I’m grateful for the chance to follow the Secretary of State today.

No-one could accuse him of underselling the Bill to the House this afternoon.

So I hope he’ll forgive me for bringing him back down to earth just a little.

As is appropriate for a second reading debate on the principles of the legislation in front of us, I want to set out the principles on which we can agree – and the detail where we differ

In the hope that the government will genuinely listen not simply to us, but to the voices of people saving for what they dearly hope will be a comfortable and very well earned retirement.

Let me start as the SoS did, with a word on history.

A word about the road to our debate today 

Because the chief reasons the Labour party will not stand in the way of this bill today is because we recognise a genuine effort to build on the strong foundations we left;

Indeed our disappointment today is that on those strong foundations the SoS is proposing to build merely a half way house.

We on the Oppostion benches will therefore ask the SoS not simply to fix some serious deficiencies, but to be bolder, to be more radical, to seize the moment that is there for the taking

If he can summons the guts, and marshall his forces in the battles with the Treasury.

I know the Cx is a man who firmly believes that there is no greater sacrifice than to lay down your budget for a friend who’s made a right mess of things…

Let me start with the foundations which the SoS is so fortunate to have in place

No-one would have envied us the legacy we inherited in 1997. 

• A link to earnings snapped in 1980
• Pensions holidays for employers
• The 1986 Lawson cap on surpluses which provoked the great drop in contributions.
• The mis-selling scandal and the inadequate Pensions Act 1995
• And the State Pension had fallen from 20% to just 14% of average male earnings.
• Those with a private pension had benefits taken from them, pound for pound
• So by 1997, nearly 3 m pensioners were living in poverty, some on just £69 per week.
• It is no surprise, that as the member for Thornbury and Yate said himself – “Pensioners, rightly, do not trust the Conservative on pensions.”

Labour’s record

That was the mess it was our task to repair.

And repair it we did

• In total, £11 billion more was spent on pensioners each year than would be spent if the policies of the last Conservative Government had been followed.

• We lifted gross income for our pensioners by more than 40%.

• 2.4 million pensioners had been lifted out of absolute poverty by 2010-11, and nearly two million out of relative poverty.

• The IFS confirmed that “both absolute and relative measures of income poverty fell markedly among pensioners” under Labour.

• We introduced the minimum income pensioners lifting incomes from £68.80 per week in 1997 to over £145 today.

• Pension credit, winter fuel payments, free TV licences and real terms increases in the value of the Basic State Pension.

• Together these have brought more than 1 million senior citizens out of relative poverty.

• We raised the tax thresholds so that the vast majority of pensioners now pay no tax.

• Pension Credit tackled the 100 per cent marginal deduction rate that many savers faced,

• We credited in low earners and carers to State Second Pension giving 4 million people now had the chance to build up a decent additional pension for the first time.

• And then we introduced auto-enrollment in personal accounts helping ensure 6 million – 9 million people will either be newly saving in a workplace pension or saving more than they would have been.  

The net result of all that work, was a conclusion published not by the Labour party but by her majesty’s government.

Pensioner poverty was pushed down to the lowest level for 30 years.

That is the difference a Labour government can make.

And that is the foundation on which the Government now builds.

Now the purpose of the Bill is in essence to address one of the matters that was identified by noble Lord Turner in his report, which we legislated for in 2007.

The noble Lord’s report recommended a new pension settlement for the 21^st century, one that is universal, reduces means testing, and provides clear incentives to save.

The Commission recommended a two-tier approach, with two flat rate pensions: the BSP and a flat-rate S2P.

In the interests of preserving the national consensus that Lord Turner constructed, It was a conclusion we accepted.

Indeed Lord Turner warned there were great risks in the strategy the government now offers us.

The challenge was of course that a slower path to the flat rate pension would involve a degree of means testing remaining in the system on a marginally bigger scale than any of us thought ideal – and this was much debated during the passage of the Pensions Bill in 2008.

Means testing

I think it is the Government’s ambition to reduce means testing which is in part the inspiration for this Bill.

Now, the government’s proposal slightly reduces means testing that frustrates many pensioners.

Figures from the House of Commons library suggest that today around 20% of pensioners enjoy access to Pension Credit, a means tested benefit. Eighty per cent do not. The impact of the Bill will be to increase the number of pensioners free of the means test by around 8 per cent.

A small improvement but any improvements I suppose we must welcome.

However, much of that is due to the abolition of savings credit and not because people are better off.

This will still mean 34%, or 238,000 pensioners, drawing on means tested council tax support and 12 %, or 84,000 pensioners on Housing Benefit.  

This of course still leaves the problem that many people who save nothing will still be better off than many people who have saved.

If a pensioner saves nothing, they will enjoy the flat rate pension at £144 a week.

They will also be entitled to housing benefit and council tax benefit totalling on average another £94 a week

A total of £238 a week.

This is considerably more than someone with savings of say £24,000 – as indeed 50k – who may enjoy an income from savings of £30 a week plus the flat rate pension – a total of £174 a week – much less than our pensioner who saved nothing.

36% less in fact.

And so that’s why I say to the Secretary of State that small steps are welcome – and it is a small step – but let’s be careful about boasting a little too much.

The difference between the “absurd situation” he likes to describe and the promised land he will deliver us to is not perhaps as large as he makes out.

The three key tests

So, some of the principles and advances are welcome – however modest – and this is why we support of the principle of the flat rate pension.

But there are three areas of concern where I genuinely hope we can make some progress while this Bill moves through the House.

First, is the question of universalism.

Every generation has to strike the right balance between universalism and targeted benefits.

History

That is the reality of the way in which the ideas of William Beveridge was translated into practice.

When the Beveridge report was published, there was widespread support for the idea of universal pensions – indeed it was the thing the public feared would never happen.  

So: the demand for full pensions paid to all after the war meant that the level of the pension was kept low – that was the conclusion i think of the Phillips Ctte, commissioined by Churchill in the 1950s, and the result was that means-tested support was necessary.

