Category Archives: Economics
Today’s headline fall in unemployment is welcome, but what today’s figures expose is that while out of touch ministers are boasting, families are battling. They’re battling another fall in wages, another rise in youth unemployment and yet another rise in long term unemployment. There is simply not enough work to go round and the proof is a record high in the number of part-time workers looking for full-time jobs.
Real wages fell yet again by £12 a week; unemployment went up across half of Britain; the youth jobless rate rose by 9,400 and long term unemployment rose yet again. There’s now been an incredible rise of 364,000 part time workers looking for full time jobs since the election.
We can’t go on like this. Under David Cameron, Britain’s cost of living crisis is not improving, it’s intensifying.
We need a recovery that benefits everyone, not just a few at the top. That is why Labour wants to help to make work pay by introducing a lower 10p starting rate of tax, paid for by a mansion tax, and to repeat the tax on bank bonuses to pay for a compulsory jobs guarantee for young people.
17 May 2013
-CHECK AGAINST DELIVERY-
There are few better places than here, to speak about the task of rebuilding Britain as a country of full employment.
Today we meet under 10 miles from Jarrow, where I spent this morning.
The town from where families hungry for work set off on the road to Westminster.
Walking in hunger they still inspire us down the ages.
Today we meet in a city where once again it is the Labour movement, in trade unions, in constituency parties and in local government, that are once more leading the campaign for work.
The story of our fight for jobs is the genesis of our credo.
When Keir Hardie stood up in Parliament as the first Labour MP, he spoke to insist on the principle of work or maintenance.
‘Useful work for the unemployed’ was the call of our first manifesto.
And it is our call today.
Next year we mark a proud anniversary in our long struggle.
We mark seventy years since the famous white paper on employment policy.
The first white paper in which a national government accepted a national responsibility to build a country where everyone had a job.
Its virtue was not simply the determination written through its pages to never return to the Devil’s Decade of the 1930s.
Its achievement was greater than that.
Its achievement was to show us how countries can be rebuilt and can be renewed if and only if we put everyone back to work.
The story of this great declaration bears re-telling. It’s mother and father, so to speak, was the Beveridge Report.
The bold plan for a system of ‘all in’ social insurance.
It was swept off the shelves in 1942 to become the most popular White paper until the Profumo report published in the 1960s.
Sex and social security were never going to be a fair competition.
The Beveridge Report was published to a country that was hungry for a vision of just what it was we were fighting for: the victories in 1942 in North Africa, in Stalingrad, in Guadacanal had delivered us the ‘end of the beginning’.
Beveridge gave us that vision of what we were fighting for.
Atlee looked at the report, and said, for us, Beveridge means socialism.
And that is why the PLP was acutely worried that Churchill would to put off the job of preparing to turn ideas into action.
And so 70 years ago, the Parliamentary Labour Party decided to force the issue.
In the biggest Parliamentary revolt of the war, 97 MPs broke the whip, voted against the government and demanded that planning for the peace begin immediately.
In his speech, Jim Griffiths, later the first Minister for National Insurance, moved the rebel’s amendment and rested his case on the belief that we could never again return to the mass unemployment of the past.
“Our people have memories of what happened at the end of the last war”, he said. “Years in which never less than one million and sometimes two million and at one time three million of our people were allowed to rust on the streets”.
“That”, said Griffiths, “must never be allowed to happen again”.
And so, Churchill relented.
A Reconstruction Committee was formed dominated by Atlee and Bevin.
And after just two years the Committee produced its finest fruits. The 1944 White Paper on employment policy, replete with its famous first paragraph that henceforth:
“The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war”.
It set out the big levers that government would pull:
Trade policy – vital for an exporting nation; interest rates – to keep money at the right price; public investment and tax rates to make good any shortfalls in business investment or consumer demand, and crucially, special help for special areas, where old industries were in their sunset years but where new industries were yet to dawn.
When Bevin launched the white paper in the Commons he was very clear that as technical as the strategy might sound, this was a moral crusade.
Remembering some of the soldiers he had bid farewell as they sailed for the D-Day landings in Normandy, he told the Commons of one man of the 50th Division who had asked him this:
“Ernie, when we have done this job for you, are we going back to the dole?”
Both the Prime Minister and I answered, “No, you are not.”
