Wednesday 23 January 2019
[Mrs Madeleine Moon in the Chair]
FTSE 100 Company Pay Ratios
I beg to move,
That this House has considered FTSE 100 company pay ratios.
It is a privilege to be under your chairship today, Mrs Moon. I have to be honest and open with the Chamber: I am guilty of trying to dumb down parliamentary proceedings; I attempted to call this debate “Fat Cat Friday”. However, the Table Office pointed out that that would not be correct in the circumstances. I wanted to call the debate that because by lunchtime on Friday 4 January, the UK’s top chief executives had earned more than their average employees would earn over the entire year. Those chief executives take home astronomical figures that are more like telephone numbers than salaries. Although the average employee has seen their salary remain stubbornly low, the pay packets of the FTSE 100 chief executive officers have risen by an average of 11% over the last year alone, soaring to a staggering average of £3.9 million per year. How can that be right, just or fair?
Let me emphasise right from the beginning that I have absolutely no qualms about those at the top being paid well; I appreciate the demands of running one of the UK’s biggest organisations. And I am not, at the moment, calling for a pay cap or a widespread cut to chief executives’ pay. I am calling for fairness—for the importance of the contribution of those at the bottom to be recognised in line with the contribution of those in the boardroom; and for organisations to determine the pay and reward schemes of all employees in one whole-company pay policy.
I will describe in more detail the pay ratios across the FTSE 100, and will consider the causes and consequences of such extreme differences in pay within organisations. Then I hope to detail the reality in some specific organisations, before considering the tangible steps that the Minister and this Government should take to combat such unfairness in the workplace.
Let us start with the FTSE 100. In advance of this debate, Will Turvill of The Mail on Sunday made a remarkable analysis of the pay ratio between FTSE 100 CEOs and the average wage of workers at their firms. Staggeringly, his results reveal that one FTSE 100 company, Melrose Industries, pays its chief executive a completely eye-watering 1,000 times more than the average wage of its employees. I appreciate that this is an extreme example, but few of the other 99 companies on the FTSE 100 index can consider themselves exempt from being similarly unjust.
Even among the FTSE 100, there is inconsistency and disparity. A FTSE 100 CEO is more likely to be called David or Steve than to be a woman or to come from an ethnic minority. What is more, the six female FTSE 100 chief executives earn just 54% of the salary of their 94 male colleagues. However, that is a debate for another day, because it is the FTSE 100 index as a whole that I will focus on today.
Back in the late 1990s, the pay of a FTSE 100 CEO was an extortionate 59 times higher than that of their average employee. If we fast-forward 20 years, it has sky-rocketed to being an eye-watering 145 times higher, and rising. Let that sink in: it means that it would take the median UK worker an extraordinary 137 years to earn a FTSE 100 CEO’s annual pay. Is a chief executive today working that much harder than they did just 20 years ago? The statistics suggest otherwise, as there is very little evidence that soaring CEO pay has incentivised or been the reward for better company performance, because the value of the FTSE 100 has changed little since the late 1990s. However, the pay of FTSE CEOs has increased by 300%. Meanwhile, two thirds of these top firms fail to pay the living wage.
Such mind-boggling figures are difficult to comprehend. To provide some perspective, a FTSE 100 CEO is paid an estimated 132 times more than a police officer, 140 times more than a teacher, 165 times more than a nurse, and an astronomical 312 times more than a carer. These indefensible ratios are a slap in the face for hard-working employees across our country who, at the very least, expect to take home a fair day’s pay for a fair day’s work.
Before this debate, the House of Commons digital engagement team kindly sought the views of the public on this matter. One person said that
“when their employees are working full time and not being able to afford proper accommodation, energy, food, transport or children, suddenly the difference in pay seems rather stark.”
Another person suggested that
“there should be a pay ratio, so if CEOs wish to continue enjoying these luxuries they must ensure that their lowest paid employees are earning a sufficient amount.”
I believe that the pay ratios that I am describing are utterly unacceptable, unjust and unfair. As the executive director of the Equality Trust, Dr Wanda Wyporska, says:
“A society that values its teachers, care workers and nurses at less than 1% of a FTSE CEO is beyond broken”.
Her view is a common one, with an Oxfam survey finding that 72% of people want to see the Government urgently addressing the income gap between rich and poor.
What is causing such extraordinary executive pay to continue soaring? Perhaps it is the fact that former or serving chief executives pack the remuneration committees that set pay levels at large companies; perhaps it is the decline in trade union membership; or, most likely, it is the inaction of the Government on ensuring that fairness is at the heart of the world of work.
These pay ratios stem not just from extortionate salaries, but from extraordinary incentive schemes that are increasingly reserved only for those in an organisation’s boardroom. I must be clear once again: I have no problem retaining incentive pay for executives. However, incentive schemes should be available to all staff on the same terms.
I am sorry for stopping a good speech, but my hon. Friend mentioned incentives; these CEOs also have the incentive of awards, including CBEs. Paula Vennells of the Post Office got a CBE, as most of these fat cats do. They end up getting awards, OBEs, knighthoods and all the rest of it, while the workers are suffering. There are people at the Post Office who face difficulties because of Horizon, a new system that has come in. Good postmasters—good people who are loyal to their communities—have been taken to court, and some of them are now going back to court. Will these CEOs be stripped of their knighthoods and awards?
I thank my hon. Friend for that intervention. I will consider the Post Office a little later in my speech.
Having such incentives for all staff seems like a common-sense way of providing sensible alignment between average workforce pay and executive pay. It is a straightforward, practical idea to have a whole-company pay policy. Let me describe in more detail the reality at specific organisations in the FTSE 100 to illustrate the inequality that grows in the absence of a whole-company pay policy. I will start with Persimmon, whose former boss, Jeff Fairburn, last year received, on the back of Help to Buy, £47 million, which is an extraordinary 882 times the average salary of his workers, before he lost his job. We all remember the backlash when Mr Fairburn was granted a £75 million bonus. In the heart of a housing crisis, do we really think that he should receive such a staggering sum, or should we have seen that money helping young couples who are looking to get on the housing ladder?
How about the owner of Ladbrokes, GVC, whose chief executive, Kenny Alexander, raked in pay that was a huge 484 times higher than the average pay of his workforce? And how about Tesco, whose CEO, Dave Lewis, received a £4.9 million pay packet, which is 303 times greater than the average pay of his employees? Is he working 303 times harder, longer, or better than them?
Then there is Sainsbury’s: a pillar of the Great British high street. Over 148 years, it has established a reputation as a leading retailer and a good company to work for, but its lack of a whole-company pay policy has led to the most disgraceful discrepancy in its staff salaries. Under the guise of an increase in basic pay, 9,000 loyal and long-standing Sainsbury’s staff are set to lose up to £3,000 a year from 2020. They will forgo their paid breaks, the night shift will be shortened, and their Sunday premium will be removed. While those shop floor staff will see their bonus scheme scrapped under these new contracts, CEO Mike Coupe takes home an eye-watering bonus of £427,000 as part of his £3.4 million pay packet, and although the salaries of those staff are crumbling, their bills, mortgages and rent are still the same at the end of each month. I wonder whether Sainsbury’s remuneration committee gave a moment’s thought to those staff when it signed off its executive bonuses. When the board and remuneration committee sit down to discuss what the pay package for Sainsbury’s CEO is going to be, they should also be deciding the pay and conditions for their lowest-paid staff. If they thought about those two things together, there would be a bit more modesty, a bit more honesty and a bit more embarrassment.
Such inconsistency and injustice has grown to become the norm throughout the FTSE 100 and across the high street, with treasured organisations such as Marks & Spencer and B&Q falling foul of the expectation of organisational fairness. The absence of a whole-company pay policy in such organisations has led to unjust disparities. It is at this point that I turn to the Royal Mail.
Of course, examples of those disparities can be found outside the FTSE 100, and I thank the Communication Workers Union for bringing the following example to my attention: since the Royal Mail was privatised by the coalition Government, the pay of its CEO has soared beyond recognition. Before privatisation, the total pay of the chief executive, excluding their golden hello, stood at just over £1 million, 50 times higher than the average wage in the organisation and 78 times higher than the lowest wage. Since privatisation, the chief executive’s salary has doubled; it is now 90 times higher than the average wage and an unjustifiable 123 times higher than the lowest wage. What would have been money for a public asset and its workers is being pocketed for private profit at the very top of the company.
As for Post Office Ltd, things started to change once it was decoupled from the Royal Mail. A postal assistant earns just 3% of the salary of the chief executive, who received a 7% pay rise last year. This is an organisation that is overseeing the privatisation of Crown post offices across the country and the potential transfer of hundreds of Post Office staff to WHSmith, rated by Which? as the worst retailer on the high street. I emphasise once again that I am not calling for a cut to, or a cap on, the chief executive’s salary; I am calling for consistency, parity and fairness across her organisation.
I am pleased to see the Minister here to respond to the debate. She may remember that we met last year to discuss exploitative pay in assignment contracts, which are thankfully about to be abolished, so she has shown that she is willing to listen. Let me assess the further steps that could be taken to bring fairness back to the world of work. In August 2017, the Prime Minister described the “excesses and irresponsibility” of some big business moguls as undermining confidence and damaging the social fabric of our country. If only she had followed those strong words with strong action!
Granted, new rules that will force all UK firms with 250 or more employees to start publishing their pay ratios should be warmly welcomed. However, those figures will be based on the median average of UK employees—that is, the salary of the employee halfway between the top of the scale and the bottom. A truer reflection would be to use the mean figure, taking into account the ratio of the lowest-paid employee compared with the highest. I ask the Minister how that policy will ensure that such extreme pay ratios do not occur in the first place, and what happens if and when they are shown to continue.
As the Chairwoman of the Business, Energy and Industrial Strategy Committee, my hon. Friend the Member for Leeds West (Rachel Reeves), says:
“If shareholders won’t or can’t hold these companies to account, then we will need Government to step in with tougher rules that clamp down on this kind of executive reward.”
Naming and shaming companies, and other piecemeal reforms that rely on organisations’ good will, have proven wholly ineffective. What is more, it is overwhelmingly clear that such excessive and unequal pay ratios are unpopular with the general public and reduce staff morale. The Mail on Sunday revealed this weekend that CYBG, the owner of Clydesdale bank and Yorkshire bank, faces a shareholder revolt at its annual general meeting over excessive bonuses for bosses.
However, we should not wait for isolated pushbacks. I suggest that the Minister takes note of the example of Sweden, ranked one of the happiest countries in the world, where companies with pay gaps face fines if they fail to close them. Furthermore, trade unions should have reasonable access to workplaces, and all FTSE 100 companies should strive to be accredited by the Living Wage Foundation. Most of all, I call for the important contribution of those at the bottom to be recognised in line with the contribution of those at the top, and for organisations to determine the pay and reward schemes of all their employees through one whole-company pay policy. If an incentive scheme is made available for some staff, it should be on offer for all within that organisation, on the same terms. Why should any organisation have a rule for just some employees, not a rule for all?
If a whole-company pay policy does not work, perhaps it is time to introduce a maximum pay ratio at those organisations. In an ideal world, I would not want society to be so prescriptive, but the worsening inequality I have described undermines our democracy, and I believe that our social democracy relies on fairness. It is based on the belief that people will behave reasonably, so when our democracy is not fair, the state must become involved. This is about more than just money, the economy and the world of work. Unfairness at these levels breeds cynicism—the feeling that the system just does not work for the ordinary person—and if that system does not work, why should a person trust in, vote in or participate in it? A lack of fairness produces spiralling disharmony and disaffection in society, and it is our duty as democrats to solve it.
The fact that it takes just three days for the UK’s top chief executives to earn more than the average employee is utterly shameful. After a hard day’s work, the very least that an employee deserves is to take home a fair wage that is in proportion to that of their colleagues. Across the FTSE 100, the absence of whole-company pay policies results in organisations rewarding the minority in the boardroom at the expense of the majority at the bottom. Enforcing or encouraging a whole-company pay policy in those organisations would be a sensible, logical and practical step towards ensuring that all hard-working employees receive a fair deal at work.
It is a pleasure to take part in this debate, Mrs Moon, and I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on having secured it. It is unfortunate that it is not as well subscribed as I had expected it to be; I had thought that this was a great debate to be involved in, on an issue that matters a huge amount to an awful lot of people who live in all the countries of the UK. I will highlight a few figures, some of which have already been mentioned by the hon. Lady; I will also talk about what we are doing about some of these issues in Scotland, and what we would like to do about them.
The remuneration of FTSE 100 CEOs between 2009-10 and 2017-18, over the course of this Conservative Government, has gone up by 66%, which is a significant increase. One of the interesting stats that I discovered when I was looking into this issue is that in 1980, median FTSE 100 CEO pay was 11 times that of the median worker. By 2010, that had risen to 116 times the pay of the median worker—an absolutely massive increase that surely does not reflect an increased workload of that level. I imagine that those CEOs are not doing 10 times the amount of work they were doing in 1980, and that the people who are working at the bottom of those companies are working just as hard as they were in 1980. An increase in the ratio to that extent cannot be justified.
In 2017, the mean pay of a FTSE 100 boss was £5.7 million. Compared with many people who live in my constituency or throughout these islands, I have a significantly large salary. I am very grateful for that, but even on my relatively large salary, £5.7 million is a number that I cannot even comprehend. It is a ridiculous amount of money for people to be earning.
I understand that the hon. Member for Mitcham and Morden was talking not about the particular salary that those individuals receive but about the ratio, and that is what I want to come on to. The important point about this debate is that it is about equality, and it goes much wider than FTSE 100 companies. We have massive inequality throughout the countries of the UK and much more can be done to improve the situation. When seeking to improve things, I tend to say that we can do so in Parliament, because we have the ability to lead the way as parliamentarians. We often fail, but we have that ability. We also have the ability to legislate to ensure that FTSE 100 companies can lead the way for all companies across the UK in removing the levels of inequality.
It is not only the person on the street or the person working at the bottom of these companies who is unhappy; there is also continuing shareholder dissent. It is important that shareholders are empowered and have the ability to make changes. They are unhappy and there is backlash from them about the massive bonuses and huge pay increases received by CEOs. If we empowered shareholders a bit more, they would have the ability to make those choices to help reduce inequality throughout the companies. Shareholders do not want to be associated with a company that has a CEO receiving a massive salary, massive bonuses and massive pay rises while the worker working on the basic wage is having their bonus scheme removed, for example. It is important that shareholders who have that moral compass can make that mark on the company.
It is important to look at corporate governance legislation and regulations. The changes on reporting the gender pay gap are helpful, but they do not go far enough. It is good that we have reporting on the gender pay gap, but there should be something—not so much a carrot, as a stick—to ensure that the gender pay gap improves. It would be unreasonable to ask companies with a massive gender pay gap to reduce it to nothing in one year, but it would be reasonable for the Government to mandate companies to show progress in reducing the gender pay gap. That should involve not just saying, “This is what we will do about it”, but, “This is the timeline on which we expect to make progress. We will reduce our gender pay gap by 5% in the next two years and reduce it further after that.”
A similar approach could be taken to wage ratios. Companies could be subject to a reporting requirement to submit details on how they will improve the ratio with set targets, and they could be subject to some kind of punishment if they do not meet those targets, rather than them just saying, “This is what we are doing”, but with no set outcomes. That is where a lot of people are on gender pay reporting and ratios.
In Scotland, the Scottish Government have put social justice at the heart of civil service pay policy. Public sector employees in Scotland are paid at least the Scottish living wage, and we have no age requirement for that. Under-25s who would receive a lower minimum wage under UK legislation are eligible to receive the Scottish living wage if they work in the Scottish public sector, no matter their age. We recognise that just because someone is 24, it does not mean they have fewer outgoings than someone who is 25. They could be in exactly the same set-up, renting a flat and with a small child, whether they are 24 or 25. The Government desperately need to tackle the fact that under-25s are being paid less. The Scottish National party has been vociferously making that case at every possible opportunity, including my hon. Friends the Members for Glasgow Central (Alison Thewliss) and for Glasgow East (David Linden) with a ten-minute rule Bill.
The UK Government are not taking the necessary action, so we are asking them to give Holyrood the power to legislate on maximum and minimum wages. That would address the lower end of the spectrum where people should be paid an actual living wage—one that they can really live on, not a pretendy living wage—and, at the other end, maximum wages and bonus payments. We want power over wage ratios. That is not to say that we have a set idea of exactly how we would legislate on high wage ratios, but if Holyrood had the power to do so we could at least have those conversations and consultations. We could come up with a policy that would work for employees, shareholders and the general public. We believe that we are more likely to take action than the UK Government, given their track record. They have not moved as far as we would to tackle inequality in Scotland.
In terms of SNP policy, in June 2018 we had a very good debate at SNP conference about wage ratios. We agreed as a party—our policy is made at party conference—that wage ratios would be one way to tackle inequality and that we would consider it and take it on. An independent Scotland would have a wage ratios consultation and discussion and, if possible, a policy. We would look at the best possible way to do that.
I want to talk a little about the real living wage and employment in Scotland. Employment law is reserved to Westminster, which we have argued against because the SNP and Scottish parliamentarians in general—this view is not reserved to the SNP—have much more respect for workers’ rights, so there is much more likelihood of them improving if we had the ability to legislate in our Parliament. Despite not having power over the issue, we have tried to make changes in our society and, to a limited extent, we have. A lower proportion of people in Scotland are on zero-hours contracts than in any other nation of the UK. The Scottish Government were the first Government in the UK to become a living wage employer, so we are putting our money where our mouth is. We are saying to people, “We are proving that we can do this. We are proving that we will put workers’ rights at the heart of what we do. That is why we believe that Holyrood should have power over that.”
Down here, we vociferously opposed the Trade Union Act 2016. We disagreed with a huge number of things in it. It is incredibly important that we have strong trade unions. If trade unions had the abilities that they previously had, their voice would be heard much more loudly. It would be amplified by the legislation, rather than quashed. Wage ratios would be tackled much more vociferously by the trade unions.
In this Parliament, we have also promoted a Bill to ban unpaid trial shifts, which would give rights to those workers who are forced to work for nothing while doing a trial shift. We promoted a Bill to give workers in precarious work the same rights as employees. It is incredibly important to ensure that they enjoy the same rights as people in more stable employment. In fact, it is even more important for someone in precarious work to have those rights than someone in work that is a bit more stable. That was a good Bill, promoted by the SNP.
Our most recent Bill was on employment rights. It would have stopped gig economy workers and small and medium-sized enterprises getting late payments, which is important for cash flow. Our Bill made clear the importance of someone working in the gig economy being paid on time.
Lastly, I want to talk about what the Scottish Government have done. In Scotland, we have the fairest income tax system in the UK. Some 55% of our taxpayers pay less than they would if they lived elsewhere in the UK. About half of English taxpayers pay more than they would if they lived in Scotland. It is the lowest-paid workers, not those at the top, who are paying more in England and less in Scotland. Next year, the top 1% will be asked to pay a little more on their income, and the remaining 99% will pay the same or less than at present. I therefore suggest that the Scottish Government’s policy on income tax is much better and fairer than that of the UK Government.
We are regularly attacked by the Scottish Tories for what we have done to improve fairness in income tax, but since we introduced the Scottish rate of income tax and varied the rates, our economy has grown faster than that of England, so the suggestions that all sorts of chaos would follow have not come to pass. There is a real difference between the actions of the Scottish Government and those of the UK Government. At every opportunity the Scottish Government have pursued fairness and attempted to reduce inequality, and the Bills that the SNP has promoted down here have attempted to reduce inequality in the whole of the UK because workers’ rights are currently a reserved matter.
Holyrood does not have the full range of powers over this matter. We want workers’ rights to be devolved to Scotland. However, given the chaos that is happening and the impact that Brexit will have on the lowest paid in particular, it is increasingly evident that Scottish independence is the only way forward. If Scotland had control over workers’ rights, we would make better decisions than the UK Government are currently making, and that makes the case for Scottish independence ever stronger.
I thank my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing this important and timely debate. Such debates expose our politics and the difference between political parties. It is vital that we discuss not only pay ratios, but solutions to extortionate pay, such as an excessive pay levy, and improved collective bargaining for workers through strong trade unions as a way to uplift the pay of millions of workers. It is also crucial that we are able to place the extortionately high pay of FTSE 100 chief executives in the context of low pay and the crisis of work in this country, where millions struggle to make ends meet, and where work is certainly no longer the preventer of poverty, which is a reality for millions of people.
Despite this state of affairs, as was mentioned, by lunchtime on 4 January, the top chief executives in the UK had been paid more than their average employee is paid in an entire year—an extraordinary fact. Every single year, that date and time comes sooner in the year. Unless action is taken, it will be one minute past midnight on 1 January when those people will have been paid much more than their employees. Every year, the Government take no action on that extraordinary fact. Those at the top are increasing their wealth.
I agree with my hon. Friend: perhaps this place should relax a little, because “fat cats” is exactly the right title for those executives who now get 133 times more than the average worker, which means that the salary of the average FTSE chief executive is the same as that of 386 workers on the minimum wage. It is politically poignant to note that some people are not outraged by that statistic. They are quite comfortable with the inordinate, huge salaries of executives who are paid grossly more than those who work for them.
I am sure that nobody would argue—my hon. Friend touched on this—that a FTSE 100 chief executive works 133 times harder than a hospital porter, a cleaner or a caterer. I went on a solidarity protest yesterday with strikers at the Ministry of Justice and the Department for Business, Energy and Industrial Strategy. Let us think about the caterer on exactly £8 an hour fighting for the London living wage. That works out at about £1,280 a month if they work a 40-hour week every single week of the month. If we think of rent, transport, bills and food, that person has a tiny amount to live on every month. I am sure nobody would argue that a FTSE 100 chief executive works 133 times harder than a teacher or a nurse in our NHS, or that they somehow have a combined worth of 386 workers.