We had a combination of universalism and means-tested support.

Today, we on this side of the House believe that universalism needs recasting once again – some universal benefits like winter fuel allowance for the richest pensioners will not be affordable

As the Deputy Prime Minister said in September 2012, “maybe…[the rich] should give up some of those universal entitlements to help some of those who are less lucky than them make ends meet”.

But surely we should say to the country that this new flat rate pension if it is so good, should be universal

The problem is: it isn’t

Today’s proposals mean 700,000 women who reach the age of 65 in 2016 when the flat rate pension starts, will be given the old pension.

Because they will have reached state pension age of 63 before implementation of the new pension starts.

Yet a man born on the same day as these women gets the new pension. But a woman does not.

Pensions should be fair to those who have contributed. And that means the new flat rate pension must be fair – and not leave hundreds of thousands of women behind.

We simply think this is wholly unfair and today I say we will campaign for these women to share the new deal.

Further:

The government is reserving the full pension only to those who have paid in 35 years of NI contributions.

This wasn’t the original plan. It was changed said the minster to the select committee to save around £1 billion.

That’s five years more than the current system, and it means the numbers who’ll get the full pension in 2020 will be around 100,000 less than if the current system were to continue. 

Each year under 35 years will see £4.11 a week less.

Anyone with perhaps less than 7 or 10 years contributions won’t get anything at all. 

I hope the government can set clarify this and crucially set out how many will be left under the poverty line.

State Pension Age

Finally: we all know and accept that the retirement age must rise.

But we have to be wary of moving the state pension age so fast that people don’t live to get it. This government has moved the goal posts on SPA three times in three years, and now is asking for the power to review and move up the state pension age every 5 years, without any consideration for retirement planning and the life expectancy of poorer communities.

Today, there is a 16 year gap in life expectancy between rich and poor communities. The idea that the goalposts will be moved every 5 years will simply destabalise retirement planning for millions.

1.2 million die between the ages of 65 and 69. 60% of these citizens are in the bottom 3 income groups. Mortality rates for the poorest are twice the rate of the richest. So we must take great care with this.

Second, we simply will not permit the SoS to lead the country down the garden path and offer a promissory note he simply cannot pay.

So we will ask: is this new flat-rate pension genueinly sustainable?

In the short-term, everyone who was contracted out is contracted back in.

That hands the Chancellor of the Exchequer a £5-6bn windfall.

In theory that means the system might be more affordable. It is one of the reasons we won’t stand in the Bill’s way.

But I’m afraid I see very big short term risks.

Let’s start with how on earth the NHS and local government are going to find the £4 billion of extra NICs payments that will be required of them from 2016, as they too are no longer allowed to contract out?

Is the Chancellor seriously saying these costs will land where they fall?

Self employed

Second, is the Government really committing now to the deal it is offering the self-employed?

Right now the self-employed pay less in NICs than anyone else.

They pay 9% of profits in National Insurance, compared with employees’ contribution of 12% of earnings and employers’ contribution of 13.8% of earnings.

But the self-employed will get the full pension – that’s what clause 2, sub-clause 4 of the Bill says.

They pay less. But get the same.

It sounds too good to be true.

And experience tells us, nothing that sounds too good to be true ever lasts.

The IFS warn that “the current way of treating the self employed is a huge open invitation to tax avoidance, because it is so much lower than you pay as an employee”.

The IoD, whose members include many self employed people, said that even the most reluctant “would recognise that, given the improvements we are going to get going forward [from the STP] it is possibly only fair that everybody should be asked to do their little extra bit”

Comfortable

Third, and perhaps most important of all is the question that many of our constituents will ask of us.

What does this flat rate pension means for my retirement. Will it mean i can look forward to a retirement in comfort. Or does it mean I will look forward to a retirement in fear.

I am genuinely worried that today’s proposals fail the comfort test.

Again, I’m afraid the answer is no.

Let’s be blunt.

The loss of S2P is a blow for anyone under the age of 59. 

Case Study 1

Approximately 190,000 people in their 50s will lose between £30 and £35 a week compared to what they would have got if S2P stayed in place.

Someone who has been contracted-in for all of their working life and is aged 55 in April 2016 would have been able to accrue additional State Pension for the remaining 11 years of working life, amounting to an additional £24 a week in additional State Pension.

This will no longer be possible under the single-tier.

They will continue to pay 12% NICs for the rest of their working life, but no additional S2P entitlement will be earned.

Case study 2

The picture is even worse for those just starting work. Those in their 20s who won’t retire until after 2060.

By the DWP’s own calculations, the majority of these will have lower pensions under the single-tier system.

Their income replacement rate will fall from 38 to 39 per cent to 30 per cent.

That’s a big drop – and it points us to the gaping hole where reform of the private pension system should be.

Case for reforming personal accounts

Now: the government i think wants personal accounts to pick up the slack.  

This was the system Labour designed and put in place.

But there are flaws the Government has introduced – and some adjustments needed.

First, the government’s decision to link membership of auto-enrollment pensions to just those earning over the new personal allowance threshold of £9,440 means that over a million people, mainly women have been excluded from the system since 2011-12.

Many of these will lose out from the abolition of S2P.

Second, with the shut-down of S2P, workers now lack a state-backed, low risk option to save into.

This is where we should be giving workers the right to save into NEST, the national pensions mutual we created.

But to allow this we need to lift the restrictions that are currently placed in NEST – something that Labour has been campaigning for.

We need to allow ‘transfers-in’ from other pension schemes, and end the upper ceilings on contributions. 

Today, employers tell us these restrictions are discouraging businesses from auto-enrolling their employees into NEST, because they want a single provider that can serve all of their employees, whether low, medium or high-earners.

Third, we need to regulate for transparency on costs and charges.

The Government has been too slow to embark on these reforms.

This is why we called for the OFT investigation into workplace pensions.

There must be a simple but comprehensive declaration of the costs of saving into a pension so that savers can see total costs.

