Amendment of the Law

Sheila Gilmore Excerpts

Thursday 20th March 2014 Commons Chamber

[Vince Cable]

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

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

[Sheila Gilmore (Edinburgh East) (Lab)]

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

[Vince Cable]

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

[Sheila Gilmore]

rose—

[Vince Cable]

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

[Sheila Gilmore]

rose—

[Vince Cable]

I have taken an intervention.

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