“Unemployment”, said Bevin, “was and is a social disease, which must be eradicated from our social life”.
And so henceforth “Our monetary system, our commercial agreements, our industrial practices, indeed, the whole of our national economy, will have applied to them the acid test—do they produce employment or unemployment?”
When Labour went to the country in 1945, we argued that if we could achieve full employment then we could afford to rebuild Britain – and we could afford to build the welfare state.
In our manifesto ‘Let Us Face the Future’, we said a policy of ‘Jobs for all’ could pay for ‘Social Insurance against the rainy day’.
“There is no reason”, we argued, “why Britain should not afford such programmes but she will need full employment and the highest possible industrial efficiency in order to do so”.
The big insight of the Atlee government was this: in a fully employed society we could afford social security. We could afford to rebuild.
It was the same insight as New Labour. We knew back in 1997 that if we got our country back to work, we could afford to renew our public services.
Our insight is the same as Clem Atlee, Tony Blair, and Gordon Brown.
If we restore our country to full employment, we can afford to rebuild; to address the biggest challenges of our times. Full employment has always been the foundation for rebuilding Britain.
It was for Atlee’s Labour.
It was for New Labour.
It will be for One Nation Labour.
Today the goal of full employment is important for a very simple reason. The faster we return to full employment, the faster we can pay down our debt, and the faster we can put the something for something back into social security.
The Tories’ problem is that they lost belief in full employment many years ago, and they never rediscovered it. This failure is now costing us not less, but more. And more money spent on unemployment means less for working people and less for care.
It wasn’t always like this.
Two years into Government, the Tory Chancellor, Rab Butler told the 1953 party conference:
“Those who talk about creating pools of unemployment should be thrown into them and made to swim”.
You don’t find Tories like Butler any more.
The old consensus about full employment is gone.
Mrs Thatcher’s death has provoked some debate about whether we are all Thatcherites now.
The Prime Minister himself does not seem sure. We can have less doubt about the Chancellor.
It seems pretty clear to me that he is, in Denis Healey’s words, just as much a sado-monetarist as Geoffrey Howe.
And in practice the Chancellor has shown by his action that he is a firm believer in those old nostrums of the 1930s, and 1980s and early 1990s, that unemployment is a price worth paying.
The Conservatives beat their retreat from the ideals of full employment in stages.
In Preston in 1974, Sir Keith Joseph declared he had been converted to ‘true Conservatism’ by the ideas set out six years before by Milton Friedman.
Friedman had set out the monetarist case in 1968 arguing the long term effect of trying to buy less unemployment with more inflation simply increased both.
Joseph did not argue that full employment per se created inflation but rather: “It is the means adopted by successive governments to achieve a high level of employment which are the cause of inflation. Instead of dealing with the real obstacles to fuller employment which are often very specific, governments try the panacea, the universal healer, excess demand”.
Jim Callaghan acknowledged the point in 1976 that, as Gordon Brown put it:
“Quite simply governments could not deliver growth and employment through a macro-policy designed to exploit a supposed short-term trade off between higher inflation and lower unemployment”.
Now, Joseph freely admitted that his prescription would create unemployment – but he at least acknowledged:
“There is no magic cure for these problems”, and that further, “In economics there is not and cannot be one cure. Economics is a matter of balance”. He argued too for “reform of employment services, re-training, mobility of labour, reform of housing policy”.
But no such balance was to moderate the disastrous policies of Mrs Thatcher’s first term: massive spending cuts, large tax rises and a big hike in interest rates.
In a year corporate profits fell 20 per cent, output fell six per cent, manufacturing fell 15 per cent and unemployment rose from 1.4 million to over two million.
It was a disaster. And it got worse. In the following two years, interest rates were cut, but public spending cuts were deep.
Unemployment grew for another five years. It did not peak until 1984.
Nigel Lawson tried to argue there was a logic to this cruel ‘British experiment’.
Macro-economic policy was targeting inflation, not growth and employment.
Micro-economic policy would target growth and employment, not inflation. It was a switch in the traditional roles played by each policy field since the war.
But it was an experiment badly conceived.
Macro-economic policy – both fiscal and monetary – targeted a bewildering array of moving targets – £M3, M1, M0, shadowing the D-Mark, and then joining the EMS – each in their turn, targets wildly missed.