The hon. Lady is making an incredibly powerful point. Does it annoy her as much as it annoys me that the Tories talk about hard-working families, but they do not mean hospital porters? They mean people who are much higher up the tree. Hospital porters, cleaners, chefs and the people she talks about work incredibly hard every day just to make £8 an hour.
And that work should be valued. It is no coincidence that those people who work really hard, but very often still cannot survive and do not have enough money to pay the bills, get into debt to pay for everyday items—not for luxury holidays, or any luxuries at all. Those people should be at the heart of our concerns in this place. I am mindful never to use the word “earn” when we talk about the pay of the very few at the top. What could they possibly do to earn such large amounts of money?
It is crucial to recognise the context in which FTSE 100 pay ratios are widening. In a stark contrast to the stockpiling of wealth by a few, years of austerity and wage stagnation mean that millions of workers across the country struggle to make ends meet, as I say. In-work poverty is rising and household debt is at its highest rate. Many people rely on borrowing, and one in five workers—more than 5 million people—are paid less than a living wage. That is a huge increase from 3.4 million in 2009. Insecure work has without a doubt become the norm, with nearly 4 million people—one in nine workers—facing uncertainty and worry. They are trapped. To illustrate the low-pay trap, one in four employees earning the minimum wage for five years has been unable to move out of that low-pay trap. Some people do two or three jobs to try to pay the bills, but it has not always been like that.
In 1980, as was mentioned, the median pay of directors in FTSE 100 companies was £63,000, and median pay across the country was £5,400. The ratio of executive pay to the average wage then, less than 40 years ago, was 11:1. In 2002, the pay of a FTSE 100 CEO had shot up to 79 times that of their average employee, and last year it had reached 150 times. This place is doing nothing to stop that runaway train of inequality. I seriously hope that those ratios are unacceptable and completely unjustifiable to anyone. It is particularly obscene that this escalation has come at a time when millions of people are struggling. There is a stark contrast between those two sets of people.
No doubt the Minister will refer to the Government’s reforms to tackle excessive pay in her speech shortly, but I want to make it absolutely clear that under this Government, not only has pay inequality continued to rise, but so has the speed at which it increases. I am proud that Opposition MPs are committed to taking action, because doing nothing is not good enough. When I have been out campaigning, loads of times I have heard people say, “The rich continue to get richer and the poor get poorer. There is nothing we can do about it,” but I fundamentally disagree. Yes, the rich are getting richer, but we can definitely do something about it.
In contrast to the Tories, a Labour Government would ensure pay ratios of no more than 20:1 in the public sector, for example, and we would introduce an excessive pay levy that would charge a 2.5% levy on earnings above £330,000 a year, which is a huge amount, and 5% on those above £500,000. It is estimated that that alone would raise £1.3 billion a year.
I am sure that the Minister will mention that from 1 July the Government will ensure that companies with more than 250 employees will be obliged to reveal and justify their pay ratios. However, there is no obligation on those companies to take any meaningful action beyond the act of publishing those facts. It is yet more empty rhetoric. How is it helpful just to have the injustice out there, without any action to remedy it?
We need practical, political solutions to curb undeserved excessive pay, and to create mechanisms for better income distribution. That is why we commissioned a report by Prem Sikka, published last year, suggesting a range of measures that would apply to the more than 7,000 companies in the UK that have more than 250 employees, accounting for more than 10 million workers. Needless to say, we are looking at the report’s recommendations closely, including proposals requiring executive remuneration packages of all large companies to be subject to a binding vote.
That is just one solution to excessive executive pay. Trade unions are the collective voice of workers, and they have to be central to the debate. They are a huge player in reducing inequality in the workplace, but, after years of anti-union policies, the vast majority of workers have absolutely no say over their pay, conditions or hours of work. Protections that existed before under collective bargaining agreements have been completely lost.
Workers deserve a lot more. Pay ratios are just one aspect of tacking pay inequality. That is why a Labour Government would set up a new Department to roll out sectoral collective bargaining—protecting the interests of workers, strengthening trade unions, and introducing new rights and freedoms so that every worker gets the support, security and pay at work that they deserve.
Surely it is time to end the excessive greed. People are feasting on the backs of workers who are struggling to make ends meet, and who have the gut-wrenching feeling that they cannot afford nappies for their children, even though they work more than 40 hours a week. Surely that cannot be right. The Government must act to end that injustice.
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing today’s important debate. She has a strong, long-standing record of campaigning on behalf of low-paid workers in the economy. I highlight the constructive way in which she approaches working across the House on some of these issues; I know that she secured an Adjournment debate on whole-company pay policy last July.
Executive salaries and pay ratios are undeniably high. Currently, the ratio of the pay of the average FTSE 100 chief executive officer to that of the average UK employee is around 160:1, based on the mean. The median average is 145:1, but it is important to set current levels of pay in a longer-term context. The data shows that executive pay more than quadrupled from the late 1990s to the early 2010s. Pay ratios increased over that period from 47:1 in 1998 to 132:1 in 2010. However, that has stabilised in the last five to seven years, albeit with minor fluctuations from year to year.
The High Pay Centre, which campaigns against high levels of executive pay, acknowledged in its most recent report that UK executive median pay peaked at £4.2 million in 2013, and is around £3.9 million for the latest reported year. That puts the UK on a par with Germany and only slightly above other major EU countries on executive pay levels, despite our quoted companies generally being much larger. In the US, CEO pay is much higher. Median CEO pay for Standard & Poor’s 500 companies in 2017 was around £9.3 million, giving the US a pay ratio of 399:1.
That sets the context, but it is certainly not grounds for complacency. Shareholders and people in wider society have increasingly been questioning how such wide differentials can be justified, both in terms of individual performance and in relation to company pay policy as a whole. The Government share those concerns.
We do not believe that it is the job of the Government to set company pay levels or impose arbitrary caps. However, it is our position that there must be transparency and accountability in executive pay, and that shareholders must have the information and the powers to challenge unjustified pay in the boardroom. That is why we legislated in 2013 to require listed companies to secure binding shareholder approval for their executive remuneration policies at least once every three years, and to disclose every year the total single figure that each director is paid.
It is also why we are continuing to take steps to force companies to disclose and explain how executive pay is matched by performance, and how it relates to wider employee pay. In particular, we recently introduced a new requirement for companies to disclose and explain every year the ratio of their CEO pay to the average pay of their employees. I am pleased that the hon. Member for Mitcham and Morden welcomed the legislation, which came into effect at the beginning of this year, meaning that companies will have to report their ratios when they publish annual reports next year.
Pay ratio reporting will, for the first time, show systematically and clearly how pay at the top of quoted companies relates to pay across the rest of the company. Companies will have to report each year the ratio of the CEO’s pay to both the median and the quartile employee pay at the company. The hon. Lady expressed concerns that the pay ratio was being calculated only in relation to the median; in fact, we require pay ratios to be published for the first quartile, the median and the upper quartile. We thought hard about whether to use the median or the mean, and finally decided on the median as a more robust figure. In part, that was a response to the TUC, which argued strongly that we should use the median. In most cases, we use the median because the result is the bigger ratio.
Shareholders, employees and others will get a clear and consistent picture from year to year of how CEO pay relates to pay across the whole company. Companies will need to explain the reasons for any change from previous years, and any pay ratio trend over time. They will also need to explain whether any change is due to a change in the company’s employment model—for example, if the reason was the outsourcing or offshoring of low-paid workers. Critically, the company will have to explain whether, and if so why, it thinks that the ratio is consistent with the pay, reward and progression policies of the company’s UK employees as a whole.
Those pay ratio explanations will be watched closely by investors, who are strongly behind the new pay ratio reporting, as well as by employees and wider society. Any company that puts forward weak or misleading explanations can expect to face significant shareholder and public criticism. As the Financial Times wrote in 2017 when we announced the plans,
“a single-figure ratio will attract attention. And that will help investors curb companies’ attempts to inflate chief executive pay—and the pay gap”.
Pay ratio reporting is part of a wider package of reforms aimed at making a real change to the level of engagement between boardrooms and employees. That package includes an important new provision in the UK corporate governance code for remuneration committees to consider workforce pay alongside executive pay, and to engage with the workforce to explain how executive pay aligns with wider company policy. It is too early to tell what the impact of the new reforms will be. The Government expect companies to respond positively and creatively to the new requirements, recognising that no one size will fit all and that there will be a variety of approaches.
We are already seeing some encouraging progress, on a voluntary basis, this year. For example, Marks & Spencer has agreed that the chair of its business involvement group, which represents the interests of the company’s 81,000 staff, will be invited to attend two boardroom meetings and at least one remuneration committee meeting each year. We must also remember that pay ratios are determined by average pay in the workforce, as well as by pay at the top, so ratios will fall where average pay increases faster than executive pay. In that respect, the Government are taking steps to boost the wages of working people through our industrial strategy to deliver better-paid jobs across the country, our £37 billion productivity investment fund and our increase in R&D investment to 2.4% of GDP by 2027.
We have taken concrete action for low-paid workers by introducing the national living wage, which is on track to hit its target of 60% of median earnings by 2020. Its introduction marked a pay rise for more than a million workers across the UK and has helped to deliver the fastest wage growth for the lowest-paid in 20 years. In April, we will increase it again to £8.21 by an inflation-busting 4.9%—an increase in earnings of more than £690 a year for a full-time worker, and a total pay rise of more than £2,750 a year since we first brought it in. Up to 2.4 million workers are estimated to benefit.
Real progress is being made for hard-working people. As a working-class Conservative MP—as a Tory—when I speak about hard-working families and hard-working people, I find that I am accused of referring to higher earners. As somebody who undertook many of the jobs outlined in this debate before I came to Parliament, I actually find it offensive that when I talk about hard-working people, I am accused of not referring to hard-working people separated across our economy.
I appreciate the Minister’s honesty. The problem is that when the middle-rate income tax threshold goes up, there are Conservatives who make the case that it will improve life for hard-working families, but very few people in the jobs we are talking about are making £43,000 a year. Maybe the Minister needs to tackle the issue with some of her colleagues.
I thank the hon. Lady for clarifying her point, but I have to say that it is this Government who have increased the threshold year on year. As a working-class Conservative MP, I am proud to say that I am standing up for hard-working people—and when I talk about hard-working people, I mean people who go out every day to earn a living, no matter what sector they are in or what job they are doing.
The Government have responded to the challenging world of work with plans for the biggest upgrade of workers’ rights in 20 years. In December we published the good work plan, which sets out how we will implement the recommendations of the Taylor review. The plan commits us to introducing a right to request a more predictable and stable contract for all workers and to bringing forward proposals for a single workers’ rights enforcement body in early 2019.
We will be making the options for employees clearer. For example, we have already laid statutory instruments to ensure that on their first day, employees are able to get a written statement of their rights. It is about making sure that workers are able to know what rights they have, and that they know that they can ask for that ability.
The Government have also laid legislation that will repeal the so-called Swedish derogation and guarantee agency workers their right to equal pay. After April 2020, agency workers will no longer be able to opt out of their right to equal pay after 12 weeks in the same assignment. In short, we are shining a light on pay at the top and taking action to improve the pay and employment rights of ordinary workers.
I want to touch on a few points made by the hon. Member for Mitcham and Morden. She rightly raised the issue of diversity on boards and gender balance, which the Government are very concerned about. We have started to see results from work on the gender pay gap: we are now at 17.9%, the lowest figure on record. We are working to improve gender diversity on boards, and we have made great progress. The next target and challenge is black and minority ethnic representation—not just on boards, but in the pipeline and among executives in general. That is one of the policy areas in my portfolio, and I take a lot of interest in it.
The hon. Lady asked whether it is right that those in large companies—I think she was referring to companies that are private, but not necessarily listed—are taking large salaries but have not signed up their employees to the living wage. I quite agree that that is not a satisfactory situation, but what is massively important is the highlighting of the issue by the media and wider public, and the transparency that we have enabled so that those companies are held under a tougher spotlight. Customers and suppliers out there who know that information about those companies will need to decide whether they want to deal with them. Things are moving, and it helps that the issue is on the agenda more widely and that more people are aware of what the big bosses are being paid.
The hon. Lady also raised long-term incentive schemes. The data show that long-term incentive schemes linked to valuation and share prices have increased over time, which has contributed to the rise in CEO pay. I absolutely accept her point, but one of the reasons for bringing in pay ratios and specifying in our rules that companies must give an illustration of the breakdown of executive pay is to enable shareholders to take a view. It will also provide real information about how that narrative relates to wider pay structures across organisations. We are hoping that the reforms will give shareholders the tools and powers to hold boards to account, and that they will exercise that right further as the legislation and the changes work their way through.
The hon. Member for North West Durham (Laura Pidcock) raised the issue of pay caps and suggested a 20:1 pay ratio. As I have outlined, the Government do not feel that it is our responsibility, or that we are in a position, to limit what companies can pay their employees. Our role is to ensure that shareholders and stakeholders have the tools to make judgments and hold boards and remuneration committees to account. We believe that the reforms that we have made over time are going some way towards achieving that.
I thank the hon. Lady for that clarification. However, I point out that a pay ratio of 20:1 could extend to foreign companies bidding for Government contracts, which would raise state aid and World Trade Organisation issues. There are issues with some of the policies and the refining that she may want to clarify further.
I thank again the hon. Member for Mitcham and Morden, who has taken the opportunity to bring this debate about company pay ratios to Westminster Hall. They are an important means of shedding light on pay distribution within companies and how that is changing over time. Their publication will spur companies and their remuneration committees to give greater thought and show more sensitivity to how pay in the boardroom aligns with employee pay. Along with other reforms implemented by the Government, they will ensure that the UK remains a world leader in corporate governance and an excellent place in which to work, invest and do business.
I have had many conversations with the hon. Lady, and I thank her for the way in which she approaches these matters. As I said yesterday in the Business, Energy and Industrial Strategy Committee, these issues will always be under review and we will always be looking at what can be done to improve transparency and clarity so that the spotlight can be shone on organisations. I look forward to working with the hon. Lady constructively on the number of issues that I know she is interested in in this area over the coming months.
That’s a very dangerous thing to say!
I thank all hon. Members for taking part in the debate. Although there are not huge numbers of us here, as a Back-Bench Opposition MP, the tools that I have to make small changes are sometimes about shame. The fact that we are here talking about this issue, that the House magazine has taken it up, and that Sainsbury’s has already sent me a very cross word about what was in the article, means that we are having some impact. As a Catholic, I completely understand the role of shame in controlling behaviour!
I come to these things as a patriot. I am the daughter of two people who came here in 1947, fleeing a small island that could not support them and could not feed their families. By dint of their own hard work and labour, they made a good life for themselves. I want that for everybody else. I believe that people should work hard. I believe that work is empowering—not just through someone supporting themselves and their family, but to the human spirit and purpose. I think it can be one of the best cures for mental health problems. To have something to do and to do a job well is a great feeling: I am grateful every day to do this job, because I love it and it leads me to do stuff. That is where I am coming from.
Like all Members here, I have an advice surgery every Friday. People come in and I look at their payslips and I think, “How do they live? How do they support their families and pay their rent? How do they get by?” I see that increasing, and I do not think that is what Britain should be about. We should be about reasonableness and fairness and giving people hope for a better future. I want work to pay, and for so many people who work so hard, who work such antisocial hours, in such poor conditions, that is not happening at the moment. Given where I come from politically, I never thought I would agree with pay ratios, but I am coming to the point of thinking that if other things cannot work, we may need to look at them.
Question put and agreed to.
That this House has considered FTSE 100 company pay ratios.
Widowed Parent’s Allowance
I beg to move,
That this House has considered the widowed parent’s allowance.
It is a great pleasure to serve with you in the Chair, Mrs Moon. I felt compelled to call for this debate about the marital status requirements of widowed parent’s allowance and the need to update the eligibility criteria of its successor, bereavement support payment, following contact by parents affected by the loss of partners. I wish especially to raise the case of Mr Arwel Pritchard and his family.
I have known Arwel, a police officer, since he was in my class in the sixth form at Coleg Meirion-Dwyfor. He met his partner, Donna, whom I also taught, while they both studied there. They were together from then until her untimely death. She leaves two young sons, Cian and Danial. The letter Arwel wrote to me 11 days after Donna’s death is heartbreaking, and his justifiable anger at the callousness with which he and his children have been treated deserves to be put on the record. If I may, I will read some of his words. He wrote:
“On the 20th of May 2018 the mother of my children and my long term partner Donna Claire McClelland passed away following a long illness with breast cancer.
She had been my partner since the time we met in college approximately 24 years ago.
During our time together we got engaged but, due to financial constraints, we did not get married as we had to make the difficult decision either to purchase a home together or get married. Wanting to raise a family, we decided to buy a house in order that we could have a home for our children.
The decision was made to become home owners, and, due to the inflated cost of living and the pay freeze that I received at work, we were never able to afford to be married.
Why am I—a person who has been a lifelong partner to Donna, who has two children with Donna and who has been in a relationship and living with Donna for more years than she lived with her parents—why am I treated as nothing in the eyes of the government?
Why am I treated differently to a person who could afford or was willing to get into debt to be married?
Why are my children not going to receive bereavement benefit for their loss just because their mother and father were not able to get married?
Why is the government discriminating against unmarried people?
Why is the government discriminating against people from different social backgrounds?
Why are children punished financially when one of their parents dies, just because their parents were unable to afford to get married?”
I am proud to be able to put those words on the record.
In many ways, widowed parent’s allowance has been around in one form or another since the inception of the modern welfare state. Society recognises that the death of either parent causes great trauma in a family and seeks to alleviate that distress with financial support. But although the names and conditions of bereavement support payments to widowed families have evolved since the days of Beveridge and Attlee, the requirement for widowed parents to be in a legally licensed relationship —either married or in a civil partnership—is a throwback to the social mores of the 1940s.
The Beveridge report of 1942 acknowledged, in a very different social context, the “problem” of unmarried couples being discriminated against, but none the less recommended limiting widow and guardian benefits to
“the legal wife of the dead man.”
That principle has remained enshrined in certain aspects of our social security system ever since.
That discrimination on the grounds of marital status was challenged in Northern Ireland by Siobhan McLaughlin, whose appeal was ultimately backed by the UK Supreme Court last summer. Ms McLaughin’s partner, John Adams, died in 2014. The couple were not married, but they had lived together for 23 years. At the time of his death, the couple had four children, aged between 11 and 19. The late Mr Adams had made sufficient contributions for Ms McLaughlin to be able to claim widowed parent’s allowance had she been married to him. The Supreme Court ruled by a majority of four to one that denying those payments to Ms McLaughlin was incompatible with article 14, in conjunction with article 8, of the European convention on human rights. Its judgment also sets out incompatibility with articles 2 and 3 of the United Nations convention on the rights of the child.
Essentially, the Court reasoned that although the promotion of marriage and civil partnerships as a policy goal is a legitimate aim for any Government, denying Ms McLaughlin and her children the benefit of Mr Adams’s contributions simply because they were not married was not a proportionate means of achieving that policy goal. In other words, privileging marriage and civil partnerships with tax breaks is one thing, but denying money to grieving children simply because they come from unmarried households is quite another. I say “children” quite intentionally.
The hon. Lady is making a very eloquent case for children who are punished because their parents chose, for whatever reason, not to get married. Does she agree that the entire bereavement support regime introduced in April 2017 punishes all children, because some families with children lose up to £12,000 a year under the new system—working-age parents with children may lose up to £23,500 a year on average—despite this being a contributory benefit?
Indeed. It interests me that the Supreme Court judgment makes reference to article 2 of the UN convention on the rights of the child, which decrees non-discrimination in relation to children, and to article 3, which endorses Governments’ working for the best interests of the child first and foremost. Those principles apply not just to the matter we are debating but to other issues.
I thank the hon. Lady for bringing forward this important matter. She outlined clearly a case in Northern Ireland. Does she agree that going from having a wage coming into the house to receiving £117 a week is a massive step, and that that help needs to continue for more than a year for homes with children? That needs to be reviewed. A year is not long enough for someone to sort out how to cope financially in the long term without their spouse and how to raise their children alone. This matter is highly important, and I congratulate the hon. Lady on bringing it forward.
I thank the hon. Gentleman for his intervention. It is evident that this matter raises a whole number of questions over and above the one I am specifically addressing.
I reiterate—I hope I say this regularly during the debate—that I say “children” quite intentionally. The great majority of EU member states make children themselves directly eligible for bereavement benefits up to a certain age. Essentially, bereavement benefits function as a sort of topped-up child benefit for children who have lost a parent and therefore require additional support. It is not, however, within the remit of the Supreme Court to correct primary legislation; that duty lies with us in Parliament.
Let me make it clear that despite the title of the debate, I believe the principle established by the Supreme Court ruling extends beyond the widowed parent’s allowance. We have heard that families in which a spouse has passed away since April 2017 are entitled to bereavement support payment, which replaced widowed parent’s allowance. It is therefore implicit in the Court’s ruling that bereavement support payment, too, ought to be extended to children regardless of their parents’ marital status. After all—I wish to impress this upon everyone present, including the Minister—the key takeaway of that ruling is that refusing to extend payments to the children of unmarried couples is of material detriment to those children and is discriminatory against those children.
