outside the south- east.
The BBC’s research revealed a clear north-south divide, and a number of factors within the categories were analysed, including the number of vulnerable and resilient industries within an area, the life expectancy of residents, the earnings of workers, and the unemployment and crime rates. The Deputy Prime Minister even admitted at the time that Experian’s research showed that a north-south divide was already present in England. He said that large spending cuts to be announced in the following months should be seen as a broader effort to put the economy on to a more sustainable footing. He spoke about the need to “balance the books”, and to redress the balance. From the north-east’s perspective, can I thank the Deputy Prime Minister? I think not.
In the face of clear evidence of the north-east’s vulnerability, what was the Government’s action? In the last financial year, while the 12 least deprived authorities in England have suffered cuts of around £5 per head of population, Gateshead has lost £88 per head, and the 12 authorities in the north-east have lost an average of £84 per head in expenditure, so no one on the Government Bench should dare to come out with the usual mantra of “We’re all in this together.” It is clear that if we are all in this together, some are dipping their toes and some are in up to our necks.
In November 2010, the Office for Budget Responsibility predicted that 410,000 jobs would be lost in the public sector as a result of the coalition’s cuts. However, in October 2011, the Chartered Institute of Personnel and Development said that overall job losses are now expected to be between 600,000 and 750,000 between now and 2015-16. In the north-east already, local authorities have shed well over 10,000 jobs, and 30,000 jobs in the public sector have gone. Some 142,000 people are on the dole in a population of only 2.5 million, and between 12 and 15 people chase each job vacancy in the jobcentres of the north-east. We are not all in it together. There is clearly a divide in the nation.
Where are the jobs in the private sector? Where is the growth that was supposed to replace public sector job losses in the north-east? They simply have not happened, and they will not happen, because the Government’s policies are sucking spending power from the north-east’s economy. Our high streets are suffering, our shops are closing, and our local economy is shedding jobs. If anything, the private sector in the north-east is becoming poorer. Although there is much innovation, cuts in input tariffs are having an impact on green industries. Other industries, such as Allied Bakeries in my constituency have shed jobs, as has Waverley Vintners. The Alcan smelter in the constituency of my hon. Friend the Member for Wansbeck (Ian Lavery) has lost jobs. Things are getting bad up there, and we need a real rebalancing of the economy. Instead of borrowing money to spend on dole and benefit payments, why do we not use that borrowing to invest in our economy, to provide infrastructure growth and create jobs in construction? We are not all in this together, and clearly the Government must wake up to that fact.
Given that I represent one of the most deprived wards in the country, I find it ironic that I should be speaking in this Opposition debate. In fact, Nelson ward is in the bottom 1% in England, particularly when we look at the lower layer super output areas.
Great Yarmouth is a constituency that, like many coastal towns, suffered from many years of being forgotten and left at the end of the track by Labour. One of the phrases that people often use is that we were at the end of the line and that the last Government forgot about us for 13 years. One of the problems was that too many things were done in isolation—working in silos with pet projects or with specific, centrally led Government projects that did not have enough focus locally, so were never able to have enough impact on the general living standards of people in my constituency or other coastal towns.
Let me give a clear example. Some years ago, Great Yarmouth was given about £17 million, which had to be spent on improving the seafront. I have to say that our seafront now looks superb; the council have set it up brilliantly. It looks fabulous and I advise all hon. Members to visit and see the great improvement. I also advise them not to step too far back from the seafront into Nelson, Southtown or Cobholm; they would see the areas left behind as industry faltered through lack of support and the last Government drew jobs away from rural areas. That included Government public sector jobs; they closed HMRC and set up the programme that eventually led to the closure of our coastguard call centre.
We need a Government like this one, who see things far more holistically and do not focus on only one specific area. That is why I am so supportive of what the Government, across all Departments, have been doing. It can benefit constituents across our country—including, from my selfish point of view, Great Yarmouth.
Did my hon. Friend experience what I did, in the similar coastal community of Hastings? During those Labour years, there was a dramatic fall in average income in comparison with the rest of the country. In Hastings, it fell by £100 a week per person during that period.
My hon. Friend makes a very good point, and I shall give another example. The UK average of gross weekly earnings is about £500 per week or £26,100 a year. In Great Yarmouth, the figures are £420 and £21,900 respectively; in fact, 10% of our full-time workers have earnings of £250 a week or £13,000 a year. That is partly because we have seasonal employment, and nobody did enough to move the situation forward until this Government. What the Government have done in improving things for business is to open up better opportunities for people to earn, look after their families and raise their living standards.
In Great Yarmouth, in conjunction with Waveney constituency and Lowestoft, we now have an enterprise zone. The importance of an enterprise zone cannot be overestimated; it has been set out and led by business people in our area who know what they need to grow businesses and attract them into the area to create jobs. The jobs that we need are not seasonal, but those based on an industry in energy and engineering that has a long-term future. The renewable energy industry believes that there are contracts worth about £80 billion across our coastline, with oil and gas decommissioning and renewable energy. That business will bring jobs to our area.
The enterprise zone, focused on areas designed and requested by local business and business leaders, is already attracting companies. The first company to go into an enterprise zone is likely to be in Great Yarmouth. ScottishPower and Vattenfall have already announced a memorandum of understanding that alone could create hundreds of jobs in one spot in my constituency. That is the kind of thing that will increase living standards. We need a more joined-up, holistic approach.
Education also needs to be part of the issue, to ensure that the skills are right. One of the complaints that I get from businesses, not just in my constituency but across industry, is that there is a shortage of people with the skills required by engineering companies and the energy industry. We need to make sure that we match that skill set to the job requirements of businesses.
Only a few weeks ago I met prime providers for the Work programme. One of them said to me that they were surprised that in certain parts of the country where they expected to have an issue in finding jobs, the problem is not finding jobs, but finding people who will apply for those jobs. In Great Yarmouth, we have third-generation, and in some cases fourth-generation, unemployment. Over the next few years, we need to change that culture—to change the programme so that people want to aspire to that first job. They should understand that that first step on the ladder is not the end of the story. They should not just stay on benefits.
A school pupil actually said to me that their ambition was to go on benefits, because their parents were doing nicely, thank you very much. That does not represent the majority of people, but we need to change that culture so that people look at that first opportunity and want to take the step on the ladder. That first job may not be the perfect one with the perfect salary, but it is the first step on the way to getting where people want to be and can be for themselves and their families. That is good for the entire community.
Does my hon. Friend agree that the welcome expansion of apprenticeship schemes is giving young people the opportunity not only to take that first step, but to learn applied, real-life skills that businesses in constituencies across the country are crying out for?
My hon. Friend is right, and directs me perfectly to the point I was about to make, which is that apprenticeships are a hugely important part of raising living standards. In my constituency alone, the number of people taking up apprenticeships has increased by about 60%. Apprenticeships give opportunities for people to get real-time work experience and for companies to train people so that they have the skill set that readies them to take on work. One of the things the Government have done well and that we can do more of is highlight the value of apprenticeships, so that young people do not regard university as their only or primary option, but see apprenticeships and going straight into the workplace as a genuine, viable and valuable way to contribute to their own family as much as to society.
Does my hon. Friend agree also that the Government’s creation of the national citizen service scheme, which is giving 16-year-olds the chance to train together, work together and develop projects together, provides a sure-fire way for them to gain the self-esteem and the confidence they need to take them forward into the workplace?