Micro-economic policy meant simply laissez-faire.
The investment – public and private – deemed so important in the 1944 White Paper simply failed to materialise.
Investment backlogs grew, in industry, in infrastructure, in housing.
Bottle-necks got worse. Productivity flagged.
By the late 1980s, Britain was suffering once again from the old curse of rising unemployment and rising inflation.
Unemployment reached 3 million mark, so high that any notion of full employment felt well beyond reach.
Now, Mrs Thatcher liked to pretend this was all about economic efficiency.
When a young Tony Blair challenged her in October 1984, she claimed not only to have read the White Paper but to have a copy in her hand-bag.
In practice the Tories were not creating new economic dynamos but new economic deserts.
The decline in industrial output between 1979 and 1981 was unprecedented.
The balance of Rab Butler and the post-war Tory party was gone.
The Tory cabinet minister Ian Gow later put it like this:
“Belief in monetarism it emerged, was now a prerequisite not only for controlling inflation but for being a real Conservative….Those who resisted conversion and clung instead to traditional Tory principles were soon regarded as, at best, suspect infidels or, at worst, the enemy within”.
Today the Conservative Party is in the grip of the same dogma, and it’s costing us a fortune.
After the recessions of the 1980s, and then the 1990s, structural social security spending rose and rose after the end of each recession.
In the 1980s, from under two per cent of GDP before the recession, to three per cent thereafter.
In the 1990s, it rose from 3.5 per cent of GDP before the recession to 4.5 per cent thereafter.
The reason is simple. A generation were written off on incapacity benefit and never worked again.
Between 1979 and 1997, the number of people on incapacity benefits more than doubled.
Inactivity rates for men aged between 25 and 55 rose from under 10 per cent in 1975-6 to around 35 per cent in the mid-1990s.
Even today of the 10 per cent of most deprived districts in England, around 40 per cent are either ex-manufacturing or ex-mining areas.
The same challenge now afflicts us once again. The cost of social security system rose £24 billion during the crash.
But since then, it’s not come down. It’s carried on rising. It’s rising by 2 per cent a year.
That is simply unsustainable
The Tories’ economic policy has failed so badly that the output gap is forecast to continue widening until 2014-15.
The Tories are reacting by taking an axe to the security in social security – and people know it.
They pay more in – and get less out.
It’s what Brendan Barber calls the ‘nothing for something’ problem.
I say we have to break out of this vicious circle.
Seventy years ago, we set out a new path to full employment.
And the lessons of 1944 are just as relevant today as they were for the post-war era.
The White Paper teaches us to be radical reformers, to build exports, supporting public investment, fanning consumer demand – and taking determined action on jobs.
When New Labour came to office in 1997, we set out a new approach.
In place of the pure and purely failing monetarism, came a new approach that:
Recognised that demand management was important but could not on its own deliver high and stable levels of employment; provided a new institutional framework for governing monetary policy including the independent Bank of England to replace the failed policy of target chasing; delivered active supply side policy – targeting productivity, competitiveness and active labour market policy – the new deal, tax credits, the national minimum wage – support for high levels of employment.
Contrary to Lawson’s neat but contrived seperation of macro policy to combat inflation and micro-policy to aid competitiveness, new Labour argued for “macroeconomic and microeconomic policy are both essential – working together – to growth and employment”.
And boy did we deliver.
In the decade before the crash, productivity employment and wages all grew together for the first time since records began.
Wages for workers in Britain rose for over a decade – an average of 3.4 per cent a year between 1997 and 2006.
By 2007 UK average wages were some 59 per cent ahead of where they were in 1997. Only two other OECD countries could match this record – Ireland and Australia.
The UK’s record was almost 20 points higher than the average for the Euro area.
In 2015, we’re going to inherit a very different country – Tories always leave higher unemployment.
So over the next few months, I want to say more about just how we raise the employment rate – raise it with five big steps.
First, tackling the crisis of youth unemployment. Nearly 40 per cent of those out of work today are under the age of 25. As the MP who represents the constituency with the highest youth unemployment in Britain, that is simply not a situation I am prepared to tolerate.
Second, tackling the crisis of long term unemployment, because we are simply not so rich that we can afford nearly one million people out of work for more than a year.