In the eyes of the Supreme Court, a policy may offer special treatment to married couples when children are not involved, but it may not do so in relation to a benefit targeted at the needs and wellbeing of children. That is directly relevant to both widowed parent’s allowance and bereavement support payment, as in both instances the wellbeing of the children is the primary purpose of the benefit. That is expressed very convincingly in the Supreme Court judgment. It is not acceptable for the state to discriminate against children who happen to hail from unmarried households—to confer stigmatising status on families as either legitimate or illegitimate in the eyes of their own Government. If the support is there, it must be there for all children.
The Minister may well argue that there are bureaucratic barriers to extending widowed parent’s allowance to the children of unmarried couples. He may suggest that the requirement of a legal union protects widowed parent’s allowance from abuse. In reply, I would highlight the armed forces pension scheme, which successfully utilises a definition of “eligible partner” that is not narrowly restricted to the confines of marriage and civil partnership. Of course, the Department for Work and Pensions routinely assesses whether individuals are cohabiting, in pursuit of rolling back their means-tested social security benefits. In many such cases, there is considerably less evidence of cohabitation on display than the existence of living, breathing children. In fact, widowed parent’s allowance itself can be withdrawn if a parent later cohabits with a new partner. It is striking that Governments past and present have been willing to recognise the validity of cohabiting couples in life but not in death.
The Minister may highlight that discrimination against the children of unwed couples was debated during the passage of the Pensions Act 2014. I would reply that the legality of the Government’s standpoint is now informed by the Supreme Court’s ruling from last summer. Where Parliament previously debated in a fog of unknown quantities, we now know that the legal union requirement violates the human rights of children born to parents who are neither married nor in a civil partnership. Defenders of restricting payments to married households typically concern themselves with spousal rights, but the crux of this issue can no longer be allowed to rest solely on the rights of a bereaved spouse. Today’s debate is about whether the Government can continue to materially disadvantage children born to unmarried parents.
Household compositions have changed visibly since the widowed mother’s allowance of 1946, and the Supreme Court ruling is a reminder that our social security system must evolve to keep up. According to the Office for National Statistics, cohabiting couple families have been the fastest-growing family demographic across the UK for two decades, and in the past few years, families headed by cohabitating couples have been more prevalent than lone-parent families in the UK. By 2017, 17% of all households with dependent children were headed by a cohabitating couple.
We also know that there is a socioeconomic and geographical element to family composition, and 49% of cohabitating households in Wales are home to dependent children—the highest proportion throughout the UK. Poorer families are more likely to be headed by unmarried parents, and both mothers and fathers in married couples are more than twice as likely to have a degree as their counterparts in cohabiting couples. Children in lower socioeconomic households are therefore disproportionately exposed to bereavement support discrimination of this type, compared with their wealthier counterparts. That is deeply ironic given the Government’s approach to non-means-tested benefits: to those who can afford to marry, they give more, but to those who have less, they seek to justify denying them at the most traumatic time.
When will the Government formally respond to the issues raised in the Supreme Court ruling and in this debate? The Minister said on 5 September last year that there would be a response anon, but a number of months have since passed. If he will not provide a set timetable today for a response, will he explain why? Could the Government use legislative vehicles to make such a change? I think particularly of the Civil Partnerships, Marriages and Deaths (Registration Etc.) Bill promoted by the hon. Member for East Worthing and Shoreham (Tim Loughton). A private Member’s Bill might well be a vehicle through which to make such a change.
Extending widowed parent’s allowance as well as bereavement support payments was recommended back in March 2016 in a report by the Select Committee on Work and Pensions, “Support for the bereaved”. It outlined, as I have done today and as the Supreme Court did last year, that excluding the children of unmarried couples from bereavement support in the 21st century is both unjust and unjustifiable.
It is a pleasure to serve under your chairmanship, Mrs Moon. I pay tribute to the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) who is a passionate advocate of this issue, and I thank her for giving me advance notice of the topics she intended to cover so that I could consider seriously the points raised. She gave an impassioned interview on BBC Radio Wales today, and her work in this area is a credit to the campaign she is championing. I also thank other Members who have contributed to this short but important debate.
Bereavement is one of the toughest experiences that people face, particularly with the immediate upheaval. I know that from first-hand experience because I lost my father at an early age. My parents ran their own small business and—this is a sign of times gone by—it was predominantly in my father’s name. At the point when grieving should have been the natural process, my mother was required to go back into work and fight the banks to try to keep a roof over our heads, and I was back in school the following lunchtime.
The Government’s focus is very much on appropriate and immediate support, and that has been reflected in some of the changes we have made. That is an important focus for the Government, and we spend £464 million a year on various forms of support for those who have been bereaved. Recent changes mean that over the next two years we expect to spend an additional £40 million. I recognise that the thrust of this debate is to encourage and push for further changes, particularly for children, and we have demonstrated a willingness to do that where appropriate.
Changes to the bereavement system will cost an additional £40 million over those first two years—something we all welcome. As a principle, such support will be easier to claim, and it will provide the immediate support that was very acute on the list of asks in the 2011 consultation—the need for help in those early months is paramount. Such support is now paid in addition to other household income, and it is not taxed, means-tested or applied to the benefit cap. After we listened during the consultation we widened the support available to include anyone of working age, and younger spouses and civil partners without children will now get support. It also removes the potential trap that stops people being able to move on because if they found a new partner they would lose any support, even if they are still in need of it.
Having listened to the consultation responses we increased the initial lump sum for those with children by an extra £1,500, to recognise that additional need. That support is in addition to the initial sum of £2,500 for those without children, and £3,500 for those with children, and therefore provides 18 months of support, rather than 12. Those without children receive £100 a month, and those with children get £350 a month, for 18 months. Overall the changes not only reflect that immediate need for support, but target those on the lowest incomes and those most in need, who will receive cash on top of what is already provided.
I appreciate the Minister informing us of that, but he has not said whether the Government intend to move on cohabiting couples, and whether—five months down the road—they intend to respond to the Supreme Court judgment, and if so, when. Forgive me, but I feel it is my duty, given the title of the debate, to press those points.
We are only five minutes into my response—fear not, there is more to come, and it will cover exactly those points.
After the introduction of the bereavement support payment, a broader point was raised about how and when we will evaluate the effectiveness of that new system. We recognise that, as with many Government changes, we need to listen, learn and act, and that is separate from any legal judgment. We intend to assess the situation once sufficient evidence is available, and we must have enough data to examine fully the continued circumstances of the bereaved once their benefit payments come to an end. We will analyse that information, which will include looking at the characteristics of those in receipt of benefits, such as age, gender and other sources of income, as well as how bereavement support payments interact with other benefits. We will also look at outcomes for recipients once bereavement support payments come to an end. At this stage, we do not have a specific timescale for that evaluation, as we must ensure enough time to allow other forms of support fully to bed in.
Let me turn to the thrust of the hon. Lady’s intervention and the principle of cohabitees. The question of opening up bereavement payments to cohabitees was debated and decided against in Parliament during the passage of the Pensions Act 2014, which legislated for the introduction of bereavement support payments in the UK. Restricting bereavement payments to claimants who are in a legal union with the deceased has been a feature of bereavement support since the 1920s. That was based on the outdated assumption that someone would rely solely on their spouse for income and would never work themselves. The concept of a legal union is a constant feature of contributory benefit schemes. It promotes institutions of marriage and civil partnerships by conferring eligibility to state benefits derived from another person’s national insurance contributions only on the spouse or civil partner of the person who made the contributions.
Cohabitation is not a straightforward concept and can sometimes be open to interpretation; unlike a legal union, it is not a black-and-white issue. That is partly why it is taking time for us to reflect very carefully. An extension to cohabitees could also trigger multiple claims on behalf of the same deceased person—for example, if the deceased was legally married to one person but cohabiting with another. That has the potential to lead to delays and additional burdens to claimants that are likely to cause distress at a time of bereavement. It is an important factor. I am not saying that the issue is insurmountable, but that is why this is a complex issue to reflect on.
I am sure the Minister needs no reminding that the UK Government ratified the UN convention on the rights of the child in 1991, and I am sure that he would therefore share my concern that if discrimination against children is being facilitated on the grounds that it is bureaucratically too difficult to resolve the issue, that is not making the interests of the child a priority.
I thank the hon. Lady for her invention and have two points to make in response. I am not necessarily questioning that. What I am demonstrating is that we have acknowledged that we need to respond—we need to act. This is not a black-and-white issue, so we cannot do that within 24 hours. In effect, there are two asks. One is that people want me to do something, and to do something quickly; and that is what I am—
I am coming to the issue raised by the hon. Lady. The second point is that we do recognise the principle in respect of children, which is why, under the bereavement support payment, there is additional money for those with children; that principle is there.
Let me cover a bit more and I will happily take interventions, because we are okay for time.
Last year, the Supreme Court declared that the primary legislation that governs widowed parent’s allowance is incompatible with the principles of human rights law, as it
“precludes any entitlement to widowed parent’s allowance by a surviving unmarried partner”.
The courts cannot strike down primary legislation; only Parliament can change primary legislation. Therefore, that ruling does not change the current eligibility rules for receiving bereavement benefits. I am keen to take action, however, in the light of the Supreme Court ruling. I made that very clear in my statement on the Floor of the House, and since then, to help to shape the response—this debate will also be taken into consideration—I have met a number of MPs and campaigners personally. That has been an important part of the process.
However, the issues are complex and there is no quick fix. As Lady Hale herself noted in her judgment:
“It does not follow that the operation of the exclusion of all unmarried couples will always be incompatible. It is not easy to imagine all the possible permutations of parentage which might result in an entitlement to widowed parent’s allowance.”
Crucially, that is not a clear steer—a clear steer equals a much swifter response from us—and we have to take that into consideration; Lady Hale herself acknowledged that. That does not mean that we are pushing this into the long grass. As I confirmed on the Floor of the House and I am hoping to convey here, we are taking it very seriously. There is extensive and comprehensive work to look into it to ensure that we get it right.
To go back to the earlier point, we do not wish to unintentionally cause additional stress where there could be competing people who feel, under the new rules—new potential rules—that they would have the claim. Each in their own right would feel that it should be them; and at a time of bereavement the last thing we want to do is cause undue stress.
I remind the Minister that virtually every other European state treats the children as eligible, in which instance the legality and licence of the relationship between the parents is inconsequential. I wonder whether the Minister would move to support such a principle, but none the less I would greatly appreciate some sense of the timeframe. I understand his point that the matter is complex and thus deserves a thorough response, but I would press him to give an indication of when he is likely to come back.
In terms of the way other European countries do this, that is part of our work, because we are looking at what has worked, what the potential unintended consequences are and what can be done to mediate that. That is shaping much of the work. I absolutely understand why the hon. Lady would love me to be able to give a specific timeframe, but I cannot do so, other than to say that it is an absolute priority for us to do this and to do it thoroughly and properly and to avoid unintended consequences. We absolutely recognise the importance of this.
I am gratified by what I think the Minister said, which is that eligibility based on marital status cannot be determined purely on the basis of convenience. I am glad that he seems to have said that, but like the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts), I ask him to assure the House right now that the children will be at the heart of any way forward that the Government embark on.
Many of the things that we do as a Government rightly recognise the importance of children. As the state, we have a duty of care to ensure that all children, regardless of background and circumstances, have the opportunity to unlock their full potential. Whichever political side they are on, every individual Member would echo that, in their own terms.
As I said, we have recognised the importance of the hearing. We are keen to do this thoroughly. We are taking it very seriously. We wish to do it as swiftly as possible, but it has to be done absolutely right. Let me give further reassurance. Although there is no one simple or obvious solution following the declaration of incompatibility, the officials are working very carefully, and ultimately I will return with potential solutions. This must go through the House’s legislative process, so all Members will have further opportunities to shape what we then believe would be the right conclusion. We are working very closely with our counterparts in Northern Ireland, recognising that the specific case was from there. But this must be done very thoroughly.
In conclusion, we are carefully considering the McLaughlin court ruling. We recognise that we currently have incompatible law on the statute books, and we are actively considering all options. With the introduction of the bereavement support payment, we have demonstrated that we will seek to make sensible and positive changes to target support at those most in need.
It is very clear that the hon. Members present feel strongly that the emphasis has to be on the children; I have heard that loud and clear. As I said, it has always been our intention to assess the impact of the bereavement support payment, which we will do once we have sufficient data. We are committed to supporting the bereaved and ensuring that they receive the right support at a difficult time. I echo my tribute to the hon. Members who care so passionately about this subject. It is a real priority for the Government and for me, and as we make progress I will be very happy to meet again, individually, those who are interested, in order to update them on the work. I want to be inclusive, because we all want the right outcomes. It is just that the issue is complex. There was not a clear steer, which meant that there could not be a quick fix, but the issue is a genuine, real priority for us.
Question put and agreed to.
Balanced Budget Rule
[Graham Stringer in the Chair]
I beg to move,
That this House has considered the balanced budget rule.
It is a pleasure to serve under your chairmanship, Mr Stringer. I am extremely pleased to have secured this debate to consider an issue that has slipped down the agenda in recent years, namely that of fiscal responsibility and the actions the state can take in order to uphold and, in some cases, guarantee it.
I am delighted to see so many right hon. Members and hon. Members here today. It is packed to the rafters and standing room only, which demonstrates the level of interest in the subject. I hope that, by holding such debates in Westminster Hall, and by dragging so many hon. Members to them to volunteer contributions, we can slowly raise this important issue back up the agenda and draw attention to it.
The particular issue I want to discuss is the principle of the United Kingdom adopting a balanced budget rule as a way to improve its finances, and the underlying responsibility of Members in this place to ensure that the country pays its way in the future. The idea, which though simple is not universally liked, is that over an appointed period, within an agreed timeline, Governments should follow the novel concept of living within their means and not spend more than they can afford. Crucially, that commitment goes beyond words and there should be consequences if there is a failure to adhere to it.
To some, that is dramatic news; to others, such as myself, it just makes sense that Governments should not seek to balance the books on the back of the nation’s children and grandchildren. The principle of the never-never is, with appropriate structuring, just as apt for the Exchequer as it is for the average household in towns such as Dronfield, Eckington, Clay Cross and Killamarsh in my North East Derbyshire consistency.
It was James Madison, one of the US founding fathers, who said in 1790 that he went
“on the principle that a Public Debt is a Public curse.”
We would do well to take heed of such sentiments.
I have prepared a long speech, because I did not think that so many Members would be here. Before I begin, I will frame the discussion to ensure that the next few minutes can be constructive and useful. The debate could easily, quickly and seamlessly descend into the usual tit-for-tat and back-and-forth on the current state of our national finances, who got us to where we are and why we are there. I am sure that that may happen during the debate. I will say a few words about that in a moment, but I hope we will not dwell on it too much. The idea is to take a broader and longer-term look at where we are, and how we ensure that we leave our country safer, more secure and more resilient than we found it. That resilience should stretch to the nation’s finances as much as it does to its borders and national security.
I declare this debate, in so far as I am able, a Brexit-free zone. That is not because Brexit will not have repercussions or implications for the issue at hand, because it blatantly will, given that the Government’s deficit elimination target has been revised in recent years. I hope my hon. Friend the Member for Southport (Damien Moore) will still have a speech to make after those comments. This debate is about a time beyond Brexit, if we can possibly imagine such a nirvana, and about the day when headlines talk about police, health and education again, rather than backstops, Juncker and tariffs. I have been in this place less than two years, and I would say that at least 90% of what we talk about is Brexit. It sucks the oxygen out of the room, and I say that as committed Brexiteer. It also looks likely to continue to do so for much of the next year, so I hope that for the next few minutes we can try to avoid it.
My proposition is simple: that the United Kingdom considers over the long term the adoption of the balanced budget rule, set in statute, which requires Government to spend only as much as they raise, over a set agreed period, and that there will be consequences if they fail to do that. That would not be an aim or an ambition, but a hard rule, which would be flexible only inasmuch as anything can be flexible when it is set down in law. To be provocative, if we were so minded we might even consider tying any attempt to change future legislation—presumably by a spendthrift Government eager to give out sweeties or goodies to buy votes—to a referendum of the people themselves, given that we have become so adept at referendums in recent years. That would certainly focus minds.
What is the point of legislating on this issue? First, we should all have a moral problem with excessive Government debt. The United Kingdom’s general Government gross debt in September 2018 was, according to the Office for National Statistics, about £1.8 trillion, which is equivalent to about 85% of our country’s GDP. Last year we borrowed, and therefore added to that figure, about £40 billion. In the last couple of decades, our debt as a proportion of GDP has risen from approximately 40% to more than 80%. Those may be just numbers, but they have real-life and real-world implications.
I acknowledge the challenges that the Government have had in trying to get the country’s deficit under control. My party remains resolutely of the view that the Administration prior to 2010 both mismanaged the country’s finances and failed to prepare for the inevitable recession, which could not be avoided given that mere mortals cannot abolish the cycle of boom and bust, and given the well-recited failure to mend the roof when the sun was shining. I support the Government’s deficit strategy and the work they continue to do to manage it down. It has proved a difficult issue to resolve, but we should acknowledge the important milestone that we hit this year, which is that debt as a proportion of GDP is falling for the first time in many years.
Even with the acknowledgement of the good work that has been and continues to be done, the reality is that we are going to run a deficit for a good number of years to come. Even when we eliminate that deficit, which I hope will be as soon as possible, we are merely returning to a place that stops us piling on any more problems for our children and grandchildren, without really having a way to cut down the problem that has already been created in absolute terms. What is the long-term strategy for cutting that debt pile in absolute rather than relative terms? How do we avoid the current position becoming the baseline and the place we start from when the next recession comes? That place would, by default, reduce our firepower to deal with those hard times.
It is worth dwelling on the moral case for not running a deficit and for keeping debt low. The debt that we run up, for whatever good or bad reason, needs to be paid back, and if we cannot pay it back, we need to service it or pay for it. That limits the headroom of future generations to make decisions about what they spend their taxes on, because some of their taxes will go on servicing the debt. It mandates that spending that benefits one generation will be dealt with by another, which is an intergenerational unfairness that we should reflect on much more deeply than we do today, as ever-eager politicians dream up another opportunity to spend.
Reducing our firepower or fiscal space in the event of a recession is the worst kind of lack of planning, and one that will hamstring our ability to pull ourselves out of those recessions, when they inevitably come. As Ryan Bourne of the Cato Institute pointed out in his excellent recent paper on the subject, at least some of the literature that has reviewed the issue highlights that when Government debt gets too high for too long, it tends to reduce growth rates overall, meaning less economic activity, less growth and less prosperity in the long run. [Interruption.]
Sitting suspended for a Division in the House.
Before we went to vote I was talking about the moral case for low debt and ensuring that the servicing of that debt was as minimal as possible, to retain and support our ability to ensure economic activity in the future. It was not for nothing that Herbert Hoover intoned sarcastically:
“Blessed are the young, for they shall inherit the national debt.”
In this context, perhaps we can bestow a few less blessings on them in the future.
Putting aside the morality of debt, the key issue, which should drive all politicians regarding the accretion of Government debt, is the year-on-year cost of servicing and holding it, as mentioned earlier. The proponents of unfunded spending may highlight how the markets are not that concerned with relatively high borrowing so long as it can be funded. That may be the case. Let us hope, for all of our sakes, that we do not enter a period of high interest rates in the coming decades when national debt is to be rolled over.
The opportunity cost of that funding, on an ongoing basis, is much less understood in this place than in public discourse. It comprises a tax, year on year, on today’s generation for yesterday’s spending. Unlike the total debt to GDP ratio, which has oscillated wildly in the last century due to wartime spending, the cost of servicing the UK’s debt has been on an upward trajectory for the last century. Adjusted for inflation, the cost of servicing that debt has risen from an average of £12 billion per annum between 1900 and 1960 to nearly £30 billion at the turn of the 21st century. Since 2009, that average has hit £43 billion every year. In total, since 1900 the UK has spent something like £2.5 trillion just on servicing its debt. About half of that has been spent since I was born—I still like to think of myself as being relatively young.
The bad news is not likely to stop there. With the continuing running of deficits until well into the 2020s, the annual cost of servicing that debt is projected by the Office for Budget Responsibility to hit more than £50 billion by the start of the next decade. In this Parliament alone, debt servicing costs are projected to be about a quarter of a trillion pounds over the five years. The sums are huge and growing. They represent a significant opportunity cost to the UK as a whole.
My hon. Friend is making a powerful point. To put it into sharp focus, does he share my concern that the annual cost of servicing the United Kingdom’s national debt is more than we spend on schools? As a matter of morality, we need to keep debt under control so that we can truly allocate resources where they are most valued.
I could not concur more with my hon. Friend, as I will address in my next paragraph. Putting this into context, about 8% of all current Government spending is diverted towards debt servicing. In 2015, that made interest payments the joint fourth largest proportion of spending by the UK after health and welfare, and on a par with defence. Spending on education, the police and transport pales in comparison with the budget allocated to debt interest. That budget could be used, as my hon. Friend has just outlined, for myriad other more socially useful activities, such as paying for a hospital to be built every four days, or for approximately 2,500 nurses, police or teachers to be hired every day throughout the year. For those of us with a more centre-right political outlook, the £45 billion spent on interest costs in 2015 could even have been used to reduce the size of the state through tax cuts, perhaps as large as 8% or 9% in the standard rate of income tax. If the populace actually knew that such a significant chunk of the taxes they paid every year was being used to pay for spending chalked up 20, 30 or 50 years ago, would they be content doing the same or worse for their children, given the sacrifices and opportunity costs involved?