Absolutely, and I would add that we also need to look at how to get businesses growing faster and quicker to employ more people. Having more people working in the private sector is without doubt the best way to raise living standards both for them and for our country, because having more jobs reduces welfare costs. That is hugely important and it is why I was so pleased to hear the Chancellor’s announcement yesterday about fuel duty being frozen and not increased in January. That, combined with the work already done to get rid of the fuel duty escalator, will get prices, although high, lower than they would otherwise have been. That is important—
No, I will not give way again.
The fuel duty measures are important not only to commuters and consumers—parents trying to get their children to school and young people trying to go to work or get to job interviews—all of whom will be better off, but to firms in transport and logistics, which need to be able to invest more in their businesses, to grow them and to create more jobs.
The Government are also working to protect the elderly, who have given so much already. Making sure that they get their winter fuel allowance and the right protection for their pension, as was announced yesterday, means that we are doing all we can, in the circumstances we inherited from the previous Government, to provide for the people who need help the most.
To me, the key is to bring all that together—education and welfare reforms, and the work being done through the Treasury and BIS on taxation and apprenticeships—in an holistic approach. In that way, our country will be able to move forward and we will see the real improvement in living standards that we all want.
This is a time of some gravity for our economy and our society. I shall address two aspects of today’s debate: first, the past 18 months and whether, if the Chancellor had made different decisions, we would be in a different position now; and secondly, the future—the prospects for growth and jobs for our constituents and, above all, whether we can avoid successive further downgrades, after the four that have already occurred, to the economic forecasts published since the general election.
The Prime Minister has introduced a bazooka test for the eurozone countries. My shorthand reading is that in Britain the bazooka marked “austerity” has been far too big and the bazooka marked “growth for the future” far too small. I shall explain that view in my speech today.
The Chancellor’s claim is very specific: that his plan of fiscal austerity is the best route to economic expansion. He uses four arguments to support his case. First, he says that the evidence of Canada in the 1990s shows that the seemingly impossible, a “contractionary expansion”, is proved possible by the Canadian experience. In fact, the Canadian squeeze took place at the same time as the Clinton boom in the United States—Canada’s primary export market. Yet the export of which the Prime Minister and the Chancellor are the most proud is the export of their austerity message to the rest of Europe—our primary trading partners. That was seen at the Busan summit, within a few weeks of this Government coming to office. In the process, they are killing the markets on which we depend.
Secondly, the Chancellor has said that private sector growth was previously crowded out by the public sector, but in his speech yesterday he accepted that Government needed to support private enterprise, including through fiscal policy, although admittedly using the off-balance-sheet tactics that he denounced so forcefully during the last Parliament. Retrenchment in the public sector is no guarantee of renaissance in the private sector.
Thirdly—this, I think, is particularly important—the Chancellor says that international markets have voted with their feet in buying UK gilts and driving down yields over the last 18 months. However, the biggest buyer of gilts in recent years has been not the international markets but the Bank of England. I will not dwell on the fact that the Chancellor denounced quantitative easing when he was shadow Chancellor, but he surely knows that for this financial year the Bank of England will have bought no less than 42% of gilt issuance. The Bank now owns more than 30% of the total gilt stock, compared with zero in 2008, while the proportion of international market ownership has barely changed. Interest rates are low in this country because of Bank purchasing policy, not because of Government fiscal policy.
My hon. Friend has demonstrated that it is harder to make a short speech than a long one, but she has summed up very well in a few words what I am trying to say in rather more.
Fourthly, the Chancellor says that without austerity we would be in the same position as Greece, but the maturity of British bonds is closer to 14 years than to the 14 weeks or 14 days that seem to afflict the Greeks; much more of our borrowing is covered by domestic savings; and above all—unlike countries including Italy, which the Secretary of State mentioned—we have our monetary sovereignty. Far from the Government’s having instilled confidence and stirred entrepreneurial spirits for the future, confidence has dropped further and faster in Britain than anywhere else in the last 18 months, and had done so well before the euro crisis. Moreover, the level of confidence is lower than it was when the Government came to office.
It is so refreshing to hear a grown-up make a speech from the Opposition Benches. Does the right hon. Gentleman agree, however, that quantitative easing took place originally in 2009—so the money was effectively already in the Bank of England’s coffers at the time of the election—that since then interest rates in Britain have dropped by more than one percentage point, and that we are now borrowing money more cheaply than Germany?
The hon. Lady is right, in that the zero stock held by the Bank of England in 2007-08 meant that quantitative easing had not yet started. When it did start, the stock went up. However, as she will know, since the general election there have been three further rounds of quantitative easing, including the most recent injection of £75 billion. That does much to explain why, although yields have fallen, international market ownership of the stock has not changed. I hope that she will engage with the issue that I am raising in all seriousness, because it is a serious problem for the Government’s argument.
In respect of the future, I want to concentrate on an aspect of the debate that relates directly to the Secretary of State’s responsibilities: youth unemployment. Let me repeat something that I said on television last week, half of which the Prime Minister and the Chancellor have enjoyed quoting. The current Government did not invent the problem of youth unemployment, but my goodness, they have made it worse. That is the charge against them. As the Secretary of State will know, it is a fact that structural unemployment among 16 to 25-year-olds stubbornly refused to fall below 10% even in the good years, when the economy was cantering along, and it is true that unemployment rose in 2005-06.
No, let me make this point.
It is also true, however, that between the start of the Labour Government and the financial crisis, long-term unemployment fell by 78%. It fell again, by 38%, between January and December 2010, before the Government’s first Budget decisions were implemented. In January, 150 people aged 16 to 25 in my constituency were claiming jobseeker’s allowance for more than six months. Today the figure is 420, and the figure in the north-east has doubled to nearly 9,000. Youth unemployment across Britain is now at record levels. Severe long-term youth unemployment—the number of people who have been out of work for at least 12 months—stands at 260,000, up by over 100,000 in 18 months, and the number of NEETs, those not in employment, education or training, has risen to 1.2 million. The Secretary of State agrees with me that those figures are a disgrace for any Government or any country. The question is what we do about it. I hope that the Government will take the following points into consideration as they think about the roll-out of their work contract.
First, the Work programme is fine in good times, in a growing economy, but it is not enough to give people job interview preparation when not enough jobs are being created in the economy as a whole. Secondly, the wage subsidy that is being introduced is designed to help 53,000 of the 260,000 long-term youth unemployed. When in 1995 the then Chancellor of the Exchequer introduced a similar scheme, however, it helped 2,300 people. The Secretary of State needs to look at those figures and understand why. Thirdly, the growth in apprenticeships is welcome, but it has got to be for the under-25s. Finally, young people who need help with transport costs, disabled young people and young people with carers need extra help. He knows it as well as I do. It is bad enough to be young and stuck on the dole. It is double the agony to be promised a job and then find that you will not get it.
Let me finish with this thought. The Chancellor’s
“latest economic commentary shows just how out of his depth he is when it comes to important economic issues. Slashing spending now could push the economy back into recession and inflict further structural damage on the UK”.
Those are not my words, but those of the current Business Secretary in February 2010. How right he was. It is time for a change of course, and it is time for a change of course now.
Yesterday, I think we all agreed when listening to the Chancellor’s statement that much of what he had to say was grim news indeed. It was worse than many of us had anticipated. The situation was certainly worse than the last Government declared when they were in office, or even predicted when they could choose their own predictions. It was also worse than the independent Office for Budget Responsibility forecast when this Government came to office.
We now know that finances will be difficult throughout this Parliament. There will be a squeeze on many people’s real incomes. Perhaps more importantly, in terms of confidence, there will be a suppression of hopes and expectations. I understand absolutely why many people are anxious, and I even understand why many people are right to be angry about the situation in which we find ourselves. They are also right to think that some people are indeed “out of touch”, as the motion puts it.