But: the biggest issue that we confront is the fractured, small scale of the funds on offer for pension savers.

I do not believe they have the scale either to offer savers the best investment decisions, or the lowest charges and so I think we have to look at how we foster an industry or bigger, simpler, cheaper pension funds.

We need to look specifically at Australia, where the Cooper Review, looked at how the Australians could create a private pensions system that works in the interest of savers.

Australia has clear lessons for us - 

The establishment of a low-cost default pension fund;

A ‘trustee-director’ for every pension scheme, with statutory duties to work in the interests of savers.

Requirements to publish a detailed charging structure and past performance to ensure transparency.

To deliver this kind of future for Britain, we will need to look at a legal requirement that all pension schemes must prioritise the interests of savers over shareholders.

We need to look at obligations on trustees to assess whether schemes have sufficient scale to deliver low costs.

If the assessment is that the scheme is too small, the trustee should be empowered to investigate merging with other schemes.

Finally we should consider regulators empowered to mandate small schemes to merge, as is done in Australia.

Conclusion

Mr Speaker,

We have always believed that issues as serious to the long term wealth and wellbeing of the country as pensions, should be approached in a spirit of national consensus.

We saw very little of that effort during the course of the pensions bill in 2011.

I hope the government will try harder this time round.

My message to the SoS is that he inherited foundations in first class conditions. Don’t offer us a half way house. Don’t offer us solutions that fail the basic tests?

We must ask in this House, will these proposals offer us a pension that is universal

A pension that is sustainable

A pension that is comfortable

I fear the answer is no, no, no.

There are some principles on which we agree today.

But please don’t let us down with a failure of nerve.

Be bold and radical and finish the job we started with such determination and passion in 2004.

Ends.

SHADOW WORK AND PENSIONS SECRETARY

JUNE 9th2013

SOPHIE RAWORTH:

Now it has been a pivotal week for Labour when the party finally seemed to embrace the austerity programme with Ed Balls hammering home the message of iron discipline on public spending and Ed Miliband calling for a cap on a large portion of the welfare bill. Two years out from the General Election, there’s limited detail on the areas a future Labour Government would curb, although winter fuel payments for wealthier pensioners would be scrapped. So what else might follow and why has Labour been so resistant to the coalition’s welfare reforms? I’m joined now by the Shadow Work and Pension Secretary Liam Byrne. Good morning.

LIAM BYRNE:

Good morning.

SOPHIE RAWORTH: 2

You finally have, it seems, bought into this austerity agenda?

LIAM BYRNE:

Well I think what’s very clear is we can’t go on like this. We’ve got workless-ness now at the highest level for sixteen years; we’ve got food banks opening every three days; and I think what people want to hear now from Labour is well, look, how would you be different in 2015. And what Ed Miliband and Ed Balls said very clearly today is that we can be radical with power and realistic with money, and that means we need some pretty fundamental reform of social security, and what Ed Miliband did is set out a very different direction to that now pursued by current government.

SOPHIE RAWORTH:

It was interesting listening to it though last week because I mean you know we all remember Ed Miliband just at the end of last year, the beginning of this year, saying you know benefit cuts were “punitive, unfair, they must not happen.” What’s changed?

LIAM BYRNE:

Well, look, if were in government today, we’d be doing things very differently. I can’t explain why the government is giving Britain’s richest citizens a whacking great tax cut and yet some of those who are poorest are now seeing their benefits taken away at such a pace that they’re relying on food banks. That surely can’t be right, but …

SOPHIE RAWORTH:

But it seems like it’s taken you an awfully long time to come to that conclusion. You were, as Ann Widdecombe just pointed out, of course famously the person who left your successor that note at the Treasury saying ‘Good luck, the money has run out.’ Why has it taken so long for Labour to come to that conclusion?

LIAM BYRNE:

Because the public wanted to hear how would we have been different today. That’s our job as opposition – to set out a different course of travel now. What we’ve got to do today, with two years to go before the election, is show how we would be very different after 2015. Now there will be some tough edges, we can’t disguise that. And 3

what Ed did this week, he said in effect there’ll be a triple lock on social security spending; there will be a cap on the amount of time you can spend on the dole …

SOPHIE RAWORTH:

(over) And tough edges …

LIAM BYRNE:

… a household benefit cap; and a cap on overall social security spending.

SOPHIE RAWORTH:

(over) And that means cuts, doesn’t it? Where will those cuts fall?

LIAM BYRNE:

Well what Ed’s done is say look, if you’ve got a long-term cap on social security spending, that means you have to put in place long-term reform of the big cost pressures that at the moment are just being allowed to run up and up and up and up. That’s got to start with more concerted action to get back into work, which is why we’ve said, look, there’s got to be a two year cap on the amount that’s going to be spent on benefit …

SOPHIE RAWORTH:

(over) Absolutely and you’ve explained all that last week. But cuts.

LIAM BYRNE:

(over) More concerted action on low pay and you’ve got to do something about the housing benefit.

SOPHIE RAWORTH:

But what you haven’t explained is where those cuts would fall because invariably you would have to have cuts, wouldn’t you? You would have to make them and that is not what you’ve explained in any detail at all.

LIAM BYRNE:

No, we’ve said that we want to bring some spending levels down. So let’s take, for example, tax credits. At the moment as a country, we spend about £30 billion on tax 4

credits, and what a lot of people say to Labour is, look, why are we subsidising low pay at companies that are doing very nicely, thank you? Now that’s why what Ed said is look, let’s have some concerted action about tackling low pay. Or let’s take another example. Let’s take housing benefit. We spend £24 billion a year on housing benefit. That budget has gone up by a billion pounds since the last election and it’s forecast to go up by another 300 million between now and 2015. Labour councils are saying to us look, give us more latitude to manage those budgets. Let’s take Birmingham, for example.

SOPHIE RAWORTH:

(over) But this would take time …

LIAM BYRNE:

(over) We’ve spent £200 million …

SOPHIE RAWORTH:

(over) You know yourself this would take … And you know advisers have said the same. It would take time for that …

LIAM BYRNE:

(over) Of course it would take time.