We know what the problem is, so why do we not just do something about it? Why do we need a legislative solution for this issue? The problem is that we as a country are not that good at stopping adding to our debt. Our Labour friends—who have temporarily deserted the Chamber—have a tendency to spend money without a huge amount of regard for the implications. My party usually ends up having to clean up the mess. Even on my side, there are not insignificant number of people who cannot resist the temptation to spend when it comes down to it.
Our parliamentary system and representative democracy are excellent at pushing the cause of individual spending requirements, many of which, I do not contest, are no doubt noble. Yet there are few people who will exercise proper restraint or promote proper fiscal responsibility to ensure that all of these myriad pots of money are truly paid for. It is always tomorrow’s problem. Mañana, mañana, as they say. The numbers show just that: over the last century, the United Kingdom has consistently increased its national debt and its deficit spending. Both in absolute terms and as a proportion of GDP, the UK’s debt burden has grown significantly since the turn of the 20th century. The recent political consensus in the UK demonstrated a clear disregard—if we are honest—for the consequences of deficit spending.
Prior to the second world war, deficit spending tended to be closely correlated with war and national defence. In more than half the years between 1900 and 1939, the UK ran an absolute surplus, including during much of the late 1920s, during economic crisis. Since 1945, however, the achievement of a surplus in the UK’s national spending has been relatively rare. Only 13 out of 71 years saw the deficit being reduced, and on only two separate occasions—the late 1980s and the late 1990s—has the UK run surpluses for more than a couple of years at a time.
If all that sounds like one long criticism, it is not intended that way. It is just a statement of fact. Whether poverty or plenty, feast or famine, there is one almost universal constant: the Government spend more than they take in. That is not unique to the United Kingdom, but a feature of western democracy: red ink reigns supreme. The main variable in western liberal democracies is whether they overspend by a little or a lot. France has never run a Government surplus as a proportion of GDP since the 1970s, nor has Italy. The United States has managed to do so only once since 1960. Even Canada, one of the more enlightened in tackling public debt, has only managed to run surpluses in less than one third of financial years since the 1970s. The Maastricht protocol on excessive debt procedure says that countries should not exceed a 3% borrowing ceiling. Just think on that for a moment: there is a protocol that automatically sets an expectation of overspending—just that it is not excessive. And we wonder why debt has significantly increased in most western democracies over the past 30 years. There is an urgent requirement, over the long term, to address this inherent deficit bias in democracies.
The idea that we need to take more drastic legislative solutions is not that new; it is just that we have never properly applied it to national spending before. Sure, the Government have their charter of budget responsibility and an equivalent office creating the data and watching what is happening. Yet the charter requires people only to identify that they are changing policy. It does not really hold people to account or limit them.
On changing policy, I am very aware of where we are at this moment in time. Does the hon. Gentleman agree that a post-Brexit economy will provide an incredible opportunity to expand and invest, that the Government must be prepared to invest in our own people, and that if we must borrow to do so, it must be done in a reasonable and controlled fashion? As he has said, we must be prepared to back our own people. I hope that the Minister will respond positively and say that he will ensure that there will be Government investment in our businesses. That is very important.
I completely agree that we have a big job to do after Brexit, in terms of ensuring that our infrastructure works and that our country is well prepared for the future and has the necessary flexibility to take the opportunities that will come our way in the coming decades. If, from a Government perspective, we need to spend in order to do that, we should do so. I am not here to disregard Government spending—it is a force for good. However, it has to be done properly, it must have a clear outcome and we have to pay for it.
Sitting suspended for a Division in the House.
I was talking about how legislative solutions are applied, what is already in place and the charter for budget responsibility. My point was that in non-financial areas of Government activity, we are happy to bind ourselves to long-term targets, because there is the political will. The most obvious instance in recent years was the Climate Change Act 2008, which created an explicit legal requirement for future Governments to reduce greenhouse gases by 80%. If a political consensus can be built for protecting the country against such a danger to our children, why cannot the same be done to prevent economic problems for future decades?
That is where a balanced budget rule could really make a difference, with a legislative requirement to balance our budget over a period, minimising the growth of the debt to be left for following generations to deal with. It is not all that innovative. The OECD estimates that about 100 countries have some kind of fiscal limiting framework. Those can be voluntary or compulsory, and they vary in strictness and the degree to which they are adhered to. None is perfect, but it is at least arguable that over time the focus on fiscal rectitude focuses minds and attention on delivering better outcomes.
Perhaps the most obvious example of a budget rule, and the best known, is Chile’s. In the 2000s, Chile adopted a rule requiring structural surpluses to be run, so that the national debt could be reduced significantly. Broadly, under the structure it created, an estimate was made of the country’s economic potential over future years, and spending was allowed only to match the anticipated growth and revenue.
What was the result? There was a sharp reduction in net debt, surpluses as high as 8% in the years leading up to the economic crisis, and the upgrading of the country’s credit rating. Admittedly, some of that was possibly because of the commodity boom. None the less, the rule permitting appropriate balance to be given to both revenue and spending was important. Even today, after the rule has been challenged and battered a bit more through experience and difficulty, Chile’s debt remains significantly below that of many other countries. It is about 20% of GDP, rather than the 80% that we are grappling with.
Switzerland is another example where a legislative solution has focused minds and improved overall fiscal discipline. The Swiss “debt brake” was introduced in 2001, having been approved in a referendum—something that that country is wont to use for important national policy questions. Integration into the national constitution followed. There is a requirement for structural balanced budgets, through the capping of annual spending with tax revenues, plus or minus some flexibility. Again, the change had a significant impact. A nation whose debtto GDP ratio had significantly increased—from around 15% of GDP in the early 1990s to 45% at the time of the referendum—saw a rapid reduction over the succeeding years. Debt to GDP is now about 25%, and is projected to fall.
Switzerland and Chile are not alone. Sweden is another country that learned from overspending, this time in the 1990s, and it has been relatively successful at maintaining surpluses. The Germans have introduced in their constitution a cap of 0.35% on structural deficits. It is not exactly a surplus, but it is a way to prevent large consistent deficits. Other examples that the OECD has highlighted include Argentina, Belgium, Denmark, Estonia, Hong Kong and the Netherlands, although their arrangements vary with respect to their legislative teeth and their success. Even the French, who have not been able to balance a budget for decades, have made tentative steps in that direction, with the transposition of their fiscal compact in 2012. The fact that that has not gone anywhere is a topic for another conversation, but at least they were moving in that direction for a time.
Of course, legislation is not the only solution, and it does not necessarily guarantee a positive outcome against politicians determined to get around it. The United States’ periodic fights over the debt ceiling—a mechanism that was designed to stop overspending—always have one outcome. In the 1980s, the attempts in the States to balance the federal budget under the Gramm-Rudman-Hollings Act, through mandatory sequesters—automatic cuts in spending in the event that politicians could not agree a budget that would fit—were unsuccessful, as resets and changes occurred when the going got tough. Nothing is infallible if we do not want it to be. Creative accounting, redefinition of spending as investment or capital, direct appeals and canny political manoeuvring can all undermine fiscal responsibility if politicians want that to happen.
I do not argue that a balanced budget rule would be a panacea. In Chile in recent years, there have been issues when estimates have not been realised and projections have been undershot. Switzerland also exempts elements of spending, such as social services, from the rules. If people want to get around this stuff they will, and no Parliament can truly bind the hands of a future one. Yet the idea of fiscal responsibility being formally codified beyond aspirations that can be amended by mere ministerial statements creates an impetus and a legal framework that focuses the political mind and public discourse on ensuring that we do something as basic as spending only as much as we raise.
What kinds of solutions should we consider? That depends on the political will and the desire to focus on the issue at hand. First, it is right to fix our immediate problem and finish the job of eliminating the deficit. I support what the Government are doing about that and want to give them gentle encouragement to accelerate it where possible. That is the first step. There is the potential to legislate in the future once we have reached a surplus, or perhaps even when the point is reached at which the deficit is relatively small, which we are starting to get to.
There are various options. We could try to act voluntarily. That, to some extent, is what we have done already, and it is absolutely better than nothing, but we can in truth see that that approach has shortcomings—for some of which there are good reasons. I shall not provide a running commentary on Government policy, which, as I have said, has been positive overall. Plans are moved, for good and bad reasons. The conveyor belt of politicians calling for more spending and pushing their own hobbyhorses—holding Westminster Hall debates—continues. Many such ideas have merit and value, but we have effectively created a pressure cooker in Parliaments such as ours, with a desire just to ask for more and do more, and seek out new ways to spend money on fixes. When one parliamentarian does it, others follow suit. We remain addicted to spending and voluntarism goes only so far.
How, then, can we formalise the approach I am outlining? We could, as happens in the United States, make it a formal requirement to vote on increasing debt when it approaches established ceilings, or when there is a question of its exceeding them. The Government debt is fixed and capped and politicians have to make a clear decision in front of their electorate to change it. That is useful but probably, as in the US, it would not focus the minds of politicians too much. Often people’s eyes glaze over when they see big numbers. That is one of the reasons why my party should stop trying to win the public services spending arms race with the spendthrifts on the Opposition Benches and focus instead on what the money is actually doing to improve outcomes. A debt ceiling has limitations, but it would send a clear signal.
Taking things further, we could establish a simple balanced budget rule that we would not spend more than we took in over a defined year or over the course of a few years. That could be done through adept forward estimating or by linking spending to the trajectory of past revenue growth. The Government would have a formal responsibility not to overspend, and to set out their plans clearly, on a short-term basis, showing how they intended to avoid overspending. In some ways, that would be the simplest solution—a clear understandable position and a clear understandable requirement to ensure that the budget is balanced. It might also improve public understanding of and support for the proposal.
Such rules, however, are often clunky and inflexible. Absolute requirements to budget on an annual or near-annual basis will significantly reduce headroom and the flexibility to deal with short-term shocks and recessions when there is at least an arguable case for fiscal stimulus in certain circumstances. That is probably one reason why such strict rules do not apply in many places around the world.
Alternatively, we could think about a more flexible approach that achieves the overall objectives, but that relies more heavily on estimating being correct, and on the Government not delaying hard decisions through a lack of political will. The requirement to balance a budget over an economic cycle would seem a strong starting point, although identifying the start and end point of that cycle will be difficult and reliant on guesswork that would no doubt not be correct in a number of cases.
Flexibility could be introduced through various mechanisms. For example, the Swiss debt brake accepts that at times the Government will need to amend their approach due to external factors. To accommodate that, it applies a model of debits and credits, so if a Government fail to achieve a balanced budget in one year, they carry over that failure to another year through a fiscal debit that needs to be made up. Similarly, fiscal credits can be built up in a bank in readiness for future problems. To avoid future debts being run up too heavily, once debits exceed 6% of total Government spending, an automatic requirement kicks in to eliminate them within three years. An exceptional rule also applies so that in times of genuine emergency or need, both Houses of the Swiss Parliament can approve spending on an exceptional basis that breaks the rules. Even then, however, the Swiss have found a way to accommodate that, and automatic amortisation of that exceptional spending must be dealt with within six years.
The challenge of the Swiss model is its relative complexity—try explaining that down the pub after a few pints or during hustings at the next election—but its beauty is that bygones cannot be bygones, which is often the flaw in attempts to regulate deficit spending and debt growth. If Chile gets its estimates wrong, it tries harder next time. If the Swiss get them wrong, they have to find a way to compensate, and all the while the cost of servicing debt remains low and does not threaten the financial health of the next generation.
Despite Brexit sucking the oxygen out of the room, and despite the challenges that the UK faces in the coming years—including from that B-word—we have to make a choice. The Government have been consistent and clear that they believe in fiscal responsibility and discipline. We have had success in restoring the UK’s financial health after such difficult times 10 years ago, and the trajectory continues—albeit a little slowly for my liking—to get us back to balance. Nevertheless, we need to talk about what we do when we get there. As some politicians occasionally point out, dealing with the deficit does not mean that we have dealt with the debt, and the conversation needs to move on to that.
Balanced budgets, fiscal rules and the promotion of fiscal discipline will be the weapons and constraints—perhaps we could call them the backstops—for when the next generation of politicians, whoever they are, are tempted to spend, spend and spend again. Indeed, some of the current generation are quite tempted to do that at the moment. Having balanced budget rules and the codification of fiscal discipline is one way to do that. It is not a perfect solution, but the status quo is far from perfect in this regard. Perhaps as a nation we should start to think more about how we create frameworks for future success, and how we address the fundamental challenge in western democracies of celebrating the money we want to spend—whether necessary and virtuous, or inefficient and virtue signalling—while not paying sufficient attention to the cost of it all. We cannot and must not keep spending today on the backs of our kids and grandkids tomorrow. If politicians are not willing voluntarily to adopt restraint, perhaps it is time to harden our resolve.
It is a pleasure to serve under your chairmanship, Mr Stringer, and to take part in this debate. I congratulate the hon. Member for North East Derbyshire (Lee Rowley) on securing this debate, not least because we all want the debt, deficit and borrowing to come down to sustainable levels—there is no disagreement about that objective. At the end of his speech, he spoke about flexibility and not harking back to the debates of 10 years ago. We supported the New Zealand model that allows for maximum flexibility for a shock, while trying to reduce the debt and deficit, and we still think it has considerable merit.
While not wishing to be at all partisan, I must take issue with the hon. Gentleman in one regard, which is that one generation’s spending paid for by the next is not a characteristic of much of our investment. Roads, rails, bridges, water, sewerage, long-term health improvement, education and even paying the state pension to those who have already contributed are intergenerational investments, and I would not characterise them as being a burden on, rather than an investment for, the next generation. The hon. Gentleman and the hon. Member for Cheltenham (Alex Chalk) spoke about morality, but there is nothing inherently immoral about borrowing if it is to fund that intergenerational investment.
I wish, rhetorically, to ask a series of questions. How do we do this? How do we run a balanced budget? What would the mechanism be? It strikes me that there are three ways that one could begin to do it. First, we could set hard targets, but if the downturn comes unexpectedly, if the revenue yield is lower than anticipated or if the money runs out, there are a number of options. We could simply stop spending, leaving a half-built bridge, road or railway, with unpaid pensions and cuts to welfare, but that would be socially, economically and politically undesirable. We could ignore the failure and carry on spending, or we could have a hybrid rule akin to the welfare cap, and the poor Minister would have to report to Parliament on why they going to make were cuts or ignore the rule and keep on spending.
In any event, there are likely to be in-year budget changes. In-year budget cuts in Westminster had an immediate impact and drove a coach and horses through the already set, voted on and agreed Scottish Parliament budget. If that is multiplied across the Welsh Assembly, Northern Ireland, and every local authority and other public body, an in-year change has a sudden and profound cascading effect on every recipient of public cash in the country—again, that is politically, economically and socially damaging.
As we have seen, the setting of a hard budget creates a perverse disincentive to hoard cash. No politician has not struggled to get cash from one public body or another in June, July, August or September, but then found a huge splurge of cash towards the end of the financial year. I bet my bottom dollar that if money is spent in that way it results in—how can I put this gently?—not quite optimum value for money.
To get round that, we currently budget against future forecasts, but if GDP is lower—for whatever reason—or if the tax yield is lower, or if the public finances and fiscal numbers are not what they might be, we are left again with a number of options. We can stop spending, which is bad. We can have in-year changes, which are undesirable. We can also allow automatic stabilisers to take their course. That normally happens for a good reason, but the budget rule is then breached. We could introduce a corollary to the Bank of England failing to meet the inflation target, with some kind of letter or report to the House of Commons. If that happened too often, it would become rather meaningless; even worse, it could become a fiscal event in its own right. Watch how the markets would respond to that, rather than a sensible automatic implementation of the automatic stabilisers.
To avoid such difficulties—as the hon. Member for North East Derbyshire said, we have seen this in the past—we can have a balanced budget over the economic cycle. I am long enough in the tooth to remember my friends in the British Labour party changing the start and end dates of the economic cycle to make the numbers fit. It was not very credible, so I would rule that out, however superficially appealing.
All those mechanisms—all of them—depend on accurate forecasts. If there is optimism bias, our fiscal numbers and tax yield will be lower than anticipated on day one. We have seen, year after year, and even with substantial depreciation of sterling, that the contribution of trade to GDP growth was far lower than expected, or even zero or negative.
Secondly, it requires those doing the forecast to have comprehensive access to all of the information. The Office for Budget Responsibility has told us that it did not have access to some Government policy changes before it produced its report in advance of the Budget, and even the most recent Red Books make precisely no consideration of the impact of Brexit on the fiscal numbers —zero—or of the impact of a reduction in immigration, which could have a profound impact on GDP growth and tax yield.
We then have the issue of having to identify in advance—although it is impossible to do so, particularly in the case of certain sorts of external shocks—the precise implications for the fiscal numbers and revenue yield of both cyclical and structural flaws in the economy.
I say to the hon. Member for North East Derbyshire that we all want to see the debt come down, the deficit come down and borrowing come down—all of us want to see that. However, in addition we all want to maintain investment and to ensure that we do not punish those with least, who are dependent on public expenditure.
I also say to the hon. Gentleman, keep pushing. Let us see if we can get an answer from the Minister, and let us see if a flash of inspiration comes over all our heads at some point. If he can identify solutions to those problems—the optimism bias, the lack of information from the forecasters or to the forecasters, and information in advance about the precise impact of both a cyclical and a structural change to the economy—I suspect that I will be the first one to put him up for a Nobel prize for economics. However, in the absence of answers to those questions, I suspect that this issue will remain something that we will have to work at and something that is unlikely to be implemented, or at least implemented quickly.
It is a genuine pleasure to serve under your chairmanship, Mr Stringer, and it is a pleasure to take part in this debate. I congratulate my hon. Friend the Member for North East Derbyshire (Lee Rowley) on securing it. It is a pleasure to see the hon. Member for Bootle (Peter Dowd) in Westminster Hall. As I go through my speech, no doubt he will not agree with the things I say, but that aside, I have tremendous respect for him.
The balanced budget rule is an important one, as it takes seriously the principle of responsible spending and enshrines it in a fiscal policy. It forces Governments to think through their spending priorities and decisions, and it contributes to more open, transparent and affordable budgeting. Countries across the world have adopted this approach, and with the exception of periods of war, economic crisis or natural disaster, they have maintained that decision.
Of course, there are different types of balanced budget rule and some Governments allow for different types of spending, or adjust their spending, depending on where they are in the economic cycle. When designing such rules, it is key that they are simple enough to be understood, followed and monitored, but flexible enough to be durable against the unforeseen economic shocks that can temporarily derail attempts to meet the goal. Indeed, if there is any short-term economic shock to the United Kingdom from, say, leaving the European Union, the Government should have the space to cut taxes in order to boost growth. The balanced budget rule also prevents profligacy, which Governments may choose to deploy to obtain votes.
One of the things that a balanced budget rule does help to do is to reduce waste. My hon. Friend the Member for North East Derbyshire referred to cheap political points, but some of the numbers that I am about to give are by no means cheap. I am referring, of course, to the last Labour Government. Although I will not give an exhaustive list of what they did, I will mention just a few things: £26 billion wasted on computer blunders; £18 billion wasted on ID cards; and £50 million wasted on an Assets Recovery Agency that only recovered £8 million in assets. The list goes on, and of course vanity projects can happen on either side of the political argument and under either party, so at all times there must be checks and balances.
However, incompetence also has a lot to answer for and I believe that the balanced budget rule would, more than our current system, prevent incompetence. Under the last Labour Government, Gordon Brown described himself as the “Iron Chancellor”. Well, he may have known a lot about iron, but he did not know much about gold, given the fact that he sold it at the worst possible time, wasting billions.
The last Labour Government talked about benefits, as does the Labour party now. Of course, as the hon. Member for Dundee East (Stewart Hosie) said, people who do not have an income of their own and rely on the Government for benefits to exist deserve to be supported. What Labour does not like to talk about when it comes to benefits is the £2.6 billion that was wasted on benefit fraud and errors. If anyone thinks that is bad, £57 million of that money was wasted on paying benefits into the accounts of people who were dead.
This country was ill-prepared for the 2008 financial crash and the situation was summarised quite succinctly by the former Chancellor, George Osborne, who said that Labour’s problem was that it failed to fix the roof while the sun was shining. The difficult decisions that this country has had to make since 2010 are due in part to the policies of that Labour Government. With the greatest of respect to the hon. Member for Bootle, I would have thought that Labour would by now have learned that lesson, but it has not. Instead, hundreds of billions of pounds of unfunded spending commitments are being made by the Opposition, even now.
My colleagues have worked hard to provide the successes in our economy today, but I urge them and the Minister to look at balancing the books with a balanced budget rule.
It is a pleasure to say a few words in this debate, Mr Stringer, and I begin by congratulating my hon. Friend the Member for North East Derbyshire (Lee Rowley) on securing it.
This is such an important issue, yet looking around this Chamber—in which there are only a few people—we could be forgiven for thinking that it is somehow a dry, bookish or niche issue. However, the reality is that what Governments of all stripes do in respect of the public finances resonates in people’s lives, including the lives of people who might be some of the most vulnerable in our community. If we lose control of the public finances, it is not the rich and the powerful who suffer, but the poor, the sick and the vulnerable. That is why it is so important that we engage with this issue, and I congratulate my hon. Friend on doing so.
However, part of the problem with discussing this issue is that we as a political generation fail to communicate about it properly. That is because if people are anything like me, once a figure gets above, say, £50 million or so, it just sounds like a very big number, and what we sometimes fail to do is to put these figures in context. How many Members of Parliament would be able to tell people the total budget that we spend every year as a nation? I suspect fewer than half. As a matter of fact, it is something in the region of £840 billion. That is an important figure to keep in mind, because it puts in context what has happened to our national debt over the last 10 years. Back in 2007, our total national debt—the total pile that we had to service as a nation—was about £500 billion or so. Now it is £1.8 trillion, and as my hon. Friend indicated that debt burden has to be serviced in some way.