We have seen in many major cities around the world the Occupy people, who are protesting against capitalism. I do not agree with much of what they say; I am a free-market liberal, and I want capitalism to work. Those of us who believe in the functioning of the market economy, however—I think that this now unites the three main parties in this country—must address the concerns that many of our constituents feel about the failure of the market economy to deliver fairness in our society. Last week, the High Pay Commission referred to the “gross inequality” that has arisen in our society, most of which arose, of course, during the period of the last Labour Government. The average pay of someone in work is now £25,900, whereas the pay of a chief executive of a top 100 company has risen to £4.2 million —145 times average pay.
The hon. Gentleman is kind in giving way, and I am following his argument closely. I am not certain which measure of inequality he is looking at, but I am sure he would accept that the Gini coefficient, which is one of the most popular measures of inequality, was practically the same at the end of Labour’s term of office as at the beginning. I am sure he would also accept that, looking around the world, the UK was one of the only countries in the OECD—I think that Turkey and Ireland were the others—where inequality was held in check. It went through the roof everywhere else.
We can trade statistics, but the right hon. Gentleman cannot deny what everyone is seeing and what all our constituents are saying to us. They are fed up that the people at the top of companies— Labour Members have referred to bankers, but it is not just the bankers; this also applies to others—seem to have got away with it, while people at the middle or bottom are being squeezed. I hope that the Government act on the High Pay Commission recommendations.
The Government are acting to safeguard the living standards of those at the bottom of the income scale.
I recommend that the hon. Gentleman looks at the High Pay Commission report, which is an excellent document containing many recommendations for controlling executive pay. I urge the Government seriously to consider many of those recommendations, including on the revolving door of non-executives on boards of companies effectively determining each other’s pay, where some of the most serious breaches occur.
On hard-working families, to which the motion refers, the Liberal Democrats’ No. 1 policy commitment at the last general election was that, in order to make work pay, we would raise out of income tax those on low earnings and those working part time by increasing the income tax threshold to £10,000 over the lifetime of the Parliament. Progress towards giving effect to that aspiration is being made throughout this Parliament. Let us contrast that with the last Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in 2007, when, just before becoming Prime Minister, he financed an income tax cut through a tax rise for the poorest in society. I remember watching Labour Members waving their Order Papers and cheering that income tax cut—
As my hon. Friend the Pensions Minister says, they did not understand that their own Chancellor was financing election populism on the backs of the poorest workers in society. Let us have fewer lectures from Labour Members on how to treat people on low pay in work.
I have taken two interventions. I will not take any more.
The Secretary of State for Work and Pensions referred to another reform that the coalition Government will introduce—universal credit—to sweep away the labyrinth of benefits and tax credits that are a legacy of the last Labour Government. In the autumn statement, the Chancellor confirmed that working-age benefits and benefits for disabled people would be increased by the full CPI rate of 5.2%, which puts into the pockets of the poorest in society extra cash that they will spend almost immediately in their local communities.
I have taken two interventions.
There was pressure from certain quarters not to make that increase, but the coalition has done the right thing and stuck by its promises to the poorest people in society.
On children, which the motion also covers, tax credits for children are being increased—given all the rhetoric, one would swear they were being cut—by the rate of inflation, 5.2%. In the long term, we want to transform the life chances of the poorest children in society, through the pupil premium and extra child care for two-year-olds announced in the autumn statement.
For young people, the Government are putting millions of pounds behind increasing apprenticeship places. The right hon. Member for South Shields (David Miliband) did not want to take my intervention on youth unemployment—
He can shake his head and then he can deny that youth unemployment was 650,000 in 1997, and after one of the longest booms in Britain’s peacetime history the Labour Government left behind 930,000 young unemployed for this Government to deal with.
For pensioners, the autumn statement confirmed that the basic state pension will be increased by £5.30, the biggest cash increase in the history of the state pension. That increase comes about because of the triple lock that the coalition Government have put in place. Let us remember another policy choice that could have been made. In 2000, when the previous Government were in office and when earnings rose by 4.4%, the CPI was 1.2% and inflation was 1.1%, which measure did the previous Labour Government choose? They chose the lowest, producing a 75p pension rise. That was at a time when the budget was in surplus and we were in the middle of a boom. In these difficult times, the Government have done the right thing by pensioners as well. No wonder that pensioners were left out of the motion that has been tabled today.
The motion mentions a squeeze, but the biggest squeeze that could be inflicted on citizens in our country—the 29 million people in work—would be on their mortgage payments, their debt interest payments, and the loans of the businesses that employ them, if the international markets were to lose confidence in this country.
The motion says that the government are “out of touch”. There is some cheek, some chutzpah, at the heart of a motion worded in that way by a party formerly led by Tony Blair, alongside whom the architect of new Labour, Peter Mandelson, said that he was “intensely relaxed” about people becoming filthy rich. If the shadow Secretary of State wants to see who is out of touch, I suggest that he and his colleagues look in the mirror, because it is they who are out of touch with reality.
I spent this morning talking about living standards with mothers in my constituency, who are losing a day’s pay today to stand with other public sector workers fighting for a decent pension. They told me that they had not taken strike action lightly or easily, and had never been on strike before. Many of them are low paid; they are all women. They told me that under the Government’s proposals for public sector pensions, when they retired they would receive only just enough to keep them above the threshold for means-tested benefits.
The Government like to encourage the myth that pensions in the public sector are gold-plated; they are anything but. The average pension in local government is £3,800 a year, and for women it is even lower—£2,800 a year. More than half of all women pensioners who have worked in the national health service receive a pension of less than £3,500 a year. Nobody in society benefits when pensioners are in poverty, and if people are reliant on state benefits in retirement, that costs the taxpayer more in the long run.
Although in my lifetime we have seen progress in terms of a fairer deal for women, it is undeniable that the women now reaching pension age are still at a disadvantage because of the decades for which women’s pay was lower. The Government talk the talk about a fairer deal for women, but I do not believe that they walk the walk. Many of us who campaigned alongside thousands of women born in 1954 will remember that the coalition had to be dragged kicking and screaming to make concessions to those women.
Under this Government the pay gap between rich and poor has been widening, and last week the Office for National Statistics figures showed that for the worst-paid jobs, the jobs traditionally held by women—the hairdressers, the dinner ladies and the waiters—pay has fallen sharply in real terms.
Will not those very women that my hon. Friend is talking about—the dinner ladies and the classroom assistants—be further hit by two years of a pay freeze, followed by years to come in which they will get wage increases of just 1%, if their jobs stay in the public sector and are not privatised?
I totally agree with my hon. Friend. There is wage stagnation at the bottom of the income ladder. People are seeing their pay frozen at the same time as they face higher food, fuel and energy costs. There is a quiet crisis going on behind the front doors of the homes in my constituency, where families are struggling week in, week out to make ends meet. Their financial affairs can be thrown into total crisis by even the smallest unexpected bill.
Today, therefore, I want to talk about how the Government have decided what side they are on. They have driven on with that course, no matter what. It has to be said that we in this House are the privileged few, and surely the moral duty of those with privilege is to defend those who have little or no power. But that is not what I have witnessed since I came here in May 2010. What I have seen is a systematic, focused political attack by the Government on the poor, the weak and the voiceless.
In the May 2010 emergency Budget child benefit was frozen, housing benefit was capped, the health in pregnancy grant was abolished, and Sure Start grant was restricted to the first child. The Library said that 72% of those cuts fell on women. In October 2010 the same thing happened: more cuts—cuts to local government, cuts to Departments whose work affects women, and nearly half a million jobs cut from the public sector. When it comes to cuts, it seems to me that it is “women and children first”.