SOPHIE RAWORTH:

Absolutely. So in the short-term what happens? Let’s say you get into power in two years’ time. You are going to have to make cuts and you know that, but you seem very nervous about using that word.

LIAM BYRNE:

I’m not nervous at all because, look, at the moment we don’t have a long-term cap on social security spending, and what that means is the government can just sit back and let failing programmes continue failing. Work programme’s a classic example. The work programme at the moment is literally worse than doing nothing, but because there’s no long-term cap on social security spending, Iain Duncan Smith can just sit back and say oh well, whatever. Now if you’ve got a long-term cap on social security 5

spending, you can’t do that. If you’ve got a failing programme, you’ve got to get stuck in, roll your sleeves up and actually sort it out. So this is a very different approach that tackles low pay, housing benefit, and, crucially, getting people back into work. (Raworth interjects) … long-term reform, the only long-term reform actually that you can put in place to get the budget down.

SOPHIE RAWORTH:

What about things like winter fuel payments? You’ve said that you will remove those. What about child benefit? You’re not going to be able to reinstate that. I mean is this principle of universalism, is that over now?

LIAM BYRNE:

Well every generation has got to reset the balance between universal benefits on the one hand and targeted benefits on the other. Now at the next election, there will be important universal benefits that we campaign on. Let’s take the flat rate pension, for example. The flat rate pension that’s being introduced by the government is a good idea, but it’s not universal. It leaves out about three quarters of a million women. Now we’ll be saying, look, that’s wrong; the flat rate pension, that should be universal. But you’ve got to reset the balance, so other targeted benefits we don’t think are affordable and winter fuel payments for people like Ann and others I’m afraid aren’t affordable for the future.

SOPHIE RAWORTH:

What about TV licences, bus passes, senior railcards. Are they next?

LIAM BYRNE:

I think … I mean Ed Balls was quite clear about this at the beginning of the week. I mean the TV licence budget is pretty small. I think bus passes are quite important to mobility and keeping older people’s connections with the outside world. But, look, you know we’ll set out those plans closer to the time, but we’re just being very candid with people that the government has had to borrow £250 billion more than it forecast because it puts the recovery in the tank. That means things are going to be awfully tough in 2015. 6

SOPHIE RAWORTH:

Ed Miliband himself, I mean he acknowledged, didn’t he, that you did not … when you were in power, you did not do enough to rein in the welfare bill?

LIAM BYRNE:

Well out of work benefits fell under Labour by about 7.5 billion. Some spending went up – pensions and tax credits. But there …

SOPHIE RAWORTH:

(over) But you didn’t do enough, did you?

LIAM BYRNE:

… there were some things that if we were reliving that time again, we’d do differently. So I think we would have been a lot faster on reforming incapacity benefit and you know we should have been building more homes too. Because you know look at the levels of rents here in London are going up and up and up, you know, and we should have been building more houses.

SOPHIE RAWORTH:

You spent too much money though basically, didn’t you? You left that note ‘The money’s run out’.

LIAM BYRNE:

Well I hate to let facts get in the way of a good headline, but the truth is out of work benefit – that bill, it fell by £7.5 billion. But the point that we have to confront today …

SOPHIE RAWORTH:

(over) But I mean that note in itself, it said it all really though, didn’t it? You spent too much money.

LIAM BYRNE:

Well, look, after a recession spending goes up. The problem this government now 7

confronts is it’s not coming back down again. So, look, social security budgets went up £24 billion during the crash and it’s not yet fallen. In fact it’s carried on rising by 2 per cent a year. Now that’s not sustainable …

SOPHIE RAWORTH:

(over) I suspect …

LIAM BYRNE:

… and we’ve got to put the system back on an even keel for the long-term and it’s going to take long-reform to do that. And what Ed has said – look, there’s a Labour way of doing it because the Conservative way, it’s failing.

SOPHIE RAWORTH:

Liam Byrne, thank you very much.

LIAM BYRNE:

Thanks.

INTERVIEW ENDS

All of Labour’s good work in tackling poverty is being washed away by a Tory cocktail of incompetence and indifference.

What these figures show is living standards are collapsing to their lowest level in a decade, and that is forcing an extra 300,000 children to grow up in absolute poverty. Inequality has sharply risen and when families are under so much pressure it is outrageous that they will be almost £900 worse off this year thanks to tax and benefit changes yet millionaires are getting a tax cut.

 The way to get living standards rising not falling is to act now to create jobs and get our economy moving. The government should not have cut tax credits for people in work while cutting taxes for the richest people in society. And they should be helping the long term unemployed back to work with Labour’s compulsory jobs guarantee.

Ends

Editor’s Notes:

1.   DWP figures published today show between 2010-11 and 2011-12, 300,000 children, 600,000 working age people and 100,000 pensioners were pushed into absolute poverty. (DWP, 13 June 2013, http://statistics.dwp.gov.uk/asd/index.php?page=hbai)

Wednesday, 12 June 2013

Speakers:        Liam Byrne

                        Joanna Gosling

JG:                  We heard the Government’s perspective there: deep-seated challenges still to overcome but overall a good news day. Is that a view you’d share?

LB:                  Well, the tiniest glimmer of hope has got to be welcomed but I’m afraid the awful truth in today’s figures is that there has almost zero progress tackling unemployment since last summer. Today’s figures also show that in two thirds of England you saw unemployment go up, we’ve seen female unemployment go up and we’ve seen the long-term unemployment go up yet again. So, long-term unemployment is now 100,000 higher than it was at the last election, that’s deeply worrying. It show the Government’s Work Programme isn’t working and I suppose our message to the Government today is very simple; we’ve got to get in hand now some serious long-term reform of the social security system, to tackle youth unemployment, to help get the long-term unemployed back to work because we simply can’t go on like this.