Again, it is all very well to say, “Oh well, it costs roughly £50 billion a year to service that debt pile”, but that is a meaningless figure unless we place it in some sort of context. As has already been said, that sum is higher than the total schools budget. People like me, who represent places like Cheltenham, go and speak to headteachers about the pressures they face in their schools, where they might be looking to increase the high needs budget, which is about £6 billion. However, the reality is that we spend about eight times more on debt interest than we do on high needs funding, which supports special schools in our country, and more indeed than we spend on defence.
To put things further into context, the mighty United States is currently in shutdown because of the inability to agree on how to pay for the US President’s border wall. The sum required is about $6 billion. To put things another way, every year we spend, on debt interest alone, a sum equivalent to about 10 of Trump’s border walls. It is a huge sum of money.
The reason this issue is important is because it has an impact on people’s lives. Here are two things that I think are axiomatic. First, there is no national security without economic security. In other words, unless we live within our means, we cannot be sure that our military and indeed our intelligence agencies, such as GCHQ, which is in my constituency, can rely on the knowledge that they will have the resources they need to keep our country safe into the future. Secondly, we cannot have economic security without fiscal security. In other words, unless we keep control of our finances, when economic shocks come, which they will, the nation will be ill-prepared to deal with them. Put bluntly, the cupboard will be bare.
That is precisely what happened in Greece. That nation had a debt to GDP ratio of about 90% to 100%, and when the storm came it was unable to deal with it. As a result, as I indicated before, it was the poor, the sick and the vulnerable who suffered, with Greece’s equivalent of NHS funding being slashed by half. The reason why that is so sobering is that the UK’s debt to GDP ratio is in the high 80s; it is not a million miles away from where Greece was 10 years or so ago. That is an important point to raise, and as a political group we need to do better in explaining its impact, but I say respectfully to the hon. Member for Bootle (Peter Dowd) that the Opposition need to be straight with people as well. It is easy enough to say, “We are going to spend £1 trillion”, but in the same sentence, Labour ought to explain the costs that will entail each and every year so that people can understand what that offer means.
The reality is that if Labour wants to spend another £1 trillion, that is absolutely fine for my generation—no doubt there will be more money for the NHS, and so on and so forth—but the next generation will suffer, because before they can pay for a single soldier, nurse, doctor or teacher, they will have to pay vastly more in debt interest. If that argument is made, people can make their choices, but everyone who does so has to be straight with the British people. I regret to say that that has not always been quite as transparent as it might be. There is a moral case for living within our means, and my hon. Friend the Member for North East Derbyshire has done an important service by making that case today. I am grateful to have had the opportunity to say these few words.
It is a pleasure to serve under your chairmanship, Mr Stringer, for what I believe is the first time. I congratulate the hon. Member for North East Derbyshire (Lee Rowley) on securing this important debate, and I thank all Members for their input and their erudite performances. They have caused me to think quite clearly, and at length, about what they were saying.
[Steve McCabe in the Chair]
The hon. Gentleman is passionate in his beliefs about balancing budgets, and used one quote that I find particularly apposite: that according to President Madison,
“a Public Debt is a Public curse”.
I do not think we need to go back that far to see the difficulties with balancing budgets. The hon. Gentleman wants a hard rule, and at some point he mentioned a referendum that could take place if that hard rule were broken; he also promised not to refer to Brexit. Unfortunately, I am going to break that rule: I think Brexit is important, as it has huge implications for the direction of our budget process. He also spoke about intergenerational fairness, a matter that is close to my heart, and I take his point. He is many years younger than I am, and I think I am allowed to say that he has the passion of youth in his ideology, which I do not always agree with.
My hon. Friend the Member for Dundee East (Stewart Hosie) made an erudite speech, especially in his description of the difficulties of forecasting when trying to get a balanced budget. He is absolutely right that past performances have shown how difficult it is to make accurate forecasts, and about how that will impact on this idea in its entirety. He referred to the New Zealand model, and we have also heard about models from the United States, Canada and Chile, as well as Greece, mentioned by the hon. Member for Cheltenham (Alex Chalk). There are lots of models and lots of places we could look to when considering this idea, but none seems to have the absolute answer.
The hon. Gentleman spoke briefly—for which I am grateful—but appositely. I have not forgotten the hon. Member for Southport (Damien Moore), but as he mainly went on the attack against the Opposition, I will leave it to the hon. Member for Bootle (Peter Dowd) to sum up what he said.
The Tories keep imposing deadlines for balancing budgets which they are missing. As far as the Scottish National party is concerned, their only interest is ideological cuts. Those cuts have not taken full account of circumstances at any given time, and in order to balance the budget, it has been impossible not to hurt those people whom some Members have already mentioned as needing the most from the public purse.
The Institute for Fiscal Studies has warned that wages have still not recovered to pre-crisis levels, and annual earnings are more than 3% lower than in 2008, with millennials the worst hit. Median earnings fell to £23,327 last year, 3.2% lower than in 2008, when the average wage was £24,088. People in their 20s and 30s have taken the biggest hit: those aged 30 to 39 have seen their earnings fall by 7.2%, to an average of £26,442, but I am not going to go on ceaselessly producing numbers. My children are affected by what has happened. It has not been a good idea to balance the budget on the backs of those people, and it is even more difficult for the Government when folk like Jonathan Cribb, a senior economist at the IFS, and Paul Johnson, director of the IFS, say as they did last year:
“The UK economy has broken record after record, and not generally in a good way: record low earnings growth, record low interest rates, record low productivity growth, record public borrowing followed by record cuts in public spending.”
If the UK Government genuinely wanted a balanced budget, they would not be giving a major tax cut to high-income earners. In sharp contrast with the Scottish Government, who are helping those on low and modest incomes, the Tory Budget gave a tax cut to the better off: it gave basic rate taxpayers £21 a year, compared with £156 for those on higher rates. Where the SNP has powers over tax in Scotland, it has introduced a progressive tax system, and 70% of all income tax payers will pay less tax this year on a given income than they did in 2017-18. If that were carried out across the UK, that surely would be something.
Scotland continues to have the fairest income tax of anywhere in the UK, with 55% of taxpayers paying less in Scotland than they would elsewhere in the UK. The draft 2018-19 Scottish budget aims for 99% of income tax payers in Scotland to pay the same or less than last year. Polling found that the public supported the SNP’s progressive tax changes for this year by 2:1—not something that we often hear stated in the Chamber. Conversely, it is not acceptable that the UK’s 2018 Budget gave the better off tax cuts at a time when those on low incomes continue to face tax squeezes on their income. Interestingly, the Government have rowed back on some of their proposed cuts. The UK Government fail to meet the Resolution Foundation’s test of spending £31 billion more to end austerity by 2022-23.
Scotland’s fiscal position is comparable to other parts of the UK, and revenue per head is the fourth highest among the UK’s countries and regions—£913 higher per person than the UK average, excluding London. Scotland’s fiscal deficit relative to its population is also better than that of Wales, Northern Ireland, and north-east and north-west England. The majority of advanced economies run a deficit; Scotland is not unusual in that regard, nor is the UK. Twenty-four out of 36 OECD countries ran a deficit in 2016, including the UK. The UK’s deficit stood at £40 billion in 2017-18, and as has already been mentioned, it has been in deficit for 53 of the past 60 years. I know that the hon. Member for North East Derbyshire wants to put an end to that, but we cannot put an end to it at the expense of the poorest and most vulnerable in our society. Scotland also has a deficit, but that has fallen by £1 billion in the past year alone, and is projected to fall further in the coming years, from 7.9% of GDP in 2017-18 to 7.4% of GDP in 2022-23.
It is difficult for this Government to talk about balancing budgets when they have not included Brexit in many of their forecasts. The Governor of the Bank of England, Mark Carney, says that Brexit has cost households £900 on average already and the Fraser of Allander Institute estimates that leaving the single market and customs union would cost 80,000 Scottish jobs.
Tough times lie ahead. Even if the UK signs a free trade agreement with the EU, Scotland’s GDP will be 6.1%—£1,610 a person—lower by 2030. It is clear that cuts to public services have markedly reduced life expectancy, with an even more significant impact in disadvantaged communities. Office for National Statistics figures show that the Tories have presided over a slowing of life expectancy increases. Between 2011 to 2013 and 2014 to 2016, improvements in a measure of life expectancy were the smallest seen in the 21st century. Is that what their ideology should lead us to?
The destruction done to the UK economy will have lasting effects on poverty and child poverty rates. The only way to avoid economic catastrophe is to stay in the single market and customs union permanently, and the UK Government have rejected that outcome. The Joseph Rowntree Foundation said last September that while child poverty rates are set to increase in spite of Brexit, many of the worst hit areas are
“highly exposed to change in trade with the EU and any loss of regional funding.”
According to the JRF, the benefits freeze will make a couple with two children £832 a year worse off by 2020. In those circumstances, can we continue to cut public spending to balance the budget?
UK private sector debt is staggeringly high, which will be a major risk in the next recession. It is now 5% of GDP. That is the largest percentage in the G7. The debt is 60% funded by capital real estate and the buying of leveraged loans. It is entirely reliant on external input. With tariffs and barriers, it is not sustainable. The Finance Committee heard last week that we face a painful adjustment post Brexit. The Bank of England has noted that personal unsecured debt now accounts for 40% of risk in its stress tests. As a nation, we are spending more than we earn. I know that is the point the hon. Member for North East Derbyshire made, and we would all like to see a balanced budget, as my hon. Friend the Member for Dundee East said, but we cannot continue to do that on the backs of the poorest and most vulnerable members of our society.
It is a pleasure to serve under your stewardship, Mr McCabe. I thank the hon. Member for North East Derbyshire (Lee Rowley) for securing this debate, which gives us an opportunity to brush aside some of the myths that he referred to. I also thank the hon. Member for Southport (Damien Moore), the hon. Member for Dundee East (Stewart Hosie), who spoke eloquently and sensibly, and the hon. Member for Cheltenham (Alex Chalk), who referred to the Greeks. I remind him that Thucydides said that
“while the strong do what they will, the weak suffer what they must.”
That is precisely what the Tories have done. They talk about the poor all the time, but it is the strong that they stick up for, and they do it time after time.
The hon. Member for North East Derbyshire forgot to mention that the global financial crisis that the Tories use time and again started in the United States. [Interruption.] The hon. Member for Cheltenham can sit there and pretend to snore, but that is the reality: until the Tories accept that fact, we will not be able to move on. There is a danger that there could be accusations of dishonesty and disingenuousness—I am not making those accusations, Mr McCabe—until those on the Government Benches begin to acknowledge that.
The issue is not just about fixing the roof before the rain comes through; we were all in it together at the time, and we all know that we have not been in it together under Tory policies. The poor have been getting a stuffing year in, year out. The Tories have also missed every target they have set. Talk about a moving target! The situation was supposed to be sorted out years ago. The hon. Member for Cheltenham said there was a debt of £800 billion, but the Tories have doubled the debt since they came into power. They have borrowed more money than Labour ever has.
We have this extraordinary situation where on the one hand Labour complains that the national debt has gone up too much, and on the other it complains that the Conservatives are not spending enough. That kind of illogicality would embarrass a 10-year-old. Surely the hon. Gentleman can do better.
Of course I will do better. At the end of the day, it is about priorities. As the hon. Member for Motherwell and Wishaw (Marion Fellows) said, the Tories have spent the money in the wrong way. The hon. Member for Southport effectively accepts that. We have had £15 billion wasted on the introduction of universal credit by the Tory party, so let us get a little bit real.
I am sick to death of talking about how useless the Tory party is, so I will speak about Labour’s fiscal credibility, which I am sure will get a certain amount of unanimity in the Chamber, and the issue of balancing. [Interruption.] I am happy to deal with it. We could have discussed the issue in a mature and grown-up way with adults in the room. Yanis Varoufakis wrote a book called “Adults in the Room”, but there are not many in the Chamber today. I suggest Members have a read of that book; it will show them what happened to Greece.
Following discussions with our advisers, including Professor Joseph Stiglitz, on 11 March 2016, the shadow Chancellor announced a fiscal credibility rule, which has five key elements. I am happy to set that out in the symposium that hon. Members are here to attend. First, Labour committed to closing the deficit on day-to-day spending within five years. Secondly, we committed to excluding investment from that commitment so that we can borrow to invest, which is important. Thirdly, we undertook that Government debt as a proportion of trend GDP would be lower at the end of a five-year parliamentary term than at the start.
Fourthly, we committed to giving the Monetary Policy Committee of the Bank of England the power to suspend the rule if it determines that interest rates are not having their usual effect due to the lower bound. That would allow stimulus action to step in when monetary policy is ineffective. Fifthly, we would shift the reporting requirements of the Office for Budget Responsibility so that it reports to Parliament, rather than the Treasury, and ensures ongoing Government compliance, to which the hon. Member for Dundee East referred. All the facts are there, so let Parliament have them. The elements of the rule mean that a Labour Government would not need to borrow to fund our day-to-day expenditure.
If the hon. Gentleman listens to what I have to say, he will find out in due course. [Laughter.] The hon. Gentlemen laugh and snigger. Meanwhile, millions of people suffer under their policies. They should stop their sniggering and listen. I know that the Tories think they have some divine right to rule and some divine economic ability, but they have not. They need to show a little humility occasionally and listen to other people.
Unlike the Conservatives’ different, haphazard and unsuccessful attempts to achieve fiscal credibility, our fiscal credibility rule has three criteria for good economic policy. I know that economic good in economic policy is an alien concept to the Tories, but they might learn one or two things if they listen to what I have to say. The three criteria are: responsibility in economic management; recognition of the value of long-term public investment; and flexibility for changing economic circumstances. A Government trying to bind themselves into a model that has palpably failed all over the world are not particularly helpful. There has to be some flexibility.
Is the irony not that that model would look like Greece? It is running a current account surplus, but the pain of a decade of even more brutal austerity than was faced here will be felt for generations to come. That would be success according to the hon. Member for North East Derbyshire (Lee Rowley).
The hon. Gentleman is spot on. I do not want to misquote the Secretary of State for Transport, but when East Coast went bottoms up he said that that just proved that the market works. That is the sort of economic approach that the Tories take to our country.
Let me go through the three criteria one by one. We are a party that, first, takes seriously the mantle of being guardians of a sustainable economy. We fully costed our election promises in our grey book, “Funding Britain’s Future”. The Conservative party, by contrast, gave no costings whatever in its manifesto. As the shadow Chancellor said, the only numbers in the Conservative party manifesto were the page numbers.
Meanwhile, Carl Emmerson of the Institute for Fiscal Studies said in his election briefing that Labour’s
“forward-looking target for current budget has much to commend it”.
The IFS also estimated that we would have met our deficit target with £21 billion to spare, and that we would meet our debt target.
Secondly, we recognise that Government spending is not something to be scared of, or to have a phobia about, and that some economic metrics do not fully capture the benefits of the gradual build-up of public assets, as the hon. Member for Dundee East mentioned. That is why we distinguish between day-to-day spend and investment in our fiscal credibility rule, because investment is a different kind of Government activity that contributes to a stock of public assets, providing benefits over time. A country is not a house, or an individual who has a lifetime; it goes on, as we know, for a long time. Comparing us to a household might be a soundbite, but it is economic fantasy.
I am not here to explain what sister parties anywhere do. I could quote sister parties for the Tories all over the place. The hon. Gentleman should be careful what he is wishing for when he starts to make those sorts of comparisons.
The Conservatives have been unable to appreciate this point in their words and in their actions: the Government’s fiscal target of cutting borrowing to less than 2% of GDP by 2021 does not exclude investment, or distinguish between spending and investment. In so doing, the Government overlook, and undervalue, the special character of investment. They do that time after time.
Their austerity programme, the mythical end date of which was in 2018—previously, it was before that—was more a signal of the Government’s failure than of any actual shift in approach. It has done lasting damage to our economy and society, and has left us with rough sleeping up by 169% since 2010, stagnant wage growth—the worst since Napoleonic times—and few examples of public infrastructure being patiently built up and supported.
The third aspect is flexibility when thinking about sound economic policy. The Tories’ austerity programme arises from, as the hon. Member for North East Derbyshire has reaffirmed today, a rigid ideological belief—not always reflected in practice, I have to say—that a smaller state is always better, notwithstanding good evidence of the state’s entrepreneurial capacity and the human costs of austerity. Such rigidity in approach is something that we have avoided in our fiscal credibility rule.
The zero bound knockout that we proposed, which would allow the Bank of England to change course in times of impending crisis when interest rates can do only so much, shows our willingness to adjust economic policy frameworks in the light of circumstances. Any sensible Government would do that—not bind themselves into a failed ideology and process. That knockout is informed by lessons learned after the global financial crisis—lessons that the Conservative party seems incapable of learning—when it became clear that continual cutting of interest rates was having little impact on spending habits and aggregate demand.
More was needed from fiscal policy, and that zero bound knockout—the fourth element of the fiscal credibility rule—acknowledges that that will sometimes be the case. Professor Simon Wren-Lewis writes that if that part of the rule
“had been in operation in 2010, we would have seen further stimulus in this and perhaps subsequent years, leading to a much quicker recovery from the GFC.”
Wren-Lewis describes that part of the rule—the part that allows a reversion to expansionary fiscal policy in times of crisis—as the part that makes the rule
“unique, and brings it up to date with current macroeconomic thinking.”
That is a perfectly reasonable comment. Time and again the Conservative Governments whom we have had to endure—I choose to use the word “endure”—over the last nine years have failed to take a wider view on policy-making in the country. Petty in-fighting over Brexit has put us on a precipitous, catastrophic no-deal path. They failed, through austerity, to see, and to care about, how an ideological commitment to cutting apart Government would have ripple effects across the country on rough sleeping, indebtedness, demand and productivity, which is virtually the worst in Europe under this Government.
Our fiscal credibility rule, and economic policy in general, takes a wider view, which is important. We understand how fiscal and monetary policy have to interrelate for the economy to function well in different times, and we understand how principles of economic management such as our fiscal credibility rule have to fit into a broader vision of an economy that serves society, and not just those with the strongest voices.
Thank you, Mr McCabe—it is a pleasure to serve under your chairmanship. When I saw that so few colleagues from both sides of the House had attended this debate, I thought that my hon. Friend the Member for North East Derbyshire (Lee Rowley) had rather made his point without having had to get to his feet. Of course, he continued with his speech for an hour, in three parts—a structure that all the best screenwriters tell people to use. He made some important points, and I do not demur from many, if any, of them.
Like my hon. Friend, I came to this House with the conviction that this country must live within its means, that it is the responsibility of our generation to be more fiscally responsible than those who came before us, that it is a moral imperative to do so, and that we must not leave the country in a weaker state, saddled with debt for the next generation to cope with. That is the task that the Chancellor, like his predecessor before him, and all of us at the Treasury have to take forward.
As my hon. Friend eloquently said, that task will also preserve what we care about in this country’s democracy. This is not unique to the United Kingdom; it is a feature of almost all liberal democracies that, unchecked, the constant desire of politicians to promise more and more and to borrow more and more may turn out to be one of those democracies’ gravest weaknesses. We want to leave the next generation a strong country, not one that is saddled with debt. The latter course would leave our economy, as my hon. Friend said clearly, at an unacceptable level of risk were there another macro- economic shock, which inevitably there will be. The Office for Budget Responsibility sensibly predicts that there is a 50% chance of one within the next five years.
As my hon. Friend also said, that latter course would leave us in an unacceptable position in terms of our competitiveness, our ability to invest in public services and in the economic infrastructure that will drive the economy forward, and our ability to reduce taxes—all of which we want to do.
Of course there was a macroeconomic shock in 2008, but what I think the hon. Gentleman is asking is whether the then Government had prepared for that shock. Of course they had not: all the estimates and analysis suggest that public spending significantly overran growth in the years leading up to the macro- economic shock. That is exactly what this Government have set out to avoid.
As we have already heard today, a great deal of progress has been made in that respect. Of course there is more to do, but we have to recognise the considerable progress that we have made. In 2010, as my hon. Friend the Member for North East Derbyshire said, we inherited a very severe situation: debt had nearly doubled in two years and was snowballing, while the deficit soared to a near record level—the highest in 50 years. Of course the financial crisis had contributed to that, but so had poor management of the public finances in the years leading up to it. We have made progress, and we are nearing a turning point in the public finances. Debt has begun its first sustained fall in a generation and the deficit has been reduced by four fifths—from 9.9% of GDP to 2% at the end of 2017-18. That is an important step forward, but there is a great deal more to do.
Does the Minister not accept that his party has any responsibility for slowing down the recovery? Does he not recognise that in 2010 the UK was one of only two countries—the other was Argentina—to completely end the fiscal stimulus, weakening the recovery and ensuring that the downturn lasted far longer than it ought to have?
No, I do not accept that for one minute. It is exactly as a result of this Government’s fiscal responsibility in that period that the public finances have now improved, credibility has been restored in the market and business has continued to invest. For those reasons and others, we now have continued record levels of employment, record low levels of unemployment and an economy that remains remarkably resilient. Let us not forget that public spending is £200 billion higher today than it was in the last year of the last Labour Government.