That leads me on to yesterday’s announcement. In June 2010 the Chancellor announced plans to increase child tax credits above inflation as a measure to prevent rises in child poverty. The spending review in October reaffirmed that pledge. Yesterday the autumn statement said that that decision would be reversed. The Daily Telegraph said today that the Treasury admitted that the cuts in tax credit would “theoretically” push 100,000 children into poverty. Let me tell the House that the child poverty in my constituency is not theoretical. It is heartbreakingly, grindingly real. So why do the coalition Government think that it is fair, or morally right, to hit hardest those who have the least?
It is not just me who thinks this way. The Children’s Society has said that it is “deeply concerned” that the Chancellor
“has decided to compound the hardship felt by low-income families.”
“Children in low-income families need to be protected from rising living costs. Instead, the Chancellor has condemned thousands of low-income families to a winter of discontent, with many more to come.”
The Working Families charity has said that
“today’s measure will lead to higher levels of in-work poverty, or to more parents being priced out of work.”
What I am saying is that child poverty in my constituency will increase as a result of this Government’s plans.
Inequality is often most obvious in the context of housing. Every week my postbag is full of letters from families who are living in overcrowded, shoddy, private-rented flats, and whose dream of a decent home seems to drift further away every month. I would welcome any initiative that helps to remedy that, but, sadly, I do not think that the measures announced by the Government, such as underwriting mortgages for families to buy new-build homes, will help families in Erith and Thamesmead.
The indemnity scheme involves taking a lot of risk on to the public-sector balance sheet. That is bad for taxpayers and could be worse for those who take up the scheme. The scheme applies only to new build, and it is widely acknowledged that new build is often marketed at a premium above market value of about 2% or 3%, so a 95% mortgage will, in effect, be close to a 100% mortgage, and if house prices fall buyers will face negative equity and the taxpayer will have to cover any losses. A better way to help families and first-time buyers is through extending stamp duty relief.
Time and again, therefore, the Government show whose side they are on: they cut corporation tax while increasing VAT; they cut housing benefit rather than tackle the unscrupulous landlords who are profiteering from housing benefit while their tenants live in substandard properties. As for the Chancellor, it is clear that not one of his post-election assertions has turned out to be correct: inflation is up; growth has stalled; the eurozone has crashed; the structural deficit is bigger than previously thought; and unemployment continues to rise month on month as the private sector fails to take up the public sector slack, although the Chancellor was certain that it would do so. It appears, too, that everybody else is to blame. The Chancellor has blamed the royal wedding, the weather, civil servants, Brussels, employment tribunals, trade unions, banks, bank holidays, people living longer, energy prices and, of course, the Opposition. We have a Chancellor who wants the power but not the responsibility, and I fully expect him to say at the next Budget, “It’s not my fault—”
I am pleased to follow the hon. Member for Erith and Thamesmead (Teresa Pearce) because it is important that we challenge some of the myths we have just heard. Before I was elected as Member for Aberconwy, I remember going out in the constituency with the police, and we came across people who were living rough. That was before this coalition Government came to power. From listening to Labour Members, however, one would think that poverty did not exist until May 2010. Their rewriting of history is completely unacceptable.
Is the hon. Gentleman as concerned as I am about the Institute for Fiscal Studies estimate that a further 600,000 children will be plunged into absolute poverty over the course of this Parliament, and is he worried about the Treasury’s own analysis published yesterday showing that 100,000 children may fall into child poverty over the next year or two?
There is not a single Member of this House who will not be concerned about the fact that there are people who are facing real difficulties, but this Government are trying to make sure we tackle the real poverty we have in this country. In Wales, for example, in many instances what we have is a poverty of ambition, which was fostered by 13 years of Labour Government. For 13 years the economic performance of Wales was worse than that of the rest of the United Kingdom. For 13 years, Labour Members happily threw money at an issue in order to salve their consciences—they threw money at the issue and felt they could then forget the communities that I am proud to represent.
I am part of a coalition Government who are aiming to ensure that if people are willing to work and take part in this economy, they will be better off by doing so. The Government are tackling a long-term problem with long-term solutions. It is unacceptable that the Labour party is attacking a Government who are willing to have a long-term strategy by trying to make short-term points about the past 18 months. This Government are brave enough to look not to the next electoral cycle but to the future.
I was astounded when I read the motion, which refers to the need to look after hard-pressed families. It does not read very well if one is a Welsh MP, because the Labour Assembly Government have completely forgotten about hard-pressed families. What has happened with the council tax in Wales, compared with that in England? The Westminster Government have made money available to allow council tax to be frozen, but the Labour Administration in Wales have decided that supporting hard-working families is not a priority. Some Labour Members have said to me, “The council tax saving is £12 a month. What’s £12 a month?” For people in my constituency, where the average wage is £23,000 a year, £12 a month is a lot.
The hon. Gentleman is making his argument with passion and force, as he always does. He will be worried, I am sure, that the cuts made over the past 18 months mean that in his constituency 700 families are losing help with child care, and the tax credits of nearly 6,000 people are being cut. He must surely accept that that is contributing to the squeeze his constituents are feeling.
Indeed. The problem is that the Labour party believes that the Government should be responsible for ensuring that families have money in their back pockets. I believe that my constituents want to take that responsibility for themselves. Hon. Members should be proud of the fact that this Government are trying to ensure that those who work are better off. My constituents will be able to keep more of their earnings because we are moving to higher personal allowance rates, and I welcome that.
I have already taken two interventions.
It is disingenuous of Labour Members to say that they are concerned about the incomes of hard-working families when the Labour party in Wales is unwilling to pass on council tax savings that would be appreciated by people in my constituency and across Wales. They have the cheek to say that the VAT increase implemented by the Government—made necessary by the financial situation that the previous Government left—should be reversed without explaining where the money will come from. Even more bizarre, Labour spokespeople explain in the media that the VAT reduction they propose would save the average family £450. I have no idea where that figure comes from. Such a saving would mean that an average family had £18,000 of disposable income to spend on “VAT-able” goods. I will not come across a family in my constituency with £18,000 of disposable income, let alone one with £18,000 of disposable income to spend on “VAT-able” goods and services.
The inflation figures show that families are being squeezed by increasing food prices. What should the Government do about such increases? Food is subject to VAT at 0%. As a result of high street competition, the prices of goods and services subject to VAT are going down.
We must be honest in this debate. In very difficult circumstances, the Government have attempted to look after the weakest in society. I was proud of the fact that yesterday, despite the changes to the Government’s finances, the triple-lock guarantee on pensions was kept. Average ages in my constituency are the highest among constituencies in Wales, and the Government’s decision will go down very well, compared with the previous Government’s 75p insult to pensioners. We should also be proud of the fact that we are increasing child credits by £390.
More crucial is the fact that, unlike the previous Government, this Government recognise the real threat to family incomes—the increase in fuel prices. I welcome the fact that the Chancellor listened and that, in extremely difficult circumstances, the previous Administration’s proposed 3p increase in fuel duty, scheduled for January, is to be postponed. Fuel prices are high—again, owing to circumstances beyond the control of the Government—but time and again the Government have listened. We had the 1p reduction, and the 5p increase was cancelled.