JG:                  Talk about that in a minute, but just to look at the figures in a bit more detail, because the Government’s stated aim when it came into power was to try to shift the growth in employment from the public sector to the private sector, and that does seem to be working doesn’t it – over the past 12 months jobs down in the public sector 300,000, up 700,000 in the private sector – so there does seem to be a rebalancing going on.

LB:                  Well, let’s look at what today’s figures show: What today’s figures show is that the number of people in work has gone up by about 24,000 and that figure is almost entirely explained by the number of people in self-employment having gone up. So, the broad story that you’re seeing from the last election is a big rise in part-time workers – up by about a quarter of a million; big rise in the number of people who are self-employed – up by a quarter of a million…

JG:                  Is that something to be knocked though, self-employment going up, I mean that shows people are being self-starters doesn’t it?

LB:                  I think what the figures do show is that people are doing anything and everything in order to get into work and of course that includes taking an absolute kicking when it comes to the pay packet at the end of the month; what today’s figures also showed is that pay packets are about £1,400 lighter than they were at the last election that’s why Labour has said it’s crazy to be cutting tax credits in the way the Government is because those changes mean that, on average, people are £890 worse off just as a result of those changes. Now, when you factor in pay packets that are £1,400 smaller, that is a real bettering for family finances.

JG:                  But better to have a squeeze on pay than be out of a job isn’t it?

LB:                  Well, I think what it tells us is there’s simply not enough work to go round. So, if you go back to last month’s figures, for example, you saw that many people who were self-employed, many people who were part-time they were at the front of the queue when it came to being laid off. So the broad message that we’re seeing from today’s figures is that the jobs market is incredibly fragile. There’s simply not enough work to go around, pay packets are being hurt and the Government, frankly, needs to bring forward far bolder measures to get people back into work and that’s why Labour has said let’s start with the compulsory jobs guarantee that would mean any young person out of work for over a year, and anybody out of work for over two years would have to go and take a job.

JG:                  When you strip everything away what is the bottom line now on Labour’s position: is it actually that different from the Government’s in terms of spending plans, we’re hearing much more talk from Ed Balls on recognising the need for austerity and pairing back spending, and we’ve not been hearing the sorts of messages on spending our way out of recession and back to growth that we were hearing before. For instance, talk of the VAT cap which would have cost £12bn

LB:                  What Ed Balls said is that the spending plans that we inherit will absolutely be our starting point after the next election. The public finances will be very bleak because the Government has throttled the recovery and has now had to borrow far more than it forecast, but we said, look, if we want to repair the public finances fast the way to do that is to get people back into work faster…

JG:                  Yes, but how are you going to create those jobs…

LB:                  That’s why we’ve said look, let’s have a compulsory jobs guarantee so no-one can be out of work and sit on the dole for more than two years…

JG:                  I want to pick up on that. You talk about this compulsory jobs guarantee, what’s Labour saying it would do to create those jobs, because jobs are being created in the public sector and previously Labour’s position was we will stimulate growth by having a VAT cut. Is that now gone away?

LB:                  We’ve always said if there was a tax on bankers bonuses and if we changed the pension tax perks of the very rich we could create a fund that would allow us to create a successor to the Future Jobs Fund, which was incredibly successful in helping get young people and the long-term unemployed back into work. That’s the kind of action that we need to take now because there are lots of firms, like firms in my home city of Birmingham who are frankly ashamed at the high levels of youth and long-term unemployment in our cities; they want to do more to help but look, they’re not charities, they do need some help in order to give something back. That’s why this idea of covering peoples wages for six months to help firms take workers on and get them embedded and trained up, get them adding value to their firms – that’s the kind of practical action which we know works, many Labour councils are now putting in place those schemes, what Labour is saying is let’s bring that measure in nationwide, that would help us get more people into work where they’d be paying in tax, not sitting on the dole where they’re talking out benefits.

The bottom line is unemployment is now higher than it was at the last election, and today unemployment rose again in two-thirds of England. Long term unemployment is now a massive 100,000 higher than back in 2010, the number of women out of work has risen yet again and last month saw a fall in the number of people coming off benefits.

We simply can’t go on like this. It’s now as plain as day that we need fundamental, long term reform of our social security system, starting with Labour’s compulsory jobs guarantee for young people and the long term unemployed.

Three years after this government came to power youth unemployment is still hovering around the million mark – and still higher than it was at in May 2010.

The Youth Contract began in April 2012. The main part of the scheme is a wage subsidy of £2,275 to employers if they employ a young person who has been unemployed for nine months. In the 2011 Autumn Statement the Government boasted that the Youth Contract would offer 160,000 wage incentives to employers.

Ministers originally promised to release data in “early 2013”, yet in response to my parliamentary question last month asking when the statistics for the wage subsidy will be released, ministers could not give us a date.

Almost a million young people are locked out of work but the government’s flagship Youth Contract is nowhere to be seen. Ministers are hiding the scheme in the very same way they hid the Work Programme, and that turned out to be performing worse than doing nothing.

Britain is in the middle of a youth jobs crisis that shows no sign of ending – we simply cannot allow government schemes to continue to fail. Ministers must now come clean, publish the results they have been hiding and bring forward a real plans to get our young people back to work, starting with Labour’s Real Jobs Guarantee.

You can read the FT’s report here .

Five and a half thousand miles from London in Rancho Mirage, California, President Obama and China’s new leader, Xi Jinping, sit down today for their first big summit. Not so long ago the American president was by far the more important to London’s future. But for the first time in 150 years, the leaders of China and America are just as important as each other. 

Speech to Pre-School Learning Alliance Annual Conference

Friday 7^th June 2012

Rt Hon Liam Byrne MP, Shadow Secretary of State for Work and Pensions

It’s a huge pleasure to have the chance to speak with the Pre School Learning Alliance today.

And it’s great to follow the speech from our leader Ed Miliband yesterday, setting out the principles the Labour way to reform the social security of our country.

What’s as clear as day is the government’s approach has failed.

