Banking (Responsibility and Reform)

Tom Blenkinsop Excerpts

Tuesday 7th February 2012 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Yesterday, Ernst and Young said UK bank lending will shrink for the first time since 2009. It has predicted lending will shrink by 2.2%, with further shrinkage in 2013. Given that, does the Minister think Project Merlin has been a resounding success, or will he choose not to continue with it next year?

[Mr Hoban]

Project Merlin set lending targets for banks. At the point of the third quarter, the targets for lending to all business had been achieved and those for lending to small and medium-sized enterprises had just been missed. Project Merlin therefore has certainly achieved in respect of its goal of getting credit flowing to the economy. I agree that businesses face challenges in borrowing money. They need to have a viable plan, and we need to work more closely with businesses to ensure that the support is in place to enable them to make successful applications for bank funding.

Youth Unemployment and Bank Bonuses

Tom Blenkinsop Excerpts

Monday 23rd January 2012 Commons Chamber

[Rachel Reeves]

The Leader of the Opposition has said that the knighthood for Fred Goodwin was not warranted, but I do not remember hearing Conservative Members saying that he should not get a knighthood when it was awarded.

Bank bonuses were taxed at 50% in the last year of the Labour Government. That brought in £3.5 billion, which was used to help to support families and to support young people back into work. Unlike Labour, which introduced a tax on bank bonuses, the Government are introducing a tax cut for banks this year. That tax cut is unwarranted and unjustified as unemployment and youth unemployment continue to rise.

The Opposition proposal is simple. While banks are still not doing their job—they are not supporting jobs or growth—the Government must step in to ensure that resources are put to better use. A 50% tax on bank bonuses above £25,000 would, on a cautious estimate, raise enough revenue to support the creation of 100,000 jobs for young people.

We know that such a measure would work because it has worked before. Labour’s 2010 bank bonus tax raised £3.5 billion, according the OBR. The future jobs fund, which was created by the previous Labour Government, supported more than 100,000 people back into work. That is a record of which Labour Members are proud. By contrast, the Government have chosen a tax cut for the banks and a belated, half-hearted and ineffective response to rising youth joblessness.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

My hon. Friend is making an excellent speech on Labour’s proposal to create 100,000 jobs for the young from a bankers’ bonus tax. The north-east is bucking the national trend in manufacturing, which is in the doldrums in the rest of the nation, but 7,000 private sector jobs were lost in the past three months of 2011, whereas 4,000 public sector jobs were lost. Given that clear disparity, what does my hon. Friend make of the Prime Minister’s rhetoric on the creation of private sector jobs?

[Rachel Reeves]

My hon. Friend speaks passionately about his region of the north-east, and I know he does a huge amount of work for businesses, young people and families in his constituency.

The reality is that northern towns and cities are paying a particularly high price for this Government’s policies. In my city of Leeds, the local authority is losing more than 25% of its grant over the next four years. As a result, more people are losing their jobs and fewer services can be provided. It is people in the poorest areas who are paying the highest price for this Government’s policies.

Regional Pay (Public Sector)

Tom Blenkinsop Excerpts

Tuesday 10th January 2012 Westminster Hall

[Jonathan Edwards]

The hon. Gentleman makes a valid point about morale and about where public sector workers choose their profession as a vocation. They do so as a lifetime commitment and are more likely to move to areas where they will get better pay. This is a pressing issue about the effect that this proposal will have on the quality of our public services in those areas where we need to be pumping up the public sector because there are problems with the economy.

It would be indefensible, considering that public expenditure per head is far higher in London than other parts of the state, for the Treasury to introduce a policy that further exacerbates the wealth divide. The spending power of people in the poorest parts of the state is obviously far lower, and that has an impact on private sector growth in those areas. In the communities that I represent, more than 30% of the population work in the public sector. Their disposable income correlates directly to cash circulating in the local economy. The move towards regional pay, therefore, is deeply worrying, as it will institutionalise lower pay in poorer areas. It will entrench those deeply socially divisive economic variances that exist within the British state and fundamentally undermine a supposed key objective of the current UK Government.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I congratulate the hon. Gentleman on securing the debate, because this is a very important issue. What would have been the consequence if regional pay had already been instituted and police officers from my area in Cleveland were sent down to London, Birmingham or Manchester during last year’s summer riots? What would have been the consequences for the pensions of those police officers if their annual pay was reduced in certain regions of the country?