Third, raising the employment rate for women. As a country we will never fire on all cylinders when our employment rate for mothers with toddlers is amongst the lowest in the OECD.
Fourth, showing just how we can make the right to work a reality for disabled people once again.
And fifth, and this is what I want to touch on today – how make sure that in the One Nation economy we want to build, we do not leave any part of our country behind.
In his very first speech as Prime Minister, Tony Blair declared that concentrations of poverty and unemployment represent ‘the greatest challenge for any democratic government’.
This is the same challenge that Iain Duncan Smith saw when he went to Easterhouse.
Back in Easterhouse, Iain Duncan Smith set himself a test. He said:
“A nation that leaves its vulnerable behind, diminishes its own future.”
He found his echo in the Prime Minister, who said in 2007:
“A modern aspiration agenda means helping the have-nots to have something, and if we do not succeed in that mission then I tell you frankly that we will all be poorer”.
Iain Duncan Smith’s time in Easterhouse inspired his reform plans for the Work Programme and Universal Credit.
The challenge is that, however well-meaning, both programmes are failing and failing badly.
Three years into the Parliament, the Work Programme has proved literally worse than doing nothing.
Universal Credit is now so mired in problems its virtues are enjoyed by just 300 people in Tameside.
The challenge for welfare reformers is not whether you have nice ideas. It is whether you can make a difference.
I believe the jury is now in for Iain Duncan Smith.
He has failed the Easterhouse test.
On three-quarters of the estates in Britain where unemployment is highest, there are now more people out of work not less. Long term unemployment has risen in two-thirds of these places.
Iain Duncan Smith has failed the test he set out in Easterhouse because he has failed to understand the challenge that poor places now face in the 21st century.
Let me explain.
Back in the 1980s, old industries were destroyed – and almost nothing was done to offer workers a new future.
The great destruction of British industry – especially manufacturing and mining had huge consequences for jobs in places like the North East.
The aftershocks of that shock therapy are still felt today, two generations later.
Of the ten per cent most deprived districts in England, around 40 per cent are either ex-mining or manufacturing areas.
What happened during the 1980s was no great programme of re-skilling.
Instead a generation was written off, put on incapacity benefit without a thought for those former workers or the damage it would do to the aspirations of their children.
Yet this is what the 1944 White Paper taught us: that when the sun sets on old industries, you need big action to reskill, ‘to fit workers from declining industries for jobs in expanding industries’.
But we were contending with a revolution in globalisation. Big time.
Two years after unemployment peaked in 1984, I was sitting my exams.
That year Deng Xiaoping was Time magazine’s ‘Man of the Year’ for the changes underway in China.
When I got to university in 1989, the Berlin wall came down, and a path opened to a united Europe of 500 million people.
A year later, Manmohan Singh was appointed Finance Minister of India and set about dismantling India’s ‘licence raj’, the vital precursor to its explosive growth a decade later.
By the time I graduated in 1992, President Clinton was in the White House, arm-wrestling through Congress a plan for the North American Free Trade Agreement and eventually a green light for China’s accession to the World Trade Organisation.
A century that began with revolution and world war ended with conscious decisions across ten years on four continents to create a global marketplace linking 6 billion of the world’s 7 billion people. It was a quite a fin de siècle.
Since this century began the commanding heights of the global economy have changed out of all recognition.
As Peter Nolan at Cambridge University has shown: since 2000, some 2,500 -billion mergers, worth in total some .4 trillion, have created a new global super-league.
A handful of firms now monopolise the aircraft industry, the world’s auto business, the world’s mobile telecoms infrastructure, pharmaceuticals, beer, cigarettes, aero-engines, computer chips, industrial gases, soft drink cans.
These giant firms often richer than nations now have the power to move jobs to wherever the skills are greatest or the wages lowest.
That means unskilled workers here in Britain compete with wages far lower elsewhere.
The ILO says low skilled wages in some of Britain’s competitors are 12 times lower here than in Britain.
That means there is simply not a lot of low skill work to go around.
The result? Over half of adults in Britain without skills are out of work. And that figure is going up not down.
Crucially, that means Britain’s poor places are falling behind. Why?
Because some of Britain’s poorest communities are home to five times more unskilled workers than Britain’s richest communities. This was the challenge Labour had to clear up.