We have long-term unemployment up and highest level for 16 years.

We have rising skills shortages and rising unemployment all over Britain.

And we have a welfare bill that’s £20 billion bigger than it was supposed to be, because the government is simply failing to put in hand the long term reform we need to put social security on an even keel for the long term.

The approach Ed Miliband set out yesterday has long term reform at its heart.

Not ducking difficult decisions.

Not knee-jerk change.

But careful determined action to get people back to work and make sure that work pays.

There are tough edges, I won’t hide that.

There is a triple lock on spending; a two year limit on how long you can spend on the unemployment benefit; a household benefit cap; and an overall cap on what’s called structural social security spending.

But the core of our approach It is an approach that aims to ensure the system works better for the people it was meant to serve, and one that will also control costs for taxpayers.

Today I want to say a few words about how childcare fits into this story. And how we see reform of child care as part of the long term change our country needs.

1. 1.     The importance of childcare

But for me this is personal.

And so I want to start today with a personal story from my constituency, just a few miles from where we meet. 

Hodge Hill has as many of you know the second highest unemployment in Britain.

It’s why the battle for jobs, jobs, jobs is at the heart of my constituency work.

And as part of our campaign, we organised a couple of weeks ago our first Mum’s Jobs Fair in Highfield Road Childrens’ Centre.

We had our JobCentre team, training providers and lots of help and advice from colleges, the great team from Mumprenuers, and people who could help with starting a business. 

I spent the morning talking to mums about what they felt they needed to get back into work.

In my community, mums want to work.

Just like families everywhere, our families are really feeling the pinch right now – and lots of mums are looking to get into work to help top up the family income, especially now tax credits have been cut back so savagely and because bills are spiralling up and up.

Yet, our story is a national story.

In fact, this week the Women’s Business Council published a brilliant report which estimated 2.4 million more women want to work, and 1.3 million women want to boost their hours. 

The second big message our mums had for me, was that we need an awful lot more skills training. Lots wanted ambitious programmes, – and lots were struggling to find basic ESOL provision.

But, most important of all, the parents I serve told me they need more childcare.

And lots of mums said to me that simply couldn’t find it, especially for 1 year olds or two year olds.

People had heard about the new entitlement to free places for 2 year olds – but it was very hard to find anywhere planning to offer it locally.

And, because free provision was available for only 15 hours – and often only available in bite-size chunks in the morning or the afternoon, it was really hard to find work to fit around it.

In a community like mine, we simply can’t tackle the great challenges that we came into politics to solve, unless we make the right to work a reality for parents.

That’s why we need a childcare revolution – and that’s why it is so disappointing that the Government is failing to give parents and providers the support that they need.

1. 2.     The Government’s record

Instead of addressing the demand for childcare, the Government is doing nothing to boost the availability of places to support parents in need.

In fact, as you know, it is radically cutting childcare support for families.

This Government has cut £15 billion from family and childcare support in this Parliament, by cutting child tax credit, child benefit and maternity allowances.

Families have lost up to £1,500 in childcare support through cuts to tax credit.

The Government likes to pretend that all of a sudden there’s loads of extra help on the way – but here’s the reality.

The money for the new voucher system is dwarfed by the scale of the cuts. And you know it.

Worse, the new help that’s promised, it won’t even arrive until after Autumn 2015 when the parents I meet need the extra help today.

Falling real wages mean that parents need real help with the cost of childcare now.

As if it couldn’t get any worse, the Government, united as ever, firm in its resolve, consistent in everything it does, decided that the right big reform was to to compromise the quality of childcare by increasing childcare ratios – only to then drop the idea when they couldn’t find a single professional to support it.

It’s a shambles.

And I want to say thank to you for campaigning so hard to get this crazy idea put in the bin. 

1. 3.     Labour’s solution

Our approach will be different.

As Ed Miliband said yesterday, Labour is the party of work – that is why we’re called the Labour party.

That’s why, in a speech a few weeks ago, I said that our task before the election is to set out the road back to full employment.

That’s why we need to look at how we secure full employment for parents.

Yesterday, Ed Miliband said that means we have got to make some changes.

We’ve got to make sure that parents, especially lone parents, are ready at the starting line to get a job as soon as their children head off to school.

Now we have childcare for three and four year olds, we should be asking and supporting parents to start getting job ready if and where their children are in free childcare. 

But look the bottom line is this government’s changes are putting huge  pressure on family budgets that are already squeezed because this government has utterly failed to get our country moving again.

On average, pay packets today are £1,900 smaller than there were at the election. That’s a heck of a pay cut.

Yet instead of helping, the government has done nothing to reverse the cuts in child care tax credit which has seen some families lost up to £1,560 a year in support

Ministers are quite simply getting this wrong. So that’s why Labour have said as a first step, we need to be learning from the right examples, not the wrong ones.

The government certainly seems to have looked abroad.

To countries like Holland.

The only problem is they’ve tried to import plans that have actually been dropped elsewhere.

We think that countries like Denmark, and places like Quebec have got a lot more to teach us.

And the lesson they offer is that the right way forward is to increase quality and childcare more affordable.

The lesson they offer is that the right reform puts up employment rates, raises living standards – and brings more tax into the Treasury.

Last year I led a team on a visit to Denmark.

They have outstanding nurseries, and have managed to keep costs down for taxpayers.

And they have 10% more women in work than the UK.

If we matched the Danish employment rate, then another million women would be in jobs.

And that would potentially bring in over £4.5 billion in extra taxes each year.

We must not forget that these policies will have huge dividends in the future.

1. 4.     Conclusion

It’s still two years until the next election.

But I think peoples’ patience with this government is now wearing thin.

It’s now as clear as day that their approach is failing and we need a new way forward.

We have now set out our principles.

For getting our country back to work.

For dealing with long term costs.

For setting course for a country of full employment.

They are the principles that have always served us well in this country.

Now, as we know begin the job of turning principles into  policies, we’re really looking forward to working with you, to listening to the lessons of your experience, to hearing your advice on how we better serve the parents I met in Highfield Road and parents just like them all over Britain.