We are not complacent about the debt or the deficit. The fiscal outlook may be brighter, but the need for fiscal discipline continues, as my hon. Friend the Member for North East Derbyshire made very clear. The debt is still more than 80% of GDP, which is equivalent to approximately £65,000 per household, and we want to reduce that figure, for a number of reasons. We are concerned to ensure that if there is a future economic shock, the economy is resilient, and we want to improve fiscal sustainability. In the most recent Budget, the Chancellor set aside £15 billion of headroom for economic shock, out of concern for any further uncertainty that might arise as a result of Brexit.
There is a broader point, however: servicing debt is costly. If our spending on debt interest were a Ministry, it would be the third largest, after health and education. Our spending merely on servicing our debt is equivalent to what we spend on the police and the armed forces. As my hon. Friend made clear, that has an opportunity cost, because that spending has no economic or social value and reduces our ability to spend on our priorities and keep personal and corporate taxes as competitive as possible. The debt burden of interest is merely being passed to future generations.
The foundations of the Government’s approach are our fiscal rules: first, to reduce the cyclically adjusted deficit to below 2% by 2020-21, and secondly to have debt fall as a percentage of GDP in the same year. Sticking to those rules will guide the UK towards a balanced budget by the middle of the next decade. The OBR’s economic and fiscal outlook, which was published in October and was quoted from earlier, shows that the Government are forecast to have met both our near-term fiscal targets in 2017-18, three years earlier than predicted. Sensibly, given uncertainties in the fiscal outlook, the Chancellor took the view that we should retain the £15 billion of headroom against the fiscal mandate in the target year and £73 billion against the target of getting debt to fall. The forecast also shows that borrowing will fall to 0.8% of GDP by 2023-24, its lowest level since 2001.
The hon. Gentleman rather makes the point that my hon. Friend the Member for Cheltenham (Alex Chalk) made. He cannot have it both ways. Either the hon. Gentleman supports debt falling—in which case he should support continued fiscal responsibility, which is one of the Government’s guiding missions—or he wishes to spend more and more. His speech argued that we should spend even more, getting us into further debt and making the situation more difficult for future generations.
First, I did not make the latter point. The Tories can make up their own policies on the hoof—but don’t make up ours. Secondly, the Minister still has not answered the question. It has nothing to do with the outcome; it is about why the Government, if they are so economically capable and confident, have missed all their targets.
I have tried to answer. We are meeting our fiscal rules, as the OBR states—in fact, we are meeting them three years early. That has given us room in the Budget to invest at record levels, with £20.5 billion a year for the NHS, for example—its largest injection—and reserve headroom in the event of fiscal shock. However, the hon. Gentleman is arguing for £500 billion of additional public spending. As my hon. Friend the Member for Cheltenham said, that makes no sense whatever.
In the little time I have left, let me answer the question asked by my hon. Friend the Member for North East Derbyshire about how we can create better architecture to ensure that we and future Governments can be more fiscally responsible. We have done so in a number of ways. Our greatest step was the creation of the OBR, an institution that is now maturing and respected and will be retained on a cross-party basis in the future. It has enabled commentators and Members to have greater confidence in the figures—of course, there may be more that could be done in that respect. This year, we will institute the first zero-based spending review, which will look at all Government spending. We have taken account of the parallel with Chile, which has adopted that model in that past.
On longer-term spending, we have created the National Infrastructure Commission, which was designed to ensure that the Government think about the long-term challenges and invest appropriately within a defined spending envelope, guiding investments in our infrastructure according to a clear economic strategy. We have also taken action to ensure that our public accounts are among the world’s most transparent—they have been certified as such by the International Monetary Fund, for example. Most recently, the Chancellor announced the retirement of the private finance initiative, so that we continue to ensure that when our accounts are scrutinised, they are as clear and transparent as possible and we are always seeking to derive the greatest value for money for the taxpayer.
We have also sought to distinguish clearly between day-to-day consumption—important though such investment is for the future of the economy, whether it is in the police, in education or in the health service—and the long-term economic infrastructure investments that will really drive the economy forward. Over this Parliament, we will make the greatest investment in such economic infrastructure—our roads, our railways, our digital infrastructure—by any Government since the 1970s.
I thank my hon. Friend the Member for North East Derbyshire for his remarks. This is an extremely important and timely debate. He made his case in his usual eloquent way, as one of the great champions in this House of smaller Government, lower taxes and fiscal responsibility. If only there were more colleagues who followed his example.
I thank everyone who came to the debate—word clearly got out and everyone came in towards the end to hear its quality. I thank my hon. Friend the Member for Cheltenham (Alex Chalk), the hon. Members for Strangford (Jim Shannon), for Dundee East (Stewart Hosie), for Motherwell and Wishaw (Marion Fellows) and for Bootle (Peter Dowd), and my hon. Friend the Member for Southport (Damien Moore) for their contributions.
I will end with a few points. First, I say to the hon. Member for Bootle, whose constituency I have the greatest affection for, having spent most of the decade before I joined this place working there, that it is possible to conflate austerity with this discussion, but the point was to go one step further and say that, whatever the political decisions we choose to make—we can have a debate about that—we should pay for them at the same time. Some of the people I have respected the most in fiscal and financial terms over the past 30 years have been social democrat and Labour Chancellors, including Roger Douglas in New Zealand and Michelle Bachelet in Chile, which, as I have said, codified a rule.
Secondly, in my view there is nothing ideological to living within one’s own means, over an appropriate cycle and with appropriate stabilisers and appropriate flexibility. The hon. Member for Dundee East is absolutely right to say that there is no absolute answer, but I know what the answer is not. It is not continually increasing debts, running a deficit continually or semi-continually in the long run, with the costs of servicing that debt approaching and about to exceed £50 billion. If that is the passion of youth, I apologise, but perhaps when we meet again to talk about this issue—and I hope we do—and we figure it out, the hon. Gentleman might nominate us all for the Nobel peace prize.
Question put and agreed to.
That this House has considered the balanced budget rule.
I should explain that we are running 30 minutes or so behind schedule because of votes in the main Chamber earlier. We now move to the debate on furniture manufacturers. I call Maggie Throup to move the motion on the next debate, which will end at two minutes past 5.
I beg to move,
That this House has considered the contribution of furniture manufacturers to the UK economy.
It is a pleasure to serve under your chairmanship, Mr McCabe, and it is also really good to see so many people with an interest in the furniture industry. I move the motion as the chair of the all-party parliamentary furniture industry group, which exists to raise awareness of the UK’s thriving furniture industry and to promote its importance to our economy.
I declare an interest as the Member of Parliament who proudly represents the town of Long Eaton, which is globally recognised as the UK centre of quality upholstery manufacturing. The furniture industry continues to flourish in Erewash, with more than 50 companies, such as Steed Upholstery, Artistic Upholstery, David Gundry and Gascoigne Designs, involved in furniture manufacturing and its supply chain in Long Eaton alone. It employs about 2,700 people with a turnover of more than £250 million each year. On a national basis, Government-verified figures show that the wider furniture and furnishings sector, including specialised retail but excluding general retail, supports some 327,000 jobs across 50,000 registered companies.
I congratulate the hon. Lady on securing this very important debate. Does she agree that in addition to the larger companies there are some smaller companies, such as Rowlands Upholstery in Great Grimsby, that do a fantastic job—not only employing people, but providing high-quality furniture? They are essential to people’s lives, and to our local economies.
I completely agree, because the majority of upholsterers in my constituency are exactly the same type of company—small and medium-sized enterprises that employ people locally, generation after generation.
Consumer expenditure on furniture and furnishings was almost £17.5 billion in 2017 and exceeded all other spend in the household goods sector. That represents a 21% increase from 2014. Year-on-year growth in the sector between 2014 and 2016 rose from 4.8% to 6.9%, with growth between 2016 and 2017 higher still, at 7.9%. The latest data shows that furniture and furnishing sales continued to rise into early 2018, with first and second quarter consumer expenditure 8.5% and 8.3% higher, respectively, than for the equivalent periods in 2017, despite many other retail sectors experiencing an increasingly challenging market.
In addition, trade fairs such as the biannual Long Point exhibition, held in Long Eaton, continue to attract global attention from international buyers looking to stock some of the finest sofas and easy chairs the UK has to offer. That has led to a steady increase in furniture exports since 2012, peaking at £1.19 billion in 2017 and representing a 12.4% increase on 2016 figures.
The good news does not stop there. Provisional estimates for 2018 indicate that exports for last year could be higher still, at £1.27 billion, which would represent a year-on-year increase of 7%. Taken together, these figures clearly demonstrate that the appreciation of and the demand for hand-made British craftsmanship remains high, both nationally and internationally.
It is hard to speak in this place without mentioning Brexit, but I promise the House that I will keep my remarks brief and confined to two main areas—trade and export, and standards and regulations. Like all sectors, the UK furniture industry now just wants clarity and a degree of certainty over Brexit at the earliest opportunity, in order to preserve confidence in the UK as a stable business environment in which to invest, and to assist with business planning.
With specific regard to trade and export, the industry wants to ensure that the Government give serious consideration to the cost of importing materials, both finished and components, during the renegotiation of our relationship with the EU. For example, if the import of fine Italian fabric were to be interrupted, manufacturers in my constituency have voiced concerns that production may be significantly disrupted or even halted while they sourced material from elsewhere. Consequently, that would have a huge knock-on effect on the local workforce and would risk the financial viability of many of these small, often family-run businesses.
Britain is soon to regain its ability to negotiate independent free trade agreements, which I believe presents a fantastic opportunity for all UK businesses to access new markets outside of the UK and Europe—something that the furniture industry already has significant experience in doing. Given that there are 30% more furniture manufacturers that do not currently export but are planning to do so within the next year, I welcome the Government’s new five-year UK export support strategy, which provides manufacturers with further details of the package of support available to help exporters post Brexit. We also have a responsibility, as Members of Parliament with furniture manufacturers in our constituencies and as members of the APPG, to continue to bang the drum for the industry and ensure that they do not lose out to larger sectors during future trade negotiations.
I turn to standards and regulation. The UK already maintains some of the highest standards for furniture safety in the world, but here again clarity is needed on both product safety and the mutual recognition regime that the industry will have to work within post Brexit.
I thank the hon. Lady for bringing about this debate. Before she moves beyond Brexit, does she agree with me that some of the pressures that some of our small and medium-sized furniture businesses face come from the lack of support and assistance that they are getting from the Department for International Trade with exports and exchange rate facilitation, or even things like intellectual property rights?
As I outlined earlier, the Government have produced an export strategy, which I would encourage all SMEs to look at and take part in. That is one of my messages today.
I shall move on from Brexit. As shown across my constituency, furniture manufacturers require a highly skilled workforce to retain their international reputation for quality. The skills of an upholsterer are passed down from generation to generation—often in the form of an apprenticeship, then finely tuned over a number of years, which can span well past the usual age of retirement. The industry therefore needs support from Government to help it to bring new generations of craftsmen and women through the system with the right skills to ensure that this type of art survives throughout the 21st century.
I thank the hon. Lady for securing this very important debate. She is just about to highlight excellent British craftsmanship. Just as in her constituency, in Slough there is an array of manufacturers, designers and fitters of furniture for bedrooms, kitchens and so forth. We pay tribute to those individuals for their craftsmanship. Does she agree that their high-quality, skilled jobs are an asset to the local and national economy?
Sorry, I am going to move on.
I know that the Minister has taken steps to address the issue of skills, which includes helping to ensure that young people understand the benefit of an apprenticeship as compared with remaining in formal education post 16. However, I ask him to review the viability of the apprenticeship levy, which businesses in my constituency have raised concerns about, and to work with the sector to raise awareness on how apprenticeship funding is relevant to SMEs.
I briefly want to mention the environmental role of the furniture industry and the important part it can play in our economy to reduce waste. It is said that the upholstery industry never dies; it always recovers. As we move from a throwaway society back to one that recycles and, thanks to Kirstie Allsopp, upcycles, that sentiment has perhaps never been truer. Once again, people are looking for something that is either bespoke or a quality piece of furniture that stands out from the crowd and lasts forever, or they want to restore a much-loved piece of furniture. The Government should capitalise on this shifting trend and work with the industry to encourage even more people to reuse and recycle a quality British piece of furniture rather than opt for a disposable flat-pack alternative.
It would be remiss of me to make a speech substantively about Long Eaton and not mention HS2. As the House might know, Long Eaton is the town most affected already by HS2, which in turn puts at risk a number of the historical upholstery firms to which I have previously referred and the homes of many of their employees, who will have to be relocated to make way for the rail line. The working draft environmental statements on phase 2b of the line identify that 1,004 jobs could be displaced or lost along the Ratcliffe-on-Soar to Long Eaton section of the route.
I made it clear in my response to the recent public consultation that it is unacceptable for any jobs to be lost because of HS2, but that need not be the case should the process for relocating displaced businesses be managed professionally. Given the unique nature of the upholstery industry in Long Eaton, displaced manufacturers must be relocated in the NG10 postcode area. The highly skilled workforce, many of whom live alongside the current factories in a true working town, must be able to access any new premises with ease. It is incumbent on both HS2 Ltd and the Government to use their discretionary powers of compulsory purchase ahead of Royal Assent to allow manufacturers to account for that in their forward business planning, and to allow for a smooth transition from their current location to a new one.
My personal ask of the Minister is to look seriously at the idea of establishing a cross-departmental taskforce with the Department for Transport to provide businesses being forced to relocate through no fault of their own with the necessary advice and support—including financial support—because this area is severely lacking. I have a meeting with the Minister already pencilled in for the first week of February, and I look forward to having a productive discussion with him, to make further progress on that idea.
I turn to Parliament itself. We will shortly commence a multi-billion-pound programme of refurbishment to restore one of the world’s most historic and iconic buildings. Although the Chamber was, on the orders of Churchill, purposely designed not to seat all 650 Members of Parliament at once, the refurbishment will undoubtedly include the restoration of thousands of pieces of furniture across the estate, including our famous green Benches. I cannot think of a better way for people in the UK furniture industry, including upholsterers from Erewash, to showcase their traditional skills than by contributing to the restoration of this mother of all Parliaments.
Like the art of upholstery, where much of the detailed work goes unseen—covered neatly by a colourful fabric—the UK furniture industry, particularly manufacturing, is so much more than it has perhaps been traditionally given credit for. Yes, it faces its own challenges, some of which I am sure the Minister will address in his remarks. Despite that, the industry remains resilient in the changing and challenging world of retail, and it continues to fly the flag for British manufacturing both at home and abroad.
I am delighted that the House has had the opportunity to consider the contribution to our economy made by UK furniture manufacturers and the wider sector. I thank the British Furniture Confederation for its continued support for the all-party parliamentary group and its tireless efforts to promote the industry. I commend this motion to the House.
It is always a pleasure to serve under your chairmanship, Mr McCabe, and today is no exception. I am grateful to my hon. Friend the Member for Erewash (Maggie Throup) for securing this debate, and to all hon. Members who have attended just to hear her—or maybe just to hear me. She mentioned much-loved pieces of furniture. I would not like to pick out any particular Members, but there are some who have been here longer than others and who could be referred to as such. I know she is very interested in representing her constituents who work in Long Eaton, and I pay tribute to her for doing so. Her predecessor, Jessica Lee, did exactly the same job, representing the interests of upholstery and furniture manufacturers—maybe she should be the greatly loved piece of furniture to which the hon. Lady referred.
The British manufacturing industry fell into—shall we say—disrepair in the eyes of commentators for a long time. There was the clothing industry in the Leeds of my childhood and that of my parents and grandparents. The Long Eaton lace industry has gone, as have many other industries in our constituencies.
I actually corrected myself—it is Ilkeston. I know there are two towns in my hon. Friend’s constituency, but for the purpose of the debate, Long Eaton is a centre of upholstery and furniture, which she will know as chair of the APPG for the furniture industry. We all support business in our constituency. I am pleased that the industry we are talking about is doing so well—so much so that people will come to Long Eaton from all over the world for the big annual exhibition that she mentioned. That is wonderful.
Industries are often forgotten about. In my role as Minister for businesses and industry, I spend a lot of time on the automotive industry, the aerospace industry and other huge employers throughout the country, but it is so pleasing when the House debates examples of how well more localised industries are doing. The economic importance of the furniture manufacturing sector is clear: it numbers 15,000 businesses and nearly 100,000 people. The east midlands region alone accounts for about 14% of that total across the country.
Furniture is fundamental to all our lives. The massed ranks of the House of Commons are sitting on nicely upholstered furniture in this Chamber. How many of them would be here if we had only planks to sit on? I am not sure. Obviously, Mr McCabe, you would always have a nice leather-upholstered chair.
We would still be here!
The hon. Member for Great Grimsby (Melanie Onn) looks very comfortable in her chair, and I am not sure that she would be attracted to something less comfortable. Maybe she sacrifices herself and uses more uncomfortable chairs in Great Grimsby, in which case I would advise her constituents to buy comfortable things made in Long Eaton.
My hon. Friend mentioned three things. First, the current uncertainty around EU exit; secondly, the regulatory framework in which the sector operates; and thirdly, the need to maintain a skilled workforce. I will try to deal with those separately.
On the EU exit, I know that the uncertainty of not knowing the rules of the future is very difficult for business. I have been in business for most of my life and I know that the one thing you need is certainty to plan —not you, Mr McCabe, but one generally. I am sure you would if you were in business, as you may be in the future if you decide to change career; I am sure it would be a brilliant career, whatever you decided to do. One thinks about the certainty of rules and the importance of frictionless trade in goods for supply chains across industry.
That is particularly important for the furniture industry, which relies, as my hon. Friend said, on sourcing the very best materials, from wherever they may come. That could be the EU, with the Italian fabrics that she mentioned, or hardwoods from other parts of the world. The Government will do everything we can to ensure that the movement of goods remains as frictionless as possible to the benefit of industry across the UK.
Secondly, on regulation, the Government understand the importance of clarity on product safety and mutual recognition issues.
To return to Brexit momentarily, I visited the Silverlining furniture company in Wrexham—a very high-quality business that exports high-spec furniture abroad—and one point it made was that skilled labour from all across Europe works for it at a very high level. We have to focus not only on materials, but on people.
The hon. Gentleman makes a brilliant point, which concerns not only the people who come to work in factories such as the one in his constituency, but the free flow and ability of labour to install and maintain many UK-manufactured products in the European Union. Many of the companies that we regard as manufacturing businesses make a lot of their added value from precisely those sorts of services. Although, like most people, I accept that when we leave the European Union we will not exactly have free movement of labour—that is part of being in the European Union—there has to be a system that enables businesses to fill vacancies quickly, without thousands of pounds-worth of bureaucracy and too many rules. I pay tribute to the people from the European Union who contribute so much to the manufacturing industry in this country. Long may that continue.
I just got going on free movement, but I shall return to regulation, which it is also important to get right. We need to maintain the industry’s reputation for excellence in both quality and safety, and to make sure that we have the support of businesses, because they work to the regulations. By and large, they want regulations that are the same here as in the countries to which they sell.
My hon. Friend rightly speaks about our furniture manufacturers’ reputation for high standards, which is one of the many reasons why Boss Design in my constituency has been picked to furnish the new World Trade Centre in New York. Research by the British Furniture Confederation showed that some products that come into the UK with CE approval are not properly flame resistant and can be burnt to a cinder in as little as 10 minutes, whereas a properly compliant product would self-extinguish within 10 to 15 seconds. Is he as concerned about that as I am?
I thank my hon. Friend for bringing that to my attention; it is a relevant point. I remind hon. Members who may have temporarily forgotten that the Prime Minister visited Boss Design and was very impressed with what she saw. I will make sure that the relevant officials are aware of the point that my hon. Friend makes.
We share the desire of businesses for consumers to have confidence that the products in their homes are produced to rigorous safety requirements. We have to work with both business and our EU partners to ensure that regulations are effective and fit for the future. That has nothing to do with whether or not we are in the European Union. There is a commonality of interest and desire among people all over the world to have the same standards.
I recognise that the industry’s continued success relies on having the right skills. As my hon. Friend the Member for Erewash mentioned, just one sofa requires a range of skills, from carpentry to the intricate skills of the upholsterer. The Government are keen to ensure that the industry has the skills it needs. We have heard the call for an immigration system based purely on skills and qualifications, and such a system is set out in the immigration White Paper. There has to be an easy and simple route for skilled workers, because it is otherwise difficult for manufacturers and other employers as far as time and money are concerned. When we talk about friction, we mean not only the friction of raw materials coming in, but of all things to do with business, and we are very conscious of that. That is particularly important where there is a skill shortage. The Government will engage businesses and employers on setting salary thresholds and the conditions around them.
In the long term, we want to nurture home-grown talent within companies, which is where apprenticeships come in. We need to develop that. The apprenticeship levy was a good idea, but it must not become a payroll tax that means that companies are unable to spend money that was theirs to begin with. That will require a lot of work. The sector has been very willing to work with Government to make the apprenticeship levy a success. Whether through the British furniture manufacturers’ FIESTA—Furniture and Interiors Education, Skills and Training Alliance—programme, T-levels or the national apprenticeship awards, the furniture industry has outperformed in its contribution to apprenticeships relative to its size. We have to ensure that the future generation of furniture makers succeed.
Finally, my hon. Friend raised the concerns of her constituents in Long Eaton about High Speed 2, as she has done numerous times in the House. The Government’s local growth team—a joint unit between the Department for Business, Energy and Industrial Strategy and the Ministry of Housing, Communities and Local Government —is supporting the Department for Transport in working constructively with places along the HS2 route and taking into account the needs of local businesses. I hope that her constituents were able to engage with the consultations on phase 2b of the route which were undertaken between October and December last year. We are analysing the feedback from that consultation and I would be happy to discuss it with her in our meeting on 5 February, which we arranged following her recent questions to me in the House. I will ensure that the relevant officials from all Departments are there.