The VAT rise is a fair point. That is possibly 2p, but we have seen duty frozen—11p, in effect, off the price, and frozen for 19 months. When the previous Administration were in power, we saw fuel duty increase by 20p and I did not see any Labour Members express any concern for those living in a rural area such as mine, where people have to travel 20 miles to get to the supermarket. This Government listen. They listen to the concerns of the elderly and of people in rural communities.
I have already taken two interventions.
More importantly, this Government know that the way out of the situation that we inherited is to champion self-reliance and enterprise, and to say to people in Wales, “Back in the 1980s we were creating more businesses than any other part of the United Kingdom. We had more new VAT-registered businesses than any other part of the United Kingdom.” I have confidence in the people of Wales. Unfortunately, the past 13 years have been wasted, but with this coalition Government, we will see change and we will see growth.
I support the motion before the House and I want to bring to the debate the perspective of a rural constituency in Northern Ireland.
There is irrefutable evidence that families, young people, the elderly, low to middle income earners and those in receipt of benefits have all found themselves squeezed, have less money to provide for essentials for daily living, and justifiably feel that they have been unfairly treated by the coalition Government. They also feel that the Government have removed the sense of fairness and equity from their vocabulary.
Proposed punitive regulations and legislation surrounding welfare reform will make the situation worse, making it more difficult for people to access benefits. At the same time they will be unable to obtain jobs. Although the concept is laudable, the jobs are not there because of the economic recession. The spectre of emigration therefore looms again, this time to Australia and New Zealand, and many small rural communities have found that young people who should be making a contribution to the economy through self-help, through the private sector or through the public sector, have simply gone away.
Added to this, the increases in fuel prices are leading to deepening fuel poverty, and the rising cost of motor insurance, particularly in Northern Ireland where it is more acute, prevent many young people from making themselves available to work where a requirement to drive is a pre-requisite on the job application. Levels of youth unemployment have risen, so child poverty has deepened. Levels of deprivation and disadvantage have deepened. We must not let the Government condemn us. We believe in self-help and in collaboration, and we have done that. We have developed our assets to their full potential but still that has not been enough because of the Government policies, which have been an onslaught on our rural economy, particularly in areas such as Northern Ireland where deprivation is at its most acute.
Against that background, we had the Government’s autumn statement yesterday. Although parts of it may be welcome, there are areas that require clarification. They centre on the cap on public sector pay, the rise in state pension age that goes with it, and the need for spending commitments to be fully subject to the Barnett consequentials. There is no doubt that in the face of the mounting economic recession, the 1% cap on public sector pay, following on from the current freeze, is derisory and unacceptable. It will prove highly controversial in a place like Northern Ireland, particularly in the light of today’s strikes.
Does the hon. Lady agree that not only will the cutting back on public sector jobs affect young people’s opportunities, but the 3% tax—the £2.8 billion that the Government hope to raise from the increase in pension contributions—will suck money out of the economy across the UK and drive families into poverty?
I do agree. In fact, we were the only party in the Northern Ireland Executive that voted against the hike in pensions, which we found totally unacceptable because it will impact on the most vulnerable in our society.
We would also like to know what the Barnett consequentials for the devolved Administrations will be in relation to the announcements in the autumn statement of the £16 billion youth contract and the £400 million for house construction projects.
I and my party colleagues support this motion because it clearly highlights the deepening problem of poverty right across Northern Ireland and because we support our colleagues in the Labour party in Britain.
At the end of the Labour period in office, when the first financial storms hit us in 2007, it was clear that the country was, at that point, living beyond its means. It had a deficit of about 3% of GDP, while at the same time the Germans had a surplus. Then we hit all the problems of the banking collapse. The hon. Member for York Central (Hugh Bayley) was right: thank God Britain had a low debt level of gross domestic product because that allowed the Government—
Yes, partly because of that. Traditionally in Britain it has been about 40%, so that gave the Government some room for manoeuvre. Any Government in office would have had a large increase in its deficit given what hit them in 2007 and 2008. There is no great argument about that and, as someone sitting on the other side of the Chamber, I think that many of the things that the right hon. Member for Edinburgh South West (Mr Darling) did were beneficial in trying to maintain a fragile economic situation.
Having said that, we cannot continue to increase debt year on year at the rate we were in 2009, 2010 and 2011 or we will overwhelm the British economy. The worst thing for our constituents is not paying tax; it is paying tax to pay interest on money being borrowed from someone else. The Government had to make a judgment, and their judgment was to set out an economic policy gradually to reduce our debt over five to seven years to a level that, once it tops off in 2016-17, can then start to be brought back to the level of more normal years, which is about 40% of GDP. In an environment in which the world was growing rapidly, that would be easier. In an environment in which the eurozone is blowing up, and there are high fuel and food prices, it becomes much more difficult. That is part of the problem for the Government in the short term. It is events—it is what is happening around the world.
There is nothing surprising about where the Government are. Sticking with the policy is perfectly sensible, but things do not go in a straight line in economics, and there will be OBR forecasts and Budgets where the figures for debt increase, and some where they decrease. It will depend to some extent on world events.
My hon. Friend is talking about debt levels. Was not one of the issues under the Labour Government the integrity of the public finances? Their estimates of public sector debt did not include the private finance initiative, which was a grossly exaggerated amount of public benefit, and they did not include the burgeoning increase in public sector pension claims on the economy. Does my hon. Friend agree that another aspect of debt in which the Labour Government’s policies were embedded was increasing the costs that people had to pay for their housing through the ever-increasing impression that housing wealth was real wealth? That has had a real impact on people’s well-being and living standards today.
Clearly, and another problem in the British economy is that there is a lot of private sector borrowing. We have a high level of indebtedness, both of government and of the private sector. In Italy, they save rather more than we do, and as a country we should try to encourage more of our citizens to save and not live on the never-never in the long term.
I support what the Chancellor did in the autumn statement. We are clearly in choppy weather, but that is no reason to change course. We cannot adjust the budget down or raise taxation painlessly. The living standards of most of the population will be squeezed. As the IFS and other organisations have said, living standards have fallen by about 7% over the past two to three years. The good news is that next year the projection is for things to be fairly flat, with some modest recovery after that. It may well be that when we get to 2015—the general election year—we have lower living standards than in 2010 as a consequence of the fact that we have inherited a major deficit, very difficult problems and a pretty rotten international environment. That is no reason for going off course, but it is a reason for sticking to a very sensible policy. Labour Members may think that we cannot do things without breaking eggs, but that is not so. We have to raise the tax burden and reduce spending, and I am afraid that that has consequences.
The hon. Gentleman said at the beginning that this would have happened under any Government. I congratulate him on his frankness, but the Chancellor is in complete denial about that—he wants to disown the fact that in 2007 and 2008 his policy was to follow Labour’s spending plans. The hon. Gentleman is right and his Chancellor is wrong, and I hope that he will try to get him to be a little more frank in future. No one disagrees about the need to reduce the deficit, but we are cutting more and more and yet the debt is going up way beyond what was predicted because the policy is not working.
We have been in office for only 18 months. It will take six, seven or eight years to stabilise the debt and probably several more to start reducing debt as a proportion of GDP.
I have said some complimentary things about the right hon. Member for Edinburgh South West. I rather suspect that had Labour won the general election in 2010 and Labour Members were sitting on the Treasury Bench, they would have a policy not dissimilar from that of the current Government. The seriousness of the problem is demonstrated by the fact that we are acting as a coalition Government. For all my political life, we fought the Liberal Democrats like ferrets in a sack, yet we have managed to find some degree of agreement because of the scale of the economic problems that we face.