Thank you very much.

Today Programme

Thursday, 06 June 2013

Speakers:        Liam Byrne

                        Evan Davis

ED:                  I want you to avoid critiquing the Conservatives, the coalition’s, welfare policies because we’ve got a lot of debate about that…

LB:                  I’ll do my best…

ED:                  Tell us what you think is most important in this speech today.

LB:                  First that the way to put the system back on the even keel for the long-term is to get people back to work so you are absolutely right to highlight that core-argument. Long-term worklessness is now at the highest level for 16 years. We’ve got to do more to get people back into jobs and that is why we are saying people should only be allowed to spend a couple of years on JSA and at that stage they should have to get a job and you are right to say we are also saying we’ll invest in helping make sure those jobs are available. Second, we do think that a cap on structural social security spending is a good idea because it forces you to make some long-term reforms and what Ed is doing today is he is setting out what Labour sees as the Labour way to do this, so we’re saying, we spend £30bn on tax credits, that bill is going up, not least because of levels of low pay in many firms so if we did more to actually force through a living wage in different parts of the country you could bring that bill down, but we are also saying, as you rightly highlight, the Housing Benefit bill is going up and up and up, we’re spending 95% of the money we spend on housing on Housing Benefit and only 5% on building houses. That doesn’t make sense and what a lot of councils are saying to us is that if they had more power to regulate and control prices in the private rented sector, they could create some savings which we could recycle into building more homes. And then finally we’ve got to do something about raising the employment rate amongst disabled people. The current Atos assessments are failing very badly, you are ten times more likely to end up in court than you are in a job and I’m afraid that isn’t good enough so we need some fast and fundamental reform of those systems too.       

ED:                  Ok. Can I ask you just to give a very brief assessment of what you think the last Labour government did wrong because clearly it is a pretty big change in direction. This government is trying to change direction, you want to change direction, I mean it starts in a sense doesn’t it, with a sense of what you didn’t do when you were in office, so what is your analysis now of the last Labour government?

LB:                  If I was reliving, if we were going through that period again I suppose there are two things that we would have done differently in my view. I think we would have moved faster on Incapacity Benefit reform. It is a highly sensitive issue, you have got to do it carefully, the government frankly is making a mess of it but I think we should have moved faster on that, and second I think we should have done more to put the ‘something for something back’ in the social security system. One of the really important arguments Ed is highlighting today is that a lot of people feel they put a lot of money in and they don’t really get much back out when they need it and that is especially true for working parents and it is especially true for people in their 50s and so we are just beginning to float a few ideas today about how those who put more in do get more out, particularly support that might help them get back into work and retrain for a different career if they lose their jobs.

ED:                  Let’s look at some of the proposals here and I’m assuming by the way that these are not detailed policy yet, there are approaches that you are outlining and you haven’t…

LB:                  Correct, these are the principles that will guide Labour’s approach to long-term social security reform.

ED:                  One of the areas which is sort of, a bit difficult for you is of course, that times are going to be financially constrained, and that much has been agreed by everybody and quite a lot of the proposals look like they involve spending more money rather than less, or at least spending more in the short-term rather than less, because, for example, if you want to deal with the problem of low-pay in order to save welfare support for the low-paid, and if you propose to pay companies to pay their workers less, that is more money to less money isn’t it, and there are a number of other things, if you want to, for example, build more houses, I mean obviously it is not quite the same kind of extra spending, but that is more money rather than less spending isn’t it?

LB:                  Great question. So if you take for example, low pay, lots of people say to us, ‘why are we subsidising low pay with tax credits?’ And I think people have got a point and so we can deal with this partly by tackling abuse of zero-hours contracts, tackling abuse of the agency workers freedom’s too, but the idea of living wage zones is that you bring employers together to say ‘look, if you’re prepared to put people on a living wage, which in London is about 1/3^rd higher than the national minimum wage, over the course of time as savings are made we’ll recycle some of those savings into helping you upgrade skills and upgrading capital equipment, basically making your firms more productive.’ So you are right to say there isn’t upfront money to ‘prime the pump’ as it were but there is a shared savings way of doing things. The same is true on Housing Benefit. A lot of councils are saying, if you take my home council in Birmingham, they spend about £200m on Housing Benefit in the private rented sector, and what councils like Birmingham are saying is ‘if we had some more power to regulate the private rented sector, used some kind of collective purchasing, we could drive that bill down and what we could then do is use the savings to help build more social housing which would bring rent-levels down over the long-term.’

ED:                  I think there has been some scepticism about whether that is going to make any difference. I mean if you re-introduce rent controls it might make a difference but you are not going to help the long-term problem of supply by capping rents and making it less profitable to build and to produce rented accommodation I wouldn’t have thought.

LB:                  But these are medium-term changes, these are not kneejerk, overnight success stories…

ED:                  Are you talking about a regulated rental sector, the re-introduction of rent controls and the like.

LB:                  I think that might be going a bit far. What we are saying is that local councils are saying that they’ve got lots of ideas for how they can make savings and they’d be prepared to crack-on with that if there is a promise on the table to share in the savings to build more houses but, I guess, the reason that we are saying that a long-term cap on social security spending makes sense is because it forces you to engage in these long-term reforms and these long-term reforms are quite a contrast to the kind of kneejerk, salami slicing un-strategic approach the government is taking…

ED:                  Long-term reform, no-one is going to disagree with that. What happens if you have a cap, say measured over a three year period and in the end of the second year you can see blatantly you are going to breach the cap, where would you be looking to claw back the savings, is it going to be tougher eligibility requirements, is it going to be reductions in the level of benefits for those who might have suspected to get quite generous benefits?

LB:                  I think this is at the core of the debate and what we’re saying is if you have got a long-term cap it forces you to plan ahead and grip things that are not working, so I’ll give you an example. The Work Programme at the moment, we know is not doing especially well. Now at the moment the government, arguably, is taking a bit of a hands off approach to sorting that problem out, if you have got a cap on social security spending I’m afraid you just don’t have that latitude, you have got to get a very quick handle on things that are going wrong.