The country has a rich history of producing world-class furniture, and my hon Friend’s constituency has a tradition of producing world-class MPs. I thank her for reminding us both of the furniture industry’s great contribution to our country and of the strong position it is in to make a positive contribution to a more sustainable future.
Question put and agreed to.
Town of Culture Award
This debate is obviously not very popular! It is scheduled to run until four minutes past 6 and about 15 people have put in to speak, so I guess that is about two minutes each. I will leave you to sort that out. I call David Hanson to move the motion.
I beg to move,
That this House has considered the establishment of a town of culture award.
I appreciate the opportunity to serve under your chairmanship, Mr McCabe. I am grateful to my hon. Friends for their turnout, which shows the Minister the strength of feeling and the focus on towns that we all share. I am pleased to see Government Members here, too. The debate has one clear aim: to explore with the Minister the possibility of establishing a specific town of culture award on similar terms to the city of culture award, so the smaller towns we all represent can participate on equal terms and enjoy the benefits of such an award.
Is it not the case that towns can apply for the city of culture award but it is very much a David and Goliath competition, because towns often do not have the resources to put in a bid of the necessary quality? For that reason and others, I support the right hon. Gentleman’s initiative.
I am grateful to the right hon. Gentleman for his support. It is true that towns are part of the wider city of culture establishment, but I defy the Minister to name a town that has won that award. I think there is merit in enabling towns to regenerate, promote themselves and participate, because they have a great deal to give.
I hope the Minister focuses on our one demand and establishes a town of culture award, but will he also discuss the idea with the devolved Administration in Scotland and my colleagues in the devolved Administration in Wales, and meet his ministerial colleagues in Northern Ireland and, in due course—I hope—the devolved Administration there, to establish the scheme on a UK-wide basis? We could have winners in Scotland, Northern Ireland, Wales and England, and perhaps an overall town of culture for the whole United Kingdom.
This idea has gained traction over the past few weeks. Although I welcome the support of the right hon. Member for East Yorkshire (Sir Greg Knight), the idea had its genesis in the Labour Towns group, where Labour Members who represent towns have looked at how we can help regenerate our towns and communities through transport, housing, employment and tourism. The Minister will know that my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) has written to the Secretary of State to ask for our central demand—the establishment of a town of culture award—to be considered. It is an idea whose time has come.
I commend my right hon. Friend for securing the debate. Does he agree that the attendance indicates the real sense of frustration among non-city Members of Parliament that there has been far too little discussion of the beneficial effect of culture on towns up and down the country? That needs to change.
I look forward to hearing my hon. Friends’ contributions in due course. They know that culture is an economic generator for towns. It provides individuals with an opportunity to promote themselves and their skills, it can bring towns together to celebrate their history, and it can be a catalyst for change, confidence and support for economic regeneration.
D. H. Lawrence, the internationally famous writer, was born and raised in the town of Eastwood in my constituency. We have a fantastic birthplace museum there. It is run by the local authority, which is obviously under financial pressure. We could do so much more to celebrate and promote our most famous son. Does my right hon. Friend agree that we could do a lot more to enable our towns to reach their full potential if there were equitable distribution of lottery funding?
Indeed. There is a separate debate, albeit relevant to this one, about whether towns, which contribute to the lottery pot, receive a fair share of lottery funding. In effect, there is a transfer of wealth from poorer towns to cities. That enables the promotion of important cultural projects, but I think my hon. Friends would agree that we should look at how we can invest that money to promote culture in our towns.
On that point, as of last March, my constituency had received £13 million of lottery funding since 1995, compared with £64 million for the Prime Minister’s constituency. Barnsley is a fantastic cultural town; in my constituency, we have everything from Elsecar Heritage Centre to Worsbrough mill. I congratulate my right hon. Friend on securing the debate. I totally agree with him, not least because I think Barnsley would win the award.
I thank my right hon. Friend for securing the debate and for being generous with his time. We will hear all sorts of amazing examples of the culture and heritage in towns across the country. Pontefract is the home of a historic castle and a liquorice fair, and Castleford was the home of Henry Moore.
There are amazing examples right across the country that are just not celebrated because we do not have the investment we need. We also need investment in new arts and culture jobs. Given the widening gap in jobs growth between city and town constituencies, does my right hon. Friend agree that the town of culture campaign has to be part of a much wider programme of investment, and that we must ensure we get our fair share of investment and jobs in towns across the country?
Absolutely. My right hon. Friend knows that we are focused on transport, the economy, jobs, businesses and the regeneration of our town centres, but culture and activities celebrating our history and what happens in towns are linked to all those things, because they bring people in to spend.
Two of my favourite cities in the United Kingdom—Hull, where I went to university, and Liverpool, where I was born—have recently been part of the city of culture programme. The city of Hull estimates that that programme generated £60 million in 2017 alone from visitor income and additional drive. It generated 800 new jobs, 5 million visitors and £220 million of additional investment in Hull. After Liverpool was city of culture, 44% of its residents expressed a positive response to the programme. It made them feel proud of where they lived—perhaps even more so than things have in the past. I am very proud of where I was born and I am very proud of where I live now, but the city of culture gave the people of Liverpool an energy that could be translated into action and used to create jobs.
Towns are extremely important. I do not want to take up too much time, because I know many Members want to speak, but I cannot resist mentioning the four towns in my constituency as examples of the potential benefit of a town of culture award. Flint, where I live, has a population of 13,000 people. It was founded around a castle built in 1277. That castle is still there. It is a historical monument that people could and should visit. It was the scene of the deposition of Richard II, who was put on trial in Westminster Hall. The whole second act of Shakespeare’s “Richard II” is set in Flint castle, and that play has been performed in the castle. We have had festivals, we have had choirs—male and female—and we had the Eisteddfod in 1969. Even Tom Cruise’s great-great-grandfather came from Flint, which shows that people can aspire to achieve in the arts. There is a Turner painting of Flint castle, which—believe it or not—has never been to Flint. It is currently in a gallery in London. If Flint won the town of culture award, that painting could be brought to Flint to be seen on a regular basis.
I have been to Flint—I had my photo taken in front of the station sign. On my right hon. Friend’s point about national treasures being in galleries and museums in our cities, a cultural award for our towns might not only embolden and encourage our communities to celebrate their creativity, but be part of a much wider debate about the disproportionate amount of funding that goes to our cities. We should share our national treasures and, on occasion, allow them to go back to their home town to be seen by local people.
As I said, a number of things are happening in Flint. They could all be celebrated by the people and that painting could return as part of being a town of culture.
Without revisiting my maiden speech, I should say that another important place in my constituency, when it comes to this debate, is Mold—a town of 10,000 people. The Mold gold cape is an ancient gold object currently in the British Museum: it is not being displayed in Mold. Let me turn to culture. Mold has Theatr Clwyd, the only production company in the United Kingdom owned by a local authority. It produces plays, some of which will shortly be in the west end. We have a food festival and a Novemberfest beer festival, as well as art installations through the town. This summer marks the 150th anniversary of the Mold riots, in which four miners and one bystander were shot dead. We will be having a community play in the town this summer to commemorate that, which will involve people and make them feel part of the history of the town.
We have a blues and soul festival, the eisteddfod, and the Daniel Owen festival, which is a major Welsh language poetry festival, in the town. We have the football. Rhys Ifans, who people will know from “Notting Hill”, came from Mold, as did Jonny Buckland, one of the guitarists in Coldplay. Siân Gibson, who is in “Peter Kay’s Car Share”, is currently resident in Mold. There is a cultural appetite and there are cultural aspirations for people to do things in the future.
In Holywell, in my constituency—where the actor Jonathan Pryce was born—there is the Well Inn music festival, as well as a country music and line-dancing festival and the Cadi Ha Welsh dancing festival. There are also heritage walks and the Greenfield Valley Heritage Park, which has historic buildings on display.
The smallest town in my constituency is Caerwys, with just over 1,500 people, but the eisteddfod held there in 1523 and 1568 led to the first ever legislation to control minstrels and bands, which was passed by Elizabeth I’s Parliament in 1588.
There is a cultural history that people need to understand and celebrate, but it also has an economic impact. Theatr Clwyd, as a major production theatre, employs hundreds of people and produces quality plays. Flintshire County Council invests something like £750,000 into the theatre. For every pound it invests in that theatre, we get an external economic impact within Flintshire of £8 and across north-east Wales, including Wrexham, of over £10. That is because people come to the theatre, but they also go to the shop and the petrol station, stay in a hotel and eat in a restaurant. They support the local economy in that theatre by buying goods for sale in the local theatre, and by spending their wages in the theatre. It has an economic impact.
Flint, Mold, Holywell and Caerwys are all supported by their local councils, which are active and engaged, and invest ratepayers’ resource in supporting activities. Mold, Flint and Holywell happen to be Labour-controlled councils that are investing, supporting and sponsoring activity that is having an economic impact. I hope the Minister will recognise that and look at how we can celebrate and promote it, and be engaged by it. With due respect to those three towns, great as they are, Flint, Mold and Holywell cannot compete with the cities of Hull or Liverpool, in terms of their scale or ambition. What they can do is have great activity in their own world, which the town can celebrate and look to promote in the future.
The central ask today, from all of my right hon. and hon. Friends, is for us to relish the chance for those four towns, and every town that those of us here represent, to be able to say, “We aspire to do better, to increase our economy, to engage with our community and to put culture at the heart of our towns.” All our towns have had that in the past—through miners welfare clubs, social clubs and a whole range of activity. We have to give that back to the community and support that for the future.
There is a city of culture, which is a great thing that we relish, welcome and appreciate, but the challenge for the Minister is that there is scope for a town of culture within that. The Minister has the chance to encourage investment, to reignite county pride, to celebrate history and culture, to encourage diversity, to promote ambition and to nurture talent. I hope that he takes that chance today.
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this important debate, about which I am very keen—so keen, in fact, that my recent column in the Slough Express was entirely devoted to a town of culture award.
Slough is on the up: we have moved on from John Betjeman’s poem. We want no friendly bombs, there is grass for cows to graze, we do not just eat tinned food and it is certainly fit for humans now. We are keen to show that we have a lot more than just David Brent and “The Office” to offer. Slough is a fantastic, diverse cultural melting pot and now it has become a major business, creative and cultural powerhouse, with Pinewood Studios right on our doorstep. A lot of people from Slough are working there, contributing to our collective national culture and increasing our collective national pride in our country.
We have the iconic old Adelphi cinema in Slough, where the Beatles performed on more than one occasion. The council and other organisations are doing brilliant work. We have the Slough youth awards, which exemplify the magnificent creativity of our young people. I think our town would do very well if we were competing with other towns up and down the country.
I impress on the Minister that there is so much support for this idea: we would be obliged if he confirmed that an annual town of culture prize rather than just a city of culture prize would be conferred. If it comes to sharing the money more fairly, current statistics show that Arts Council funding is more than four times higher on average in city constituencies than in town constituencies. About 70% of Arts Council national portfolio theatre grants awarded in 2015 to 2018 went to cities, with a pitiful 12% awarded to towns. The current scenario is not good enough; our towns are being left behind.
Many people from working-class backgrounds, residing in towns, are being excluded from arts and culture. Our communities can benefit. I am well aware that there are many different Members wanting to speak, so I will bring my points to a conclusion, but please, please let us have the annual town of culture award.
I congratulate the right hon. Member for Delyn (David Hanson) on bringing forward the debate. We were proud to be the home nation of the first UK city crowned city of culture in 2013—lovely Londonderry. As the Member for Strangford, I well remember thinking that Newtownards, despite all that we have to offer, could never be considered for that prestigious title because it is not a city. That is why I am pleased to be here and to support the right hon. Gentleman.
The award would enable the tourism industry to point its eyes and minds towards the hidden gems throughout this beautiful United Kingdom of Great Britain and Northern Ireland; it would be worth every penny needed to set the initiative up.
Let me give the example of Newtownards—we are all here for our constituencies, and why not? The little town is 25 minutes from the airport on a great road with enhanced travel links in the form of local bus routes, which are fully modern. Visitors could stay in the local hotel or in one of the many B&Bs that dot the area. The B&Bs have phenomenal views of countryside and the incomparable Strangford lough; I live on the edge of it. Ulster Scots culture, history, verse, poetry and music— it is all there.
People can have an active holiday as well, with water sports, cycling and quad racing parks, sedate walks in our forest parks and country rambles. We have the world-famous Mount Stewart gardens and country home, Scrabo tower and Exploris in Portaferry, which is renowned the world over. Those who want the arts can enjoy choral performances in the old Priory, which dates back to St Patrick, and the independently-owned Lyric theatre, as well as all the other things that come with cinema and nightlife. For those who want to shop—everybody likes to shop, especially the ladies—we have a high street packed with boutique shops to suit anyone’s tastes. For the kids, we have the Ark open farm, which is exactly what we need.
You want a spa weekend? Of course you do. We have a brand new all-singing, all-dancing Ards Blair Mayne Wellbeing and Leisure complex, with clip and climb, crazy golf, soft play and swimming facilities for the children, Swedish saunas, steam rooms, aromatherapy rooms, heated seating, heated relaxation pools and beauty appointments, all in one place—Newtownards. We have fine dining, because once you have got rid of all that extra weight, you can go for Thai, Chinese, Indian, or Italian food, good homemade cooking and even pub grub. It is all there—[Interruption.] The hon. Member for Vale of Clwyd (Chris Ruane) knows it, too.
I know that other MPs can well boast of their towns, and they should, but I will say this: I do not think any of them can really compare to Newtownards. Yet the sad fact is that not enough people know that the £50 flight to Northern Ireland is well worth every penny. This award is something that could highlight Newtownards and other towns like it. I thank the right hon. Member for Delyn and give him my full support. I have my application ready for the first award.
I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. In thinking about the decline of towns, we have concentrated a lot on shopping and shops, and I think we have the balance wrong. The idea of a town of culture award is really important, because people want far more in the place they live in than to be able to go shopping.
My constituents have a fantastically rich heritage. Barnard Castle, for example, was the home of Richard III and it is now the home to the greatest collection of European paintings between London and Edinburgh, at the Bowes Museum. Shildon is the birthplace of the railway and at the moment we are limbering up for the celebration of 200 years since 1825, with a heritage action zone. Bishop Auckland itself has been the home of the Bishops of Durham for 900 years.
Perhaps this is the most interesting example of how culture can be used to regenerate: the Church Commissioners had the idea of selling Zurbarán paintings that hung in the palace, and local people completely opposed that. We ran a very successful campaign to keep those works of art in Bishop Auckland and not to let them be taken to a gallery in London or even the west coast of America. Consequently, a philanthropist, Jonathan Ruffer, came and has invested in the castle. We are now seeing an absolute flowering, including a new Spanish art gallery, in partnership with the Museo del Prado in Madrid, a mining art gallery, a summer night show, Kynren, and a museum of the history of religion supported by the Heritage Lottery Fund.
That is all absolutely flourishing and it is giving people a new focus and a new sense of pride. It is great for people who live there, but it is also a reason for tourists to come to the town, and that has economic spin-offs. We have created lots of apprenticeships and are hoping to create 1,000 jobs. If anybody wants to get off the train between York and Edinburgh, I suggest that a long weekend in my constituency would be fantastic.
It is a great pleasure to speak in this debate, which was opened so magnificently by my right hon. Friend and near neighbour, the Member for Delyn (David Hanson); I am sure the Minister can feel our enthusiasm.
I do not want to sound biased, but of course the constituency of Clwyd South has the best range of towns and villages, the magnificent Chirk castle, the outstanding Llangollen international eisteddfod and of course Corwen, the great home of Owain Glyndŵr. All those towns have magnificent histories and culture and so much going on, but I also want to put in a word for our villages. As we speak about the importance of developing a town of culture, it is important that we recognise the culture in our villages.
I think of Glyn Ceiriog in my constituency, which so magnificently hosted the Powys eisteddfod a few years ago. I think of the community of Cefn Mawr, which has the wonderful Cefn Mawr and District Museum, entirely run by volunteers. Such is the interest in that museum that local schoolchildren produced a wonderful history set at the time of the first world war armistice. Among the other many magnificent villages in my 240 square mile constituency is my home community of Rhosllanerchrugog. My right hon. Friend spoke earlier about the miners’ institute there—the wonderful Stiwt—with several choirs and so much more. It has a great Welsh nonconformist heritage. Those are just a few of the things in my constituency that I can do justice to in a couple of minutes, but as we speak about the towns, let us speak about the villages too.
On the subject of Rhosllanerchrugog, I know it has a fantastic working men’s hall and institute. In Blaenau Gwent we have a world-class brass band, the Tredegar town band, and the estimable Beaufort male choir, who recently performed with Public Service Broadcasting. People may be surprised to know that in the villages above Trefil in Tredegar we now have a growing film industry, which has contributed to Hollywood blockbusters and, of course, “Doctor Who”, which is produced in Cardiff in Wales. Does my hon. Friend agree that this initiative would be brilliant for boosting our cultural pride across our country?
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this important debate.
Something happened to me last night that illustrates the importance of this debate. I was talking to a colleague of mine who represents, shall we say, a more prosperous south Manchester seat. I told him I was going to speak about Heywood and Middleton’s rich cultural heritage, and his response was, “What are you going to talk about for the other 59 minutes?” He probably had not envisaged how popular the debate would be—I actually have only two minutes, so in the other minute I have left I will talk about the rich cultural heritage of Heywood and Middleton.
Even the Wetherspoon pub in Heywood is named after the Lancashire dialect poet Edwin Waugh. Steve Coogan was born in Middleton. The Chameleons and the Courteeners are famous bands born and bred in Middleton. Julie Goodyear, also known as Bet Lynch, was born in Heywood and still lives there. We have Middleton Arena, a fantastic cultural hub that is currently rolling out a new programme of National Theatre live broadcasts, making theatre from here in London accessible to residents in my constituency. We have Heywood Civic Centre, a venue providing a programme of live events and community participation, aiming to become a borough-wide hub for community-led cultural participation and creation.
We have my friend, Labour councillor Kallum Nolan, who has made a film about Sam Bamford, the radical who led the march from Middleton to Peterloo—the film is a rival to Mike Leigh’s film, “Peterloo”—and used local people as actors. We have Cartwheel Arts, based in Heywood, and we have the architecture of Edgar Wood, who left Middleton with a fine collection of historical buildings, immortalised in a recent film, “A Painted Veil”, made by Middleton filmmaker Anthony Dolan and which I was proud to host in Parliament last year.
I wish I had more time to talk about the artistic and cultural activities that go on in my wonderful constituency. I will finish by saying that I cannot wait to enter Heywood and Middleton for the newly founded town of culture award.
It is an honour to speak under your chairmanship, Mr McCabe. I thank my right hon. Friend the Member for Delyn (David Hanson) for securing the debate.
Why do we need a national town of culture award? It is really simple: it is about pride and confidence in where we live, bringing our communities together, enhancing social cohesion and growing economic and social investment in our towns. According to the 2011 census, more than 38 million people live in towns—about 59% of our population. Yet despite being the majority of the population, people in towns frustratingly feel that they are competing with cities for jobs, infrastructure and wider arts and cultural investment, so it is about fairness, too.
Obviously, I will speak about Batley and Spen, which includes the wonderful towns of Birstall, Cleckheaton, Heckmondwike and Batley. We have amazing organisations, such as the Batley festival, the Bagshaw Museum, the Cleckheaton folk festival and the Batley and Spen Youth Theatre Company. I would love to celebrate all those things, but I also need to say to the Minister that we know that the Department for Digital, Culture, Media and Sport understands the impact that winning the city of culture award has. Impacts derived from that award were referenced in the recent cultural development fund announcements, in which funds were awarded to Wakefield, Grimsby, Plymouth, Kent, the Thames estuary and Worcester. Of course I congratulate those communities, but we want to take the impacts of that award much further; we want to bring them to our towns and communities.
Buxton, in my constituency, has world-class arts; it has the Buxton festival and the Buxton opera house. It also has fantastic community arts, in which people can get involved to boost their health and wellbeing; that is an amazing treatment for post-traumatic stress disorder. Given that we have less mental health treatment in our towns and rural areas, does my hon. Friend agree that the Government should look at the ongoing benefits of supporting the arts in our towns?
I thank my hon. Friend for that powerful statement about how creativity can affect mental health. Certainly Creative Minds in my constituency works with social prescribing to support mental health.
Other Members want to speak, so I will conclude. I am co-chairing a parliamentary inquiry on social mobility in the performing arts. My personal commitment, in supporting the call for a town of culture award, is to work to ensure that we have diverse participation in both the bidding and the implementation process.
Being a town of culture is a key opportunity to drive better access and social mobility in the arts sector. We cannot continue to see statistics such as 12% to 13% working-class participation in the arts. We must do better, and we can. As they say, “If you don’t see it, you can’t be it.” I ask the Minister to please let us make this happen. Let us celebrate what makes towns great.
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing the debate.
I fully support the call for a town of culture for the UK. Culture plays a huge part in our economy—it is worth £90 billion a year. One in every 11 jobs is in the cultural industries. The percentage of our GDP spent on goods is going down; the percentage spent on experience is going up. The UK is a world leader in music, theatre, film, literature, architecture and design, but that has been too closely focused in cities. We need to expand that to towns. We need to increase the amount spent by central Government on culture, which is 0.4% of GDP, even though it produces 9% of jobs.