During our time in office, Britain’s employment rate hit record highs; from 71 per cent of the population in 1998 up to 73 per cent in 2008.
This increase in the employment rate was coupled with a long-term shift in the number of British workers with skills.
Back in 1994, 22 per cent of the workforce had no qualifications. By 2005 this had fallen to 13 per cent.
Because we believed it was wrong to dismiss the future employment chances of disabled people, we introduced the Work Capability Assessment (WCA) and Employment and Support Allowance (ESA).
We combined reform with investment in back to work programmes; the employment rate amongst those with disabilities rose by over ten per cent between 1997 and 2008.
Now of course we didn’t finish the job: there remained a gap between the national employment rate (72.4 per cent) and employment in our ten biggest cities (68.4 per cent). But at least we closed the gap.
This government is simply ignoring that lesson.
Even when the jobs are there, we’re not training the unemployed to do them.
In great regions like the North West or Yorkshire and Humber, business says they’ve skill shortages, yet we have unemployment way above the national average.
Yet, we knew this was going to happen.
The challenge of poor places and changing places isn’t new. It’s an old challenge.
It was crystal clear to inter-war politicians.
You know too the big challenges that poor places face.
How in many communities, we still grapple with the legacy of the ‘Right to Buy’ legislation of the 1980s, that often led concentrations of the poorest housing stock, where councils were forced to house the most disadvantaged households – often adults without skills.
In poor places, jam-packed like my own with aspirational people, problems multiply.
A low skills base, poor transport connections to work, brownfield land left unoccupied and limited private investment.
Yet, these places are packed with potential.
Over the last ten years, thinking about how to regenerate inner-city areas – in the UK and the US (especially under the Clinton Administration) – has been re-animated by fresh thinking which has explored the idea that inner-cities might actually have some competitive advantages and are in fact a ‘missed market’.
But to unlock that potential means we have put investment in people, and investment in places in the same place.
Unlocking that potential means coordinating skills, education, crime, worklessness, transport, physcial regeneration, health, housing, environmental sustainability, social regeneration, spatial planning, and economic development.
That’s complicated today.
And in fact if you try to do it from Whitehall, it’s impossible to do. We know – we tried.
In fact we had 36 different organisations, operating on four different levels: national, regional, sub-regional and local trying to coordinate this work.
We made progress. But it was no surprise that it was slow.
This is not a mistake that other countries make – they devolve far more to their regions.
It is in fact, something that people on both sides of the debate now agree with.
Lord Heseltine, the Rab Butler of his day, put it like this:
“We need to mobilise the skills of provincial England. I want to shove power out of Whitehall, into the provinces.”
Once upon time, Iain Duncan Smith agreed with him. Once upon a time he told his party conference:
“In the past, Conservative governments have been guilty of taking power away from local government to Whitehall. That was a mistake. We will reverse this process and restore to local councils the discretion to act according to the interests of the communities they serve.”
But it’s not happening.
The problem is that neither Vince Cable or Iain Duncan Smith believe Lord Hesetline. They are the new road-blocks to reform.
The result is our back to work system is hopelessly centralised. This is what the clear conclusion of Labour councils who are now leading the fight against youth unemployment.
That’s why I’m publishing today analysis of the way other countries work.
In Germany, a more localised approach has contributed to saving billions of Euros in welfare payments by driving up the employment rate. Jobcentres work closely with surrounding schools and have deep roots in the local labour market which allows them to engage with employers far beyond the traditional low skill, low pay sectors.
In Canada, localised delivery of back to work programmes gives local government the flexibility to establish their own priorities and to develop programmes to achieve this. Provinces and territories control how the funding is allocated in order to meet the needs of their particular labour markets, which in turn gives them the opportunity to apply local expertise to skills development, allocating targeted wage subsidies, and creating Job Creation Partnerships, to help provide useful work experience that leads to sustained employment.
Next year we celebrate the 70th anniversary of the white paper on full employment.
I believe we should mark that anniversary not with empty words but with big plans.
Plans to rebuild the path to full employment for new times. Plans which could help us modernise our social security system, to rebuild trust, and crucially put its finances back on an even keel for the future.
Our economy not rebalancing
Despite the huge depreciation of our currency since 2007, our export growth has been anaemic.