[Jonathan Edwards]

The hon. Gentleman makes a very informative intervention, which shows some of the problems. He is right to point to the recent riots in London, because police forces from his area and mine were sent down to London to deal with those problems. What would the morale in the police force be if there was differential pay in different parts of the British state? In fact, I cannot think of many other policy interventions that would undermine completely attempts to rebalance the economy geographically.

Returning to some of the arguments used to promote the idea, the notion that depressing public sector pay would lead to the brightest and the best leaving the public sector to generate wealth seems a slightly strange one. Public sector workers often make a lifetime commitment to joining a profession and to public service. Rather than seeking work in the local private sector, they are far more likely to seek similar employment in other areas where they will receive better pay. That will result in speeding up the brain drain that has caused so much damage to the communities that I represent.

There are a number of technical problems with the introduction of regional public sector pay. One obvious problem is how to calculate pay. Is the idea to link it with private sector pay? If so, the huge disparities in pay in the private sector between different parts of the UK would be replicated in the public sector. Generally, private sector wages in Wales are only half those in London. Are we seriously saying that a public sector worker in Southwark who does exactly the same job as an individual in Carmarthenshire should be paid twice the rate?

How many different regions will there be? How will boundaries be set, and how often will pay and boundaries be reviewed? In an unusual sign of activity, the First Minister of Wales announced within hours of the autumn statement that if the UK Treasury introduced the policy, the Welsh Government would seek to assume responsibility for public sector pay. I remember being interviewed by the BBC on the steps of St Stephen’s entrance on my response to the autumn statement. I was asked to respond to the First Minister’s comments, which I had not heard previously, that regional pay was

“a code for cutting pay in Wales”.

He continued:

“Ultimately we may have to look at taking over pay and conditions here in Wales. It’s not as easy as it sounds. There are real issues in terms of how that’s done. But if we’re forced into that situation, better that than have people’s pay cut by the UK Government in London.”

That sort of fighting talk, with an alternative course of action, is extremely unlike the current Welsh Government. We normally get a pile of hot air based on Labour-Tory tribalism, but with even the Welsh Government awakening from its slumber, perhaps Ministers here in London should be very wary of the strength of opposition that these proposals will generate.

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[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Chope, and I congratulate the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on securing the debate. The issue of regional pay is important for people living in Wales, Scotland and Northern Ireland, and in regions such as the north-east of England.

I spoke about regional pay, or the localisation of pay, in a debate on 6 December 2011, and the issue has been on the agenda for Governments since at least the 1980s, when I was a civil servant in Durham. The Megaw report wanted to devolve public sector pay in the civil service on a regional basis, but that proposal did not get anywhere. Introducing local rates of pay is difficult. The previous Government looked at the issue with regard to the public sector, and a Treasury guidance note from 2003 stated:

“At the extreme, local pay in theory could mean devolved pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

That is the basic, fundamental reason why devolution of levels of pay in the public sector has not been introduced.

This is a time of austerity. Public sector pay has been restricted and will not be increased for two years, and then it will increase by just 1% for two years. Let us look at markets in the north-east of England; if we had devolved local pay bargaining, people might say that pay should be frozen in that region for another year because of the difference between the public and private sectors. Do the Government believe that public sector workers in some parts of the country should have a pay rise, while those in other places should not receive one, because, according to Government analysis, the pay difference between the public and private sectors is too big?

We should not look at only one region. The difference in pay in the north-east and in the south-east of England is 10%, and we should try to decrease that. Why is it right for a nurse working at St Thomas’ hospital, across the way from here, to be on a different pay rate from a nurse who works at the university hospital of North Tees in my constituency, or in Bishop Auckland or Hartlepool? I cannot see how that can be right if both nurses are doing the same job. Many private sector companies, especially supermarkets and some banks such as Santander, have national pay agreements. There may be some flexibility within those agreements, but they have national pay systems. To say that some public sector workers should suffer austerity measures for longer than others because of where they live is divisive. How can we encourage a public sector worker to move from south-east England to the north-east to do exactly the same job if the rates of pay in the north-east are completely different from those in London?

[Tom Blenkinsop]

My hon. Friend makes an excellent case. There are institutionalised national bodies that survey and assess prices in supermarkets. How on earth would regionalised public sector pay work in an economy with five or six big supermarkets that are