The Government’s policy is sensible and measured in trying to do things gradually. That means that it will take a long time to implement, but we will ultimately get to a point where we have managed to reduce debt and get the economy into a much better state. In the short term, as I say, it is going to hurt, but I am afraid that that is a consequence of where we are. I see no other way around that. Tough decisions are necessary. I am glad that the Government—Conservative Ministers and even Liberal Democrat Ministers, to my surprise—have taken some pretty tough decisions. They are doing so for the national interest and for the interests of our children and our grandchildren.
The hon. Member for Poole (Mr Syms) almost had me agreeing with some of his speech, certainly in its early moments, but I am afraid that he blew it at the end when he talked about the Chancellor being sensible and then praised the Liberal Democrats—neither of the main parties in this House should stoop to such a level.
We have heard the phrase, “We’re all in this together”, many times over the past 18 months. I wonder how the 11,600 families in my constituency who will see their tax credits cut by an average of £680 per annum—on top of the three-year child benefit freeze and all the other cuts that they have seen—will feel about our all being in this together. I think they will be sitting there thinking that we are certainly not all in it together. Around the country, 100,000 more children will be in poverty as a result of this Government’s plans, proposals and policies. Will they think that we are all in it together? I somehow do not think they will. The number of young people in my constituency who are aged between 18 and 24 and have been claiming jobseeker’s allowance for six months or more has increased by 154%. That is a huge increase in the number of young people who find themselves in the position of not having any work. They will not think that we are all in this together, and rightly so, because we are not.
The Minister sneered a few times when the issue of bankers came up. The Government are keen, with their coalition pals, to talk about how hard they have been on the bankers with their levy. They always seem to forget that they offset the hit of the levy with the corporation tax cut and other giveaways to the bankers. The bankers are not sitting there saying “We’ve been really hard hit by this; we’re all in this together”—of course they are not. They are quite happy because on the face of it, they have had this big levy, but the reality is that that is diminished by the corporation tax changes and other benefits.
The pay of FTSE 100 directors has risen by 49% but my constituents can only dream of a 4.9% increase in income. Are we all in this together? I do not think that we are. A pattern is developing. The wealthiest, the bankers and the FTSE 100 all seem to do nicely as against the children and the poorest. The three poorest deciles are being hit three times as hard as the top decile.
The Minister shakes his head, but I am afraid that the figures do not support his position.
The Opposition are wrong to say that the Government’s policies are hurting, not working, because they are not hurting but murdering our communities. They are so punitive that they are destroying our communities. We are not all in this together by any stretch of the imagination. We heard earlier about a list of areas that were among the most vulnerable to the impact of the cuts. Stoke-on-Trent was high up on that list but the Government’s policies actively take money away from places like Stoke-on-Trent to help all-in-it-together places like Kensington and Chelsea or Westminster, which obviously need the money far more than do the people of Stoke-on-Trent.
Then there is this nonsense, this con––let us get it out on the table––of the freeze on council tax. I am sorry but this 2.5% increase in council tax, which is what this nonsense would amount to––
My hon. Friend makes a sound point, to which I was just coming. Because of the large number of band A properties in Stoke-on-Trent, the tax take is relatively low. Just taking the 2.5% increase instead of the much larger imposition that would be needed to go some way to not having to make the £24 million or so of cuts this year on top of the £36 million or so last year, means that the council will probably be unable to afford not to raise the price of things like respite care or day care centres. The council could not take the 2.5% pay-off to do that but would have to raise council tax by more to get some way to avoiding that.
Day care centres are under threat. There is talk of closing such things in Fenton and in Burslem in the constituency of my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley). These cuts across the board are again hitting the poorest and most vulnerable people in our society who live in Stoke-on-Trent.
I have a long list of things, but in the time I have left, I want to mention something that the Chancellor announced yesterday in respect of what on the face of it appears to be help for energy-intensive users. Stoke-on-Trent has many energy-intensive users in the ceramic industry. As Dr Laura Cohen of the British Ceramic Confederation has said, the thresholds have been set so high and the proposals have been done in such a way that they will not help ceramic producers in Stoke-on-Trent, many of whom have contacted the confederation to say that it is an empty gesture that will not assist them. That is the sort of thing that Government policies are doing. They are hammering communities such as Stoke-on-Trent and, frankly, that is outrageous.
I want to talk particularly about the importance of getting the country going in order to raise living standards. I pressed the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) on what Labour’s growth plan was and how much it would cost. I will happily accept any intervention from Opposition Members on this, but it seems to me that it would cost billions. How would it be funded? It is clear that it would be funded by debt––more borrowing.
We have narrowly avoided suffering from the debt storm throughout Europe, but were we to give way on the fiscal rectitude that we have shown and to go to the markets and borrow to fund Labour’s extravagant growth plan, we would be at risk of higher interest rates. Let us bear in mind that every one percentage point increase in interest rates means another £1,000 on the average mortgage.
Painful though the programme to cut overspending has been for so many people throughout the country, the most important achievement—the most important tax cut, if we like—has been the reduction in the cost of borrowing. It has helped so many hard-pressed families, including those in my constituency, to muddle through the recession as best they can, in a situation in which global inflation from imported goods, such as petrol and so on, has been higher and has put pressure on living standards, as every constituency MP understands all too well.
These are very difficult times not just for my constituents in Dover and Deal, but for everyone in the country who finds themselves without a large pay rise at work and facing rising global food prices. It has been a very difficult year, as the OBR makes clear. This year, average inflation has been 4.5%, yet average earnings have not kept pace. It has been difficult, and it has been a squeeze, but world prices, including in commodities and food, are something over which no Government have any great control. I, like my hon. Friend the Member for Poole (Mr Syms), have not heard from the Opposition any clear plan for what they would do differently to deal with the situation, but it does get better next year as those things work their way through the system.
My hon. Friend paints a picture of the difficulties that families throughout the country face, and I fully understand the points that he makes. Will he speculate on how much worse the situation would be if, having entered government with a warning on our triple A credit rating, we had not taken those necessary steps? We would be in the same situation as Italy or even Greece. How many more families would be out of work, and how much smaller would be the amount of money to go round?
I thank my hon. Friend for that powerful intervention, and she is absolutely right. The point has been made that, when we entered office, we had similar interest rates to Italy, but its rate is now up at about 8% and we are basically parallel with German borrowing. If we were turned by the Opposition into—dare I say it?—an Italian job, we would find that interest rates shot up for the average home owner and small business borrower, and that we faced serious difficulties and serious economic decline. In fact, we are not in recession and we are still growing.
On my hon. Friend’s point about the real difficulties that we would face if our interest rates were the same as those in Italy or Greece, does he agree that the 25,000 home owners in my constituency would face real hardship, real misery, and possibly repossession?
I could not agree more. If we had pursued such a plan, we would now be in recession, and the fact that we are not in that situation and do not plan to be is a testament to how well the Chancellor has managed the economy since the election, and to how well the coalition Government have done in taking the tough and necessary decisions to steer the right and careful course.
The situation is, of course, difficult for our young people. All Government Members feel painfully how difficult it has been with youth unemployment, and it would be a lie to say otherwise, but we have taken action: we have had an apprenticeship revolution, which has done so much; we have seen the new youth contract, which is going to make such a big difference; and, although we know that the trend had been rising for some time, we now need to reduce it and to turn the oil tanker around. I am confident that this Government are absolutely determined to do that.
When the Labour party left government, it left huge debts, and the cost of paying just the interest is running at about £44 billion a year. That works out at about £1,800 per household in taxation—just to pay the interest on Labour’s debts. Does my hon. Friend agree that that is having a huge impact on the spending power of families and is one reason why they feel under real pressure?