Business investment is low.
Corporate tax cuts have now totalled £5.7 billion over the course of this parliament. Yet this great act of corporate welfare has not been repaid.
The cash is simply stacking up in corporate bank accounts. Our new Bank governor Mark Carney will recognise the phenomenon from Canada where he has attacked the curse of ‘dead money’.
The result is persistent, high unemployment. The result is OBR now downgrading the country’s trend rate of growth.
The result is that there is quite simply not enough work to go round.
And the government’s strategy is causing engine damage that may last for years to come.
That’s why we need a new plan. We need a new plan for growth. We need a new plan for jobs. And we need people to vote for it at the next election.
To win that vote we need to show how a new plan for full employment will help us pay down debt faster and with less risk by putting our social security system back on an even keel after the crash.
The people of Britain know we can’t go on like this.
And profound change is needed because life has changed since we created the system back in 1945.
People need different things from social security today.
I want to put the something for something back into the system. I want to put the system back on an even keel after the expense of the crash.
But I believe the lesson of our history is simple:
We can afford to do big things to repair and renew our country, to pay down our debt faster, to bring fairness back to the system if, and only if, we get people back to work.
If you want a quick and easy guide to how closely the Obama administration now mirrors the UK plan for fight-backing against the recession, see Christina Romer’s – the Chair of US Council of Economic Advisors – testimony to Congress. http://tinyurl.com/orwpxk
NIESR, the independent economics think tank, published their first estimate of GDP growth for the third quarter – showing growth at 0%. If it turns out to be true, it is a step up from the falls in wealth we saw at the beginning of the year – and is fresh evidence that the help we put in place is working. It adds to comments from the IMF, which said last week that growth would return to the UK during the second half of the year, and the EU which published positive interim forecasts for the UK for the 3rd quarter.
If anything is clear from today, its that now is absolutely not the time to switch off the fiscal stimulus as Mr Osborne proposes. Of the 186 countries in the IMF, all are supporting a fiscal stimulus. I know the Tories are isolationist, but turning their back on the economic strategy of practically the entire world is pretty extraordinary even for them…
Research by the NIESR shows that underemployment has risen from 6.2 per cent of the UK workforce in 2008 to 9.9 per cent in 2012.
Underemployment is the untold story of Britain’s jobs crisis. Under David Cameron, one in ten people are now unable to pick up the hours they need to get by – not including the two and half million locked out of work all together.
We can’t go on like this. Britain desperately needs action to get our flatlining economy moving again but all David Cameron has delivered is three years of failure, and that’s holding the whole country back.
The UK jobless figures speak for themselves. And Osborne knows it – My article in the Guardian, Wednesday 17th April 2013
The IMF warned him and the facts back it up: on the economy, employment, pay and welfare, government policy has failed.
I think we can say the jury is in. And the verdict is blunt: this government’s economic plan has failed and failed badly. On Tuesday, the IMF’s chief economist warned George Osborne to change course. Now we see new evidence showing why.
Three years into this parliament, unemployment is not only higher than in 2010, it is soaring up as companies lay off temporary and part-time workers. Seventy thousand people joined the ranks of the unemployed. Youth unemployment rose by 20,000 and is now within a whisker of the one million mark. Long-term unemployment, also close to a million, rose once more.
But just as shocking were the figures laying bare what’s happening to pay packets. Real wages are now £1,700 a year smaller than they were in 2010. That’s why working people feel they’re going backwards. Because they are going backwards. And that’s why it is such a scandal that this government has chosen to hit working families with tax and benefit changes while giving millionaires an average tax cut worth £100,000.
So on top of smaller pay packets, families now have to deal with £891 worth of tax rises, tax-credit cuts and cuts to help. Together this means you have to work a month and half longer to make the same as you did in 2010. This government is not only failing. It’s unfair.
Behind the headlines the picture looks darker and darker. Growth is flatlining. Inflation is too high. Business investment has barely risen. Exports are actually falling. The “rebalancing” of our economy is just not happening.
It’s no wonder ministers are so desperate to divert attention away from what’s really going on. But for all the bluster there is one very simple truth that they can’t escape. The welfare bill they promised to bring down is rising – and is now £21 billion higher than expected. Osborne is taking more and more from working families because his plan has failed, the Work Programme doesn’t work and far too many people are left locked out of jobs.