I was approached recently by creatives in my home town of Rhyl, who want to use creativity to encourage regeneration. They reminded me of the great people from my town who have been involved in the creative industries: Mike Peters and The Alarm; Lisa Scott-Lee from Steps; Nerys Hughes from “The Liver Birds”; Lee Evans the comedian; Adrian Henri, the beat poet, who worked in a fairground in Rhyl; Carol Vorderman, who was educated in Rhyl; Paul Higginson, my friend, who is chief executive officer of 20th Century Fox in Europe, Africa and the middle east; and Sara Sugarman, the Hollywood film director. We have had a folk club in Rhyl for 55 years, a musical theatre for 100 years, a brass band for 120 years, a classical music group for 70 years, and the first purpose-built children’s theatre in the whole of the United Kingdom.
I ask Members to look at examples of seaside towns. Where arts come, regeneration follows. St Ives was regenerated around the Tate gallery. Margate is regenerating as we speak, as a result of Tracey Emin and her art. Southport is regenerating through the Gormley statues, and the billionaire Roger De Haan has invested his own money—tens of millions of pounds—in art and creativity to regenerate the town of Folkestone.
We should tap into the passion in the Chamber, so that we can be leaders in our towns and communities, and ensure that culture plays its proper part in the regeneration of our towns.
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. It is already clear that the case for a town of culture award is absolutely irresistible. I am sure the Minister will stand up and tell us that it is nailed on. The competition is so intense that whoever will be on the judging panel will have a difficult job.
As my right hon. Friend said in opening the debate, the award is about aspiration, celebration and pride. It is about identity around people and place, and about culture. Those are all important things. Our towns are in danger of being forgotten a bit. Putting them on the map with a town of culture award would make a real difference.
Let me mention the three towns in my constituency. The town of Bottesford has the magnificent St Peter’s church, and interesting cultural activities around Bottesford Beck, which spawns all sorts of interesting things. The town of Kirton-in-Lindsey celebrated its diamond jubilee town hall by renovating it in the 60th year of this Queen’s reign, although it was first put there in the 60th year of Victoria’s reign. The town of Scunthorpe has its magnificent steel heritage. Only a few weeks ago, thanks to the work of Jim and Christine Pearson, former mayors of Scunthorpe, a steelworkers statue was unveiled. People thronged to see that. That is just one example of how culture lifts people’s spirits. The town of culture award will lift everyone’s spirits.
As the only south-west Member of Parliament here, I am here to speak up for the west country and our fantastic array of towns. There is so much more competition than just the excellent towns we have heard about from the north and from Wales; there are those in the west country, too. We are about so much more than clotted cream and whether it should be jam first or cream first. We have fantastic towns right across our region. We have the world heritage site in Tavistock; the Tate at St Ives; our Cornish tin mining museum; amazing food in Dartmouth; Fowey and its sailing; and Plymouth, the creator of the pasty, Plymouth Gin and the Mayflower Steps. The Mayflower Steps and the Mayflower story are so powerful.
We have the opportunity to tell stories that connect our towns right across the country, from Scrooby and Babworth in Bassetlaw to Gainsborough, Boston, Immingham, Harwich, Rotherhithe, Southampton, Dartmouth and Plymouth. We need not only to have a towns of culture competition, but to join up our towns, because telling the story of how our towns are connected will create more jobs and more passion. An awful lot of people are proud of their towns in the west country. This competition would be such a boost for that.
I fully support all those who have spoken. In particular, I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate on a wonderful idea.
The past few years have seen immense success for the UK city of culture, which has created renewed interest in those cities that have had successful bids. The bidding process has been beneficial even for cities that have not been successful. Crucially, it has showcased culture and arts outside London and the big metropolitan hubs. Government figures show that 53% of the population of England live in an urban settlement that is not part of a conurbation, but towns get less than half the Arts Council funding that cities receive.
Towns are the fabric of our nation, and their cultural offer needs to be acknowledged, respected and celebrated. Unfortunately, too often they are the areas that are made to suffer as a result of private and public sector decisions, such as closures, underinvestment and consolidation in cities. When Hull’s year of culture was launched in 2017, there were unprecedented crowds; hundreds of thousands of people came from all over the country to celebrate. It was 12 months of visitors, events and inward investment in the city from tourism.
Many Members have mentioned their towns. I represent six. Like all small towns, there is an element of pride to them. Composers, bands, authors, scriptwriters, “Coronation Street” actors, artists, Dave Pearson, politicians come from the towns I represent. My home town of Accrington has the beautiful Haworth art gallery, with its Tiffany glass collection—the only one outside the United States. We also have the club that would not die, Accrington Stanley.
We have to go beyond arts and look at engineering and textiles in some of these proud towns. Accrington produces the hardest bricks ever produced; they prop up the Empire State building and others. I am trying to save a tower that dates from 1148, which is hard to do in a town where the local authority does not have the funding for that. Some of these towns suffered as a result of globalisation, and they need the resource and the support that cities get. A fraction of the £220 million that Hull received would go a long way.
I will conclude by saying that this is a fantastic initiative. I support this debate and personally congratulate my right hon. Friend the Member for Delyn, who secured it. I hope the Minister listens and takes this initiative forward.
It is a pleasure to serve under your chairmanship, Mr McCabe, and I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. Yesterday was Great Grimsby Day. If Members did not know about that, they know about it now. They can put the date in their diary for next year and can expect something spectacular, because my town will be doing something amazing, thanks to a Labour council and Charlotte Bowen of the Culture House; I especially wanted to mention her tireless, assiduous efforts to bring a range of cultural activities to north-east Lincolnshire, and her assistance in securing the £3.2 million of Government funding for culture and arts that was recently announced. Members need to come and get involved in that.
Grimsby is a proud, tough, hard-working town full of committed and enthusiastic people who are keen to improve the area and make it a more desirable place to stay, work and play. On top of the exciting events and installations that we hope to see once this money comes through, we have had our town deal agreed. We have had agreements from the landowner and the port operator, Associated British Ports, that the famous Kasbah area of the Grimsby docks can start to be developed and opened up. It has received money from the Heritage Lottery Fund and has been given a boost by a company called Creative Start Art, which is taking up a tenancy to kick-start regeneration in the heritage action zone.
Culture comes in many different forms. Grimsby has not only a wonderful concert venue, the Grimsby central hall, which more people should go to, but the annual Bradley youth festival, which showcases local acting, musical and spoken word talent. We have an amazing arts section at the local college, which excels in designing for movies, doing makeup and theatre sets. We have the Caxton theatre, the auditorium in which Kevin from Grimsby will star in “Burn the Floor”; the fishing heritage centre; the Time Trap museum; and a range of knitters, sportspeople and dancers. The people of Grimsby know that they are much more than “Skint” and Sacha Baron Cohen’s “Grimsby” film. How wonderful it would be if we had the chance to put all those positive things together and won what will clearly be a much-coveted award.
I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing the debate. Sir Walter Scott sat in the Boat Inn pub in the village where I live and drafted his novel “Ivanhoe”, inspired by Conisbrough castle. Ted Hughes lived in Mexborough, did his newspaper round through Old Denaby, and went on to write his famous poems. Of course there are others, such as Diana Rigg and Lesley Garrett, and let us not forget Brian Blessed—all home-grown in Doncaster.
Today’s debate is about having a showcase to celebrate our heritage and what we have achieved over the centuries in our towns and villages, but I would not like the Minister to think that this is all about the past. It is about the future as well; it is about creating new art, new music, new plays, new novels and new poems, as well as enriching a sense of aspiration within our communities. A person does not have to go to London or our cities to get a job as an actor, musician or artist, or to work in the creative sector. We can grow those sectors in the towns and villages of the UK. I hope the Minister will act quickly to establish the town of culture award.
It is a pleasure to see you in the Chair, Mr McCabe, and I congratulate my colleague on the Select Committee on Justice, the right hon. Member for Delyn (David Hanson), on securing this debate. I am pleased that this ever-so-slightly oversubscribed debate is taking place, and I fully support the initiative that he set out so eloquently. I am not sure what the record is for the number of contributions in a 60-minute debate, but so far we have heard 19 passionate sales pitches on behalf of constituencies across England and Wales, and we are about to hear one from Scotland.
And from Northern Ireland, with apologies to the persistent hon. Member for Strangford (Jim Shannon). I will come to him. We have heard so many pitches. In a 60-minute debate, we have heard from the right hon. Members for Delyn, and for East Yorkshire (Sir Greg Knight), the hon. Members for Wrexham (Ian C. Lucas), and for Barnsley East (Stephanie Peacock), the right hon. Members for Normanton, Pontefract and Castleford (Yvette Cooper), and for Don Valley (Caroline Flint), and the hon. Members for Slough (Mr Dhesi), for Strangford, for Bishop Auckland (Helen Goodman), for Clwyd South (Susan Elan Jones), for Blaenau Gwent (Nick Smith), for Heywood and Middleton (Liz McInnes), for Batley and Spen (Tracy Brabin), for High Peak (Ruth George), for Vale of Clwyd (Chris Ruane), for Scunthorpe (Nic Dakin), for Plymouth, Sutton and Devonport (Luke Pollard), for Hyndburn (Graham P. Jones), and for Great Grimsby (Melanie Onn). The strength of feeling is pretty clear.
It is vital that we recognise the value of our towns, big or small. They often have bigger personalities than cities many times bigger. I am proud to be an MP for Paisley, the town I was born in. My friend George Adam, the MSP for Paisley, often refers to it as the centre of the universe. In an Adjournment debate in November 2016, I provided evidence to show that, for its size, Paisley is unrivalled in its contribution to the world. It can be said that Paisley is one of the reasons why we are having this debate: as some hon. Members will be aware, the Paisley 2020 campaign for UK city of culture helped raise awareness of Paisley’s spectacular, historical and ongoing cultural contribution to the world. Although we were robbed blind of what was rightfully ours, the bid alone was fantastic for the town and will leave a legacy of its own. The fact that Paisley was the first town to make the shortlist highlights the issue with the city of culture award, as it stands, without an accompanying town award.
A city or town of culture award will provide an excellent opportunity to boost the profile, economy and self-confidence of the winning town or city. The bidding process alone is a huge opportunity and can be cathartic. I can speak only for Paisley’s experience, but at the start of the process, the number of Paisley buddies and those from wider Renfrewshire who were highly cynical about the bid and viewed the town negatively far outweighed the number who supported the bid. However, as the months passed, buddies were reminded of what was and is great about the town, and learned about some of the planned investments and events, and that opinion rapidly shifted.
Despite losing out on the award, some of the investment plans have remained in place; there is a £110 million investment plan for the town centre and venues. To me, the real value and prize of the bid was getting buddies to believe in the town again. Unlike the majority of UK cities, the name Paisley is known worldwide, having given the world the famous pattern of the same name, though we may have borrowed it from somewhere else, as you may well know, Mr McCabe. Paisley’s textile mills—the first of which was built by the Coats company, which at one point was the biggest company in the British empire and the third-largest company in the world—started mass producing shawls with the pattern. The name Paisley is literally woven into history.
Paisley was home to the world’s first constituted Burns club and is also home to the UK’s largest youth theatre, PACE, which has helped produce fantastic performers—this is where Paisley outshines the towns mentioned in the rest of the contributions, I would say—such as James McAvoy, Paolo Nutini and Richard Madden, who recently won a Golden Globe for his role in the BBC drama “The Bodyguard”, which featured a fantastical plot about a UK Government Minister up to no good, which obviously would not happen in real life. Paisley can also boast of calling Gerry Rafferty, David Tennant and Gerard Butler our own.
Paisley is not the only town or village in my constituency with a proud cultural heritage. From Bishopton to Bridge of Weir, and from Elderslie to Erskine, everywhere has something to offer. The historical capital of Renfrewshire, my home town since I was four years old, has a proud history that few can match. Renfrew is known as the cradle of the royal Stuarts, as it was an early home to the final royal family of the Kingdom of Scotland. In 1164 at the battle of Renfrew, King Malcolm IV of Scotland repelled Somerled, the Lord of the Isles.
We all have many towns and cities rich in history and culture, many of which miss out on vital investment. This proposed town of culture award would potentially unlock that investment and bring a sense of pride back to these places. My message to hon. Members across this House is that Renfrewshire stands ready to win any such award. I urge the Minister to take this proposal forward.
There is not a lot of time left, but I remind the Minister that he will not need long to say, “Yes,” in response to this debate. I endorse the proposal by my right hon. Friend the Member for Delyn (David Hanson) and other hon. Friends. I congratulate the Labour Towns group on turning up en masse and coming up with such compelling arguments, as well as the other hon. Members who spoke. My right hon. Friend rightly said that there was an opportunity to do something on a UK basis and involve the devolved Administrations; I thought his proposals were very good. He also took some very good interventions, including those of my hon. Friends the Members for Barnsley East (Stephanie Peacock) and for Ashfield (Gloria De Piero), who are no longer in their places, and my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper). He mentioned Richard II and Flint castle; as he may know, my brother Patrick is an actor who once played a small part in promoting Flint indirectly—he starred in “Richard II” at the Globe theatre.
My hon. Friend the Member for Slough (Mr Dhesi) spoke passionately about his constituency, putting to bed the reputation that it was perhaps unfairly given by John Betjeman. My hon. Friend quite rightly said that arts funding tends to be higher in cities than in towns—we really need to look at how to redistribute resources much more effectively through the arts budget.
It is always very comforting when the hon. Member for Strangford (Jim Shannon) speaks in a debate—when he turns up, we know that things are normal in the world. He made his constituency sound like the garden of Eden, although I remind him that that is where original sin was invented. I look forward to playing crazy golf with him in Strangford some day.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) referred to Richard III—another king who met a dodgy end. I look forward to a long weekend in Bishop Auckland, which sounds like a wonderful place.
In reply to my hon. Friend the Member for Clwyd South (Susan Elan Jones), may I take the opportunity to mention Rhosllanerchrugog? She took an intervention from my hon. Friend the Member for Blaenau Gwent (Nick Smith), who is no longer in his place. My mother was born in his constituency—in Nantyglo, another town that would really benefit from the sort of initiative we are debating.
As ever, my hon. Friend the Member for Heywood and Middleton (Liz McInnes) spoke passionately about her community. So did my hon. Friend the Member for Batley and Spen (Tracy Brabin), who made the important remark: “If you don’t see it, you can’t be it.” I know that her constituency work is very much based on that idea. She took an intervention by my hon. Friend the Member for High Peak (Ruth George), who mentioned Buxton and the importance of cultural and artistic activities to health and wellbeing.
My hon. Friend the Member for Vale of Clwyd (Chris Ruane) spoke passionately about Rhyl. I remind him of Cerys Matthews’s song “International Velvet”, in which she sang, “Darganfyddais gwir baradwys Rhyl”—“I discovered true paradise in Rhyl.” My hon. Friend reminded us to “tap into the passion”, and his speech certainly did that.
My hon. Friend the Member for Scunthorpe (Nic Dakin) spoke brilliantly, rightly pointing out that the judging panel will have a difficult job. He also pointed out Scunthorpe’s steel heritage, which he knows that I share in my background.
My hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) mentioned clotted cream and the question whether the jam or the cream should come first. What I say to the Minister is that we do not mind which it is—as long as it is not “jam tomorrow.”
My hon. Friend the Member for Hyndburn (Graham P. Jones) spoke, and my hon. Friend the Member for Great Grimsby (Melanie Onn) spoke brilliantly about the welcome investment in the arts in her community. My right hon. Friend the Member for Don Valley (Caroline Flint) promoted her constituency, as ever, and gave us a remarkable list of people from it who have risen to prominence—they have a very prominent MP as well. The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) spoke for the Scottish National party.
I represent a city seat, but I was born and brought up in Cwmbran, a new town. Every time I drive back to see my 89-year-old mother, a song comes into my head: Simon and Garfunkel’s “My Little Town”. One of the lyrics is:
“And after it rains there’s a rainbow, and all of the colors are black.
It’s not that the colors aren’t there—it’s just imagination they lack.”
If we have the imagination and the investment, we can do wonderful things. We all know what has happened to our towns through the evisceration of local government funding, the removal of services from our high streets and the loss of banks, libraries and museums. Those institutions are very important. Let us have a renaissance in our towns, let us have a town of culture, and let us hear the Minister say yes.
It is a real pleasure to close this debate, Mr McCabe. I thank the right hon. Member for Delyn (David Hanson) for securing it and all hon. Members present for their valuable contributions and advertisements for their towns or localities. I also thank those hon. Members who co-signed the letter to the Secretary of State asking that our Department establish a town of culture award.
I am thrilled with this debate, because it really is recognition of the value of culture generally, which we all know about; as Culture Minister, people would expect me to say that. I have been to 35 locations around the country in the past 12 months and seen the value of culture in towns, villages and cities alike, and how important it is for society as a whole.
I join colleagues in celebrating the rich heritage and culture of towns across the UK. I must confess to being possibly a little biased in favour of this motion, as my own constituency is in a town. Of course that town is the very best of towns—I was born and brought up there and it has its own very generous share of cultural heritage—so I recognise, first and foremost, the value of towns. Creativity, arts and heritage make our towns and all our places—cities included—unique, and our communities better places to live in. A Conservative colleague suggested recently that we should also have a county of culture. Culture goes across the board.
As the right hon. Member for Delyn has highlighted it, I will say something about the UK city of culture award, because it has a powerful social and economic impact on the winning bidders. Hull 2017, which has been alluded to, leveraged truly enormous private investment and generated £300 million through increased tourism alone.
I understand the potential for arts and culture to transform communities, which is why a range of places, including towns, can already enter the UK city of culture competition. Of course I recognise that towns will have a lot to compete against when they come up against cities in the same competition. The bidding process for the title of the 2021 UK city of culture, which was awarded to Coventry, invited bids from cities and towns, and it allowed partnership bids from two or more neighbouring cities or towns, or from a closely linked set of urban areas. That is one way of dealing with this issue.
It is for individual places to weigh the benefits of bidding, in terms of galvanising local partners and raising the profile of the place, compared with the costs of putting together a bid. I am currently reviewing the criteria for any future competitions and will continue to keep under careful consideration the offer to towns, as well as the burden of bidding. This debate has been very influential in that regard, so I again congratulate the right hon. Gentleman on securing it.
The hon. Gentleman will be among the first to know. Of course, there are already a number of Government-wide initiatives to invest in our towns and high streets. I have only a few minutes left to highlight some of them; indeed, some have already been alluded to by hon. Members.
I am also keeping under careful consideration the effectiveness of different types of support to help towns and other places to prosper. Wider Government support for towns and high streets includes, of course, the future high streets fund, which is worth £675 million. It was announced in the autumn Budget to encourage vibrant town centres where people can live, shop and spend leisure time.
The prospectus for that fund was only published in December. It invites local authorities to submit expressions of interest for capital funding. There is a lot of money available, so I encourage hon. Members to invite their local authorities to take an interest in the fund and submit expressions of interest.
Of course, DCMS-related sectors contribute to successful and healthy high streets, and it is key that they do so. The Royal Society for Public Health report, “Health on the High Street: Running on Empty 2018”, found that residents of towns with healthy high streets live on average two and a half years longer, and that libraries, museums and galleries contribute to the healthiest high streets. Culture has a powerful health as well as wellbeing benefit, and has a positive cultural impact.
The Government’s plan for the high street also includes the creation of a high street taskforce in 2019 to support local leaders. The Government already run the Great British High Street awards, a hotly contested competition to find Britain’s best high street. Crickhowell was announced as the overall UK winner for 2018, and I was delighted to see St Giles Street in my town of Northampton win the category in 2015. Towns can win, and this competition enables towns to raise their profile and celebrate local efforts to create vibrant town centres that are loved by their communities.
Just before the Minister finishes, I want to try to tie him down. My right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) has written to ask for a meeting with Members of Parliament to discuss this process further. Will he and the Secretary of State agree to attend the meeting?
I cannot speak for the Secretary of State, but I will agree to meet. We will set that up, and I am happy to do so.
My Department believes that place-based cultural investment should be a key part of the local growth strategy for all towns and cities in England. The cultural development fund, which has already been mentioned and was launched in 2018, is a £20 million competitive fund to support towns and cities to develop and implement transformative, cultural and creative growth plans. Just last week the Secretary of State announced the winners: Grimsby, Plymouth, the Thames estuary, Wakefield and Worcester.
Grimsby will receive £3.2 million to deliver a new programme of international events and public art to revive the town centre, provide a business support programme for local creative businesses, and create new production facilities in the town’s historic centre. The Thames estuary will receive £4.3 million. The cultural development fund and the UK city of culture projects are exemplars of local enterprise partnerships. We also welcome the innovation of local areas developing their own initiatives to celebrate local culture. For example, the Liverpool borough of culture and the London borough of culture are attempts to broaden the impacts of cultural titles and moments to areas beyond city centres.
I want to stick up for Arts Council England. Some 75% of its funding goes outside London—it is being distributed widely. We of course have to bear in mind that large centres of population are within cities, but my experience of Arts Council England is that it recognises that its role is to spread its resources around the country, which it is doing. Some 9.2 million people saw British Museum exhibitions and objects on show outside the museum in 2017-18, and more than 2,500 objects were loaned to 126 venues around the country.
A lot of work is already being done in this area. I am very happy to meet colleagues and interested partners to discuss the matter further, and I am keeping the situation under review. My Department and the Government recognise the value of culture. It is a precious part of our community life and has multiple assets and benefits. We will continue to support it.
I thank all Members who have turned up today. I thank the Minister for his positive response, and we will be in touch to make further progress. The time has come to encourage economic development in our towns on a cultural basis.
Question put and agreed to.
That this House has considered the establishment of a town of culture award.