No, because I have taken three interventions, which is more than generous.
Finally, it is not the job of Government to create jobs. Jobs, wealth and prosperity are created by business. A Government who want higher living standards and economic growth are a Government who will back business to the hilt and ensure that it has a stable environment in which jobs can be created. I welcome the enterprise zones that have been created, the incentives for business to grow and create job opportunities and the measures to help business announced by the Chancellor in the autumn statement. I welcome all the reductions in corporation tax, the cut in the small companies rate, the extension of loan guarantees, the simplification of health and safety laws, the investment in science and apprenticeships and the promotion of exports through major trade missions. That is what we should be doing. We need an activist Government who are concerned with active growth and making this country this great again after 13 years in which Labour took us back to the edge of bankruptcy, just as it did in the 1970s. We want to take this country forward to better growth and living standards and better prosperity and business success across the world.
I draw attention to my registered interests. I was interested to hear the comments of the hon. Member for Dover (Charlie Elphicke). All I can say is that it would be nice to see some of the growth he talks about, but he must be aware that it is proving stubbornly resistant to the policies the Government have adopted.
I intend to focus my remarks on the housing market and associated benefits, which the Minister will be familiar with as his Department is responsible for them. I will do so for three reasons. First, the availability and affordability of housing is critical to people’s living standards. Secondly, housing and construction have a huge contribution to make to employment and the country’s economic performance, and currently they are underperforming. Thirdly, the Government’s policies in this sector provide in microcosm a rather telling illustration of incoherence, which is why their policies, not just in housing, but across the whole economy, are doomed to failure.
Like the wider economy, the housing market is in a fragile and parlous state. The recovery that was under way in the early months of 2010 has been halted in its tracks, output has plummeted and net additions to the housing stock in the latest 12 months are just 121,000, the lowest ever recorded and only half the level required to meet estimated need. New housing starts are even worse. In the latest 12 months new starts fell below 100,000 to just 96,000.
The Government have responded with some measures. The mortgage indemnity scheme announced in the autumn statement addresses one of the factors that are currently inhibiting the market: the availability of mortgage finance to people who cannot raise substantial deposits. I welcome that, with some reservations, but it does not address the other factors discouraging market recovery, particularly the wider economy; the fear of unemployment, which clearly inhibits people from taking the risk of purchasing a new house; and the considerable problems of uncertainty in the planning system, which are the product of the Government’s ill-considered meddling in planning rules. The scheme does not provide the rapid response that is urgently needed, because we do not yet know the full details, how lenders will respond or, critically, what interest rates are likely to apply on mortgages given with the indemnity. If they are high, that will largely undermine the potential benefit, thereby reducing potential take-up. We do not yet know when the scheme will come into operation. We think that it will be in the spring, but that is almost six months away and in the meantime the market is seriously underperforming.
The position in the rented sector is even bleaker. The Government have made huge cuts to the Homes and Communities Agency budget for investment in housing, essentially stopping social housing investment. There has been an overall cut of 60% in investment and in the latest six months only 454 new social and affordable homes were started in England. That is a measure of just what a desperate state the affordable housing market is in.
The Government’s new policy is based on the Orwellian concept of affordable rents. The previous Government’s policy of target rents was based on a formula that took account of earnings, so it generally delivered rents that were affordable to people on low incomes. The new affordable rents, however, are related to market rents, and the concept is 80% of market rent. In areas of high values, such as London and the south-east, that is a recipe for huge rent increases, and in some cases a doubling of rent levels.
The interesting question, to which I hope the Minister will give some thought, is how people on low incomes will meet those vast rent increases. Either they will go elsewhere, and probably the only option is the private rented sector, where rents will be even higher because, by definition, they will be market rents, or they will be dependent on housing benefit. Back in the 1980s and 1990s, the then Conservative Government talked about housing benefit being the solution to coping with higher rents. The problem now is that we have a Department for Work and Pensions that is hellbent on cutting housing benefit at the same time as the Department for Communities and Local Government is making people more dependent on it. That is inherently contradictory, and simply cannot work. It will result either in increased poverty, homelessness and deprivation, or in a huge increase in the housing benefit bill, which will no doubt spark further calls for it to be reduced. The policy is incoherent, and cannot deliver the new homes that are needed. It threatens serious social consequences, and I hope that the Government will reconsider.
I would like to open my remarks by trying to find some consensus in this place. What do we, as parents, all want and hope for our children? I think that each and every one of us agrees that we hope to pass on to our children stuff that is better than we have had as we have lived our lives. For example, we want our children to have a better education than we had, a higher quality and standard of living, and perhaps a happier and more fulfilled life. Essentially, we want them to have more and better things than we have enjoyed. We do not want our children to have to bear the burden of debt from a previous generation—a debt and a deficit in which they played no part. I certainly do not want that for my children, who are 20 and 21. It is not right, and it is not fair that they and the rest of their generation, and arguably the generation that will come from them, should bear the burden of the debt and deficit that my generation—the generation in this House—has ratcheted up, particularly as a consequence of the policies adopted by the last Government.
It is breathtaking to sit in this debate listening to the Opposition. It is as though the last 13 years of their Government did not exist. It is as though they were not here, and as though some of them have landed from planet Zog. They talk about things that bear no resemblance to the reality of the policies that they pursued, and the consequences that we are now living with.
It would be ridiculous to try to argue that it is all the fault of the last Government. We know—others have spoken more eloquently and with greater knowledge than me—about the external factors and forces, but at the heart of this nation’s problem is our deficit. One does not have to be a woman or to run a family budget to know that the matter is simple. One works out how much money is coming in, and how much is going out, and tries to ensure that one spends only as much as is coming in. Someone who gets it wrong and spends more than is coming in runs up debt.
I am more than happy to give way in a moment to the hon. Lady whose constituency is next to mine in Nottingham.
What people do not do—they recognise this if they are responsible—is to borrow more. If they have reached the maximum on their credit card or their overdraft, they must pull in their horns, live within their means, and cut their expenditure to match their income. Opposition Members struggle with that concept, because they never practised it when in government. That is why we have an appalling level of debt and, worst of all, an appalling level of deficit.
The first thing the hon. Lady seems to be suggesting is that the national debt is a brand new concept. The country has always had a national debt. The reality is that until 2008, her party supported our spending plans. The national debt fell between 1997 and 2007 under the Labour Government. She is talking as though the issue is brand new, but the reality is that a global economic crisis caused the scale of the deficit, and she must take that into account.
There we have it: the finest example that we could have expected of an Opposition Member who simply does not get it. Deficit deniers—after 18 months of argument, they still do not understand. It is the structural deficit that is our problem. We are not earning as much as we are paying out. We have this debt, and that is what is causing the economic crisis.
I do not know what planet the hon. Lady was on yesterday, but here we heard that as a result of the Chancellor’s failed economic plans, more people are out of work and as a result he is having to borrow an extra £158 billion, which is making the deficit worse.
Again we have another brilliant example of somebody who just does not get it. They do not understand the problems. Some of the problems are external, as I have explained, but at the heart are the failings of 13 years of Labour Government. Some of us are old enough to remember what happened at the end of the Labour Administration before that. My generation, the ones who did our homework by candlelight, had to pick up the pieces. Who was it who had to sort out the mess that Labour created? A Tory Government—and here we are again, all these years later.