The best way to bring down the benefits bill isn’t to reach for cheap headlines, it’s to get people into work, paying into the system instead of drawing out benefits. Welfare reform that is tough, fair, and that works. That’s how we get Britain moving again.
It’s time the government listened to the IMF and changed course – starting with Labour’s idea for a compulsory jobs guarantee to ensure we get everyone young or old on the dole long-term back into a real paid job – one they would be required to take or face losing their benefits. We can’t go on like this. The IMF is right. And today’s jobless figures speak for themselves.
This article was published in the Guardian here.
“Three years on its now as clear the Government’s plan is failing, and failing badly. Not only are more people unemployed than at the election, it’s soaring up. Seventy thousand more people are now on the dole than last month, youth unemployment rose by 20,000 and long term unemployment rose yet again.
“Yet just to add insult to injury this Government is slashing tax credits and child benefit but giving millionaires a tax cut. Families are £891 worse off because of tax and benefit changes and pay packets are now a whopping £1,700 smaller than at the last election. People have to work almost an extra month and a half to make what they did in 2010. Working people feel they’re going backwards because they are going backwards.
“With the IMF warning George Osborne to change course and unemployment getting worse, it’s clear the time has come for a fresh approach. Ministers must now take the decisive action we need to get Britain working again starting with Labour’s compulsory jobs guarantee to get anyone out of work for more than two years back into a job; a job people must take or lose their benefits.”
Liam Byrne MP, Labour’s Shadow Work and Pensions Secretary, responding to today’s Labour Market Statistics, said:
“Budget day begins with a clear sign that George Osborne has failed.
“Half way through the Parliament, Britain is still being scarred by rising unemployment and it is our next generation that is paying a brutal price. Today, youth unemployment has soared back up towards the million mark, overall unemployment is up and unemployment amongst women is up yet again.
“If the Chancellor needs any more evidence for why he should change course he should look no further than today’s figures which show the massive hit working families are now taking. Families in Britain have taken a £1,200 a year pay cut and that’s why we need real action to kickstart our flatlining economy and help families on middle and low income, not a tax cut for millionaires and more of the same failing policies.”
If there’s a phrase that ministers have grown fond of in recent months, its that Britain is now in a global race. I agree. The problem is that David Cameron and George Osborne are doing their best to make sure we lose it.
When China joined the World Trade Organisation back in 2000, few – especially in China – had any idea that the profound shift in the world’s balance of power would arrive quite so soon. When Jim O Neill and the Goldman Sachs team coined the BRICs, they forecast China might become the world’s largest economy many years in the future.
A few months ago, the OECD said in fact China may become the world’s number one in the first year of the next Parliament.
Take a trip to Tianjin, the ancient port of Beijing and China’s fourth biggest city, and you can get a sense of just how fast things are now changing. Tianjin is one of China’s richest places. Low value manufacturing is on the way out. Aerospace, pharamceuticals and financial services – the things we like to think we’re good at – are on the way up. Airbus, Glaxo Smith Kline, Standard Chartered all have big new hubs in town.
That’s why Ed Miliband’s speech on economic reform last week was so important. Two billion people are about to join the global middle class in the next decade or two. That’s a huge new market for Britain. But we won’t – and can’t – win in that market as a low skills, low tech, low pay economy.
And look at what’s happening to Britain today. Business investment is £18 billion a year lower than before the crisis. Real terms investment in science has been cut, while Germany’s has grown. The prime minister has decided to put party interest before national interest and put at risk our membership of the EU for a prize he can’t even describe.
Thousands of talented youngsters from low income backgrounds have been priced out of higher education. There’s no attempt to advance the revolution in technical education that’s now becoming mission critical. A million young people are shut out of jobs and a nearly a million have been out of work for over a year.
Growth in UK productivity compared to the US and Germany has collapsed. And guess what? All of this shows up in peoples’ pay-packets. New figures prepared by the House of Commons library for my office show that on average, workers have taken a massive £1,000 a year pay cut since the election.
Last week, Ed Miliband set out a very different approach. Because we need a skills revolution we need to transform investment in the ‘forgotten 50 per cent’ who don’t go to university with a technical baccaluarate to complement A levels and employer control of training budgets.