ED:                  I fear you haven’t really answered the question as to where you look to sort of claw things back… because the cap isn’t a target as I understand it, it is different from a target isn’t it that you are allowed to breach a target, and you say ‘well, that is disappointing.’ But a cap is a cap.

LB:                  A cap is a cap and obviously you set your social security budgets each year within that cap but what a long-term approach forces you to do is not let problems lie. It forces you to get absolutely stuck into fixing things…

ED:                  Doesn’t avoid the difficult decisions…

LB:                  It certainly doesn’t avoid the difficult decisions but what it does force you to do is actually get a grip on stuff that frankly is failing.

ED:                  Now what this new approach to welfare, let’s call it a new approach to welfare and let’s assume that you can put flesh on all these sort of ideas that are out there, they are not going to get you out of some very ordinary decisions that have to be made and that the current government is going to confront you with. I mean most notably they have removed Child Benefit for higher rate tax payers, is that something the Labour Party believes is a good idea or a bad idea.

LB:                  If we were in office today that is not a change that we would have made, we think it is the wrong idea. But we are being completely candid that the inheritance in 2015/16 is going to be bleak. The budget that we inherit is our starting point; any changes that we make to that budget have got to be fully funded. We are going to be introducing some quite tough long-term controls on social security spending, a triple-lock if you like which means a 2 year limit on JSA…

ED:                  But basically Child Benefit for higher rate taxpayers is not coming back under Labour is it, it is gone now.

LB:                  We can’t make any changes that are not fully funded and this is a couple of billion quid, that is a large amount of money and there will be a big queue of things that we want to get done.

ED:                  Just one other quick one, there’s been a bit of a debate about whether people who have more children than they can support themselves, than they could reasonably have expected to support themselves. Whether how much generosity the benefits system should bestow upon them. Would you ever agree with the idea that people who have, say more than two children should get no more benefit than those who stick with two.

LB:                  I personally think it is a very bad idea. Because one of our proudest achievements in government was lifting a million children out of poverty all that good work is being undone by this government and what we should be doing, frankly, is helping parents work and indeed, one of the things Ed is talking about today how we do more to help lone-parents prepare for work as their child approaches school age so, look, child poverty remains a great cause and crusade for the Labour party and we are not going to back away from that.

-ends-

I’m delighted to announce the launch of my book, Turning to Face the East.

The book is the story of a simple quest. We always knew this was going to be the Asian century but the great crash in the west means something big. The Asian century is arriving 20 years faster than anyone expected. So the question is: how are we going to prosper in this new world? Are we going to muddle through? Or really make a go of it? The book brings together the things I’ve learned exploring this question, travelling and working in China as a politician over the last five years, together with interviews with Britain’s leading China thinkers.

Here’s the Amazon link to the book, and it’s also available in the Guardian shop.

The Observer ran some extracts of the book which you can see here, and The Sunday Telegraph published a short editorial piece on Sunday, which is here. There’s also a piece on Politics Home which is here. Finally, I debated some of the book’s themes on Nightwaves on Radio 3 last night together with Rana Mitter and Linda Yueh; here’s the link to the programme. My friend and colleague, Chuka Umunna has picked up on some of the themes over at city am here, and I have a blog up today at politics home  

I hope you enjoy it!

Ed Miliband, Leader of the Labour Party

In Turning to Face the East, Liam has made a major contribution to the debate on how Britain competes in an increasingly globalised world. As Liam argues, we need a change of direction at home and we need to learn lessons from dynamic economies around the world.

Lord Mandelson

”With the world moving East there are few better guides to understand the challenges we face to benefit from the rise of China than Liam Byrne”

Lord Sainsbury, Chancellor, Cambridge University

 “An excellent account, by a frontline politician, of how Britain needs to change to succeed as an innovation nation in a world in which China plays an increasing role. It deserves to be widely read.”

Shadow Chancellor, Ed Balls: 

“In difficult times like these we cannot afford to let opportunities for growth slip through our fingers. There is no doubt that the emergence of China offers the UK just such an opportunity – and as Liam rightly argues it is one we should be grabbing with both hands.”

Shadow Foreign Secretary, Douglas Alexander

“This book is a vital contribution to an urgent debate. China’s rise is no longer a prediction – it’s a reality, and as Liam Byrne expertly lays out it’s a reality Britain cannot afford to ignore.”

Shadow Business Secretary, Chuka Umunna MP

“For Britain to prosper in the coming century we have to succeed in emerging markets. ‘Turning to face the East’ offers a roadmap towards giving our exporters the confidence and support they need to do exactly that in what is set to be the world’s biggest economy. That’s good for business and it’s good for Britain. Liam’s book makes a significant and powerful contribution to the discussion of how best Britain can compete globally and pay its way in the world.”

Lord Digby Jones

“What a wake-up call! We really are at five-to-midnight as our country deals with Asia’s century. Turn East sets out the “how did we get here” and then the “what can we do about it” and leaves hanging in the air the conclusion that every reader must reach about what will happen to us if we do nothing.”

Kerry Brown, Former Head of Asia Programme, Chatham House

‘In the space of a generation China has risen from isolation and poverty to become a global power, but one we have no easy framework within which to understand. Liam Byrne’s wide ranging study, grounded in his own experience as a politician, asks how fit for purpose UK policy is towards this major complex power, and finds it wanting. This book is a wake-up call for policy makers, business people, academics – anyone who needs to think and engage with China. And these days, as his book vividly shows, that means pretty much everyone.’

Rana Mitter, Professor of the History and Politics of Modern China, University of Oxford

“Liam Byrne’s book is a thoughtful and wide-ranging reflection on one of the most crucial economic issues facing Britain today.  It will stimulate an important and much-needed debate on our future in an era of growing Chinese power.”

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