I would like to make another point. We all come from different backgrounds, but we all come here for the same reason: to make change. We all want to make things better for everybody in our society, and I find it deeply offensive when the Labour party claims a monopoly on compassion. No one person, party or side has any such monopoly. Nobody on the Government Benches came to this place to make the life of the poor even worse. In fact, many of us came here because we want to eradicate poverty. How rich it is to hear the comments from the Opposition, who failed to hit all their targets for child poverty—after 13 years of their Labour Government, the difference between rich and poor actually grew. That is their legacy and the indictment of the last Government’s failures.
I believe in fairness as much as I believe in compassion. I would much prefer there not to be any need for regulation, but there must be fairness when it comes to restraint and responsibility among executives over their pay. Other hon. Members have touched on the issue. It is just not on to see the levels of pay and bonuses that we have seen in the financial sector. I urge all those people to exercise restraint and responsibility in difficult times, which affect every other one of us.
I reject the Opposition motion and support the autumn statement so eloquently explained to us yesterday. I do not wish to tread on the toes of the hon. Member for Nottingham South (Lilian Greenwood), but I am sure that, like me, she will welcome one of the proposals in that statement—the widening and improvement of the A453. It does not lie in my constituency, although if the Boundary Commission gets its way, a large part of it will, but that work will have a profound benefit for the people of Greater Nottingham and the whole county.
I commend the Conservative-led county council for their efforts in bringing everybody together to persuade the powers that be that the improvement and widening of the A453 would bring great economic benefit to Greater Nottingham, including my constituency of Broxtowe. Many things are happening, such as the extension of the tram, that give people hope for the future—the prospect of more jobs and apprenticeships. I am happy to reject the motion and support the Chancellor in all he does to make a better future for all of us, especially our children.
I agree with the hon. Member for Broxtowe (Anna Soubry); I do welcome the work on the A453. However, if her Government had not cancelled it 18 months ago, work would already have been under way.
Families in Nottingham are finding life hard this autumn. They tell me that they are worried about turning up the heating because gas bills have shot up. It costs more and more to do the weekly shop, they pay more for the bus and it costs a fortune to fill up the car. Thousands have found themselves out of work, but even if they have a job, their wages are likely to be frozen or rising by less than inflation. There certainly is not much left over for Christmas presents or occasional treats, let alone holidays or major purchases.
Obviously those who are home owners are paying low interest rates, but many who rent their home are having to pay a lot more.
People in my city are angry that the irresponsible behaviour of a small number of people in banks brought our economy to the verge of collapse. They do not feel that those who caused the damage are doing enough to pay for the costs. They are also angry that the Government are making the situation much more difficult by putting up VAT, freezing child benefit, cutting the support families get for child care, taking away their children’s education maintenance allowance, or closing down services they rely on. A year ago, the Chancellor claimed that his £40 billion of extra cuts were necessary to get borrowing down, but now we know that borrowing will be £158 billion higher than he planned—a lot of pain for no gain. It was his decision to cut too far and too fast that choked off growth and led to rising unemployment: more people are claiming benefits and fewer people are paying taxes; people have less money to spend, so businesses struggle and more people lose their jobs. It is a vicious circle that this Government helped to create.
Thousands of people in my constituency face an even bigger hit. Public sector workers are being told that they have to find an extra 3.2% from their pay packets to help the Government pay down the deficit. Teaching assistants, nurses and youth workers are all being asked to pay more. The Government say they need to pour more money into their pensions, but the money is not going to boost their pension scheme; it is going straight to the Treasury. That is why people who have never taken part in a strike in their lives are doing so today. They feel they have no choice. This is the last resort when their employers simply will not listen or negotiate properly.
Let me tell the House about one hard-working family in my constituency that this Government are squeezing. Mark Thomas works for the city council as a neighbourhood enforcement officer. His job is to inspect houses in multiple occupation, of which there are thousands in Nottingham, particularly around our universities. Mark does vital work protecting public health and ensuring that young people are not exploited by unscrupulous landlords. In July this year, Mark and his partner Alison bought their first home together, and Mark’s 14-year-old son lives with them every other week. Like most people, they worked out how much they could afford, taking account of all the other bills they would have to pay each month and how much they had coming in through their wages. In addition to the usual utility bills, Mark pays child support to his son’s mother. Alison went to university to improve her career prospects and has student loan payments deducted from her salary. As Mark says,
“We are not a wealthy family. I would class us as average, getting by”.
Mark earns £2,500 less than the national average wage and currently pays £120 a month towards his pension. If the proposals to increase pension contributions go ahead, Mark will be paying half as much again—an extra £60 a month. Perhaps a member of the Cabinet would not notice £60 a month, but ordinary people who are not completely out of touch know that that is a lot extra, especially when their pay has been frozen for two years already. Mark and Alison face a double whammy because Alison also works for the city council, as an environmental health officer. She earns a bit more than Mark and pays £155 a month toward her pension, so her 50% increase will be £77 a month. One Nottingham family, an average family, getting by, is being asked to find an extra £137.50 each month, not to benefit their pension fund, but to help the Treasury pay down the deficit—a deficit caused by bankers; a deficit that this Government are making worse.
Mark and Alison are worried sick about finding that extra money. Mark says,
“£137.50 would pay our council tax, or buy gas and electric credit for the month, or pay for a large amount of grocery shopping. We already have to save over a number of months to buy necessities such as glasses and dental treatment.”
Mark is anxious that he will not be able to give his son the life he wanted to. He is worried that his son might choose to spend more time at his mum’s house because she is able to provide for him better financially. I am pretty sure that Ministers do not lie awake at night worrying about their family like that, and Mark and Alison should not have to either.
Of course pensions have to be sustainable and affordable, but changes have to be fair. They have to be fair to taxpayers—of course, public servants are taxpayers themselves—but also fair to the people who care for us when we are sick, educate our children and keep our streets clean and safe. The Government need to stop attacking the people our communities rely on day in, day out. They need to listen to why people are so angry and they need to try to resolve the dispute by engaging in real negotiations.
I am delighted to be able to speak about this important subject. I believe that if the country is ever to improve living standards for the long term, three elements will be necessary. We need a Government who have a vision of how such an improvement is to be achieved, who will consider in detail how they can empower families and businesses, and who will deal with the cycles of poverty that trap people in the benefits system and work to make those people’s lives better.
I want to suggest some ways in which we can improve the living standards of families and children, especially vulnerable children, and also help businesses. The most vulnerable children, surely, are those who do not have parents. Their lives are troubled from the beginning. They are children of the state, looked-after children. Thousands of people work with those children throughout the country, doing a really good job in children’s services, the voluntary sector and many other areas, but they need support. For many years there has been a disturbing trend towards disproportionately low outcomes for looked-after children. Their educational outcomes are poor, and the number who turn to crime is disproportionately large.
We simply must do better for those vulnerable children. Such changes can never happen overnight, but I believe that the Government have got off to a promising start. We have benefited from the expertise of the right hon. Member for Birkenhead (Mr Field), whose report on child poverty is a fascinating document containing real insights on how we can make progress, and the hon. Member for Nottingham North (Mr Allen), who also happens to sit on the Opposition Benches and who spoke about early intervention during Prime Minister’s questions today. That is a key theme. If we can target and help vulnerable children with early intervention policies, it will be entirely possible to improve their outcomes. That is the most important aspect, but they will also become less of a financial burden—if I may put it that way—on the state and on taxpayers.
I do agree. Other policies will also be helpful, although sadly I have not enough time to list them all. We have the pupil premium and the reports that have been commissioned, including those dealing with social workers produced by Eileen Munro and other experts.
Does my hon. Friend also agree that the Government will be able to save money at local council level by promoting infant early intervention programmes? By helping struggling families at the outset, they will save society much more money further down the track, because those families have been supported from the beginning.