Because we need a financing revolution, we need new laws for real bank reform that splits casino banking from high street banking and change to the Regional Growth fund so it starts to work for small business. And because we need a lot more long-term thinking, we need to stop takeovers waved through with the votes of speculators and hedge funds.
Crucially we need to bury the idea that trickle-down economics is some kind of miracle tonic for our economy. It isn’t. The big tax cuts for the richest that kick in in April aren’t not going to miraculously jump-start growth, which is why Labour says let’s cut reintroduce the 10p rate of tax instead.
If we couple this kind of fair tax policy with modern industrial policy and add social security reform that boosts childcare, helps the over 50s back to work, unlocks pension fund investment in infrastructure and crucially renews the bridge from school to work for our young people then we will have a fighting chance of winning a big slice of the vast new markets opening up around us.
This week Ed Miliband and Douglas Alexander visit three countries – the Netherlands, Denmark and Sweden with an awful lot to teach us. For years our northern European neighbours have done well by mixing innovation and strong social security systems that help keep people in work.
They’re not countries that aren’t attempting to prosper by cutting taxes for the super-rich with a prayer they’ll spend it. They’re countries that foster strong, middle income jobs open to the many not the few. And that’s how we win the global race. By opening up new chances to all-comers.
Can I thank the minister for advance sight of the statement
I think we got a pretty good idea of what he was going to say.
There is welcome news for Britain’s pensioners
When we were in office we lifted a million pensioners out of poverty and increased pensioner incomes by 40%
Today, the minister has confirmed that pensions are to be uprated by 2.5%
We welcome that and we look forward to the Pensions reform proposals which are acquiring mythical status.
We hope they prove the minister makes a reality of his white paper soon.
But while the news for our pensioners is welcome, the news for working people is a disaster.
Buried in the small print of yesterday’s budget is the brutal truth that this was a budget for unemployment.
- The Cx has throttled the recovery
- The SOS for CLG is cutting hardest the places where jobs are fewest
- The work programme is worse than doing nothing
- The OBR is revising up the claimant count for 340,000 by 2016
This is a budget that puts up unemployment
And the bill for that is large.
The dole bill is £0.9bn higher in 2015-16, and is cumulatively higher by £1.6bn over the next three years.
The bill for failure is not coming down but going up
And now we learn from the minister that it is working people who are going to pay the price.
We already have 6.1m working people work in poverty
Buried in the HMT Policy Costings, is the news that the 1% squeeze will save £6.7bn by 2016-17.
The resolution foundation tell us 60% of the cuts will fall on working households
Provisional analysis by the library shows just 23% is from JSA, ESA and IS
The rest is from tax credits, maternity allowance, maternity pay, sick pay, tax credits and housing benefits which of course is claimed by working people
In fact its claimed by the strivers and battlers that the PM promised to stand up for at his conference.
I hope we won’t have any nonsense about the virtue of raising personal allowances
- wiped out by the breath-taking scale of the raid on their tax credits
- £14 billion is being taken away from working families.
This budget steals another £5bn off tax credits by 2016-17.
- And UC, has been hacked into before its even started
That is a price that is going to be paid by 6,000 families in the minister’s constituency
They are no doubt delighted with him.
So, perhaps he can tell us….;
What is the value of this squeeze for working peoples’:
Maternity allowance; SSP; maternity pay, paternity pay and statutory adoption pay?
And What is the value of this squeeze for working peoples’:
Working Tax credit and child tax credit?
During the second reading of the Child Poverty bill, the minister said that he gave up being an even-handed academic, because I quote: ‘he was appalled at what was happening in our country to the most vulnerable people’. He attacked the Conservative for ‘standly idly by’ and watching Child Poverety reach record levels.
Well, before the Autumn Statement, the IFS said 400,000 children will be plunged back into poverty by 2015 because of the government’s plans.
How many more children will fall into poverty as a result of the changes announced?
Will he please justify, how Cx can press ahead with a £3 billion tax cut for the 8, highest earners worth £107K for the 8,000 earning over £1M
When 6,000 families in his own constituencies are going to lose out?
Mr Speaker, this is a budget that up the claimant count, put up the cost of failure and is asking working people to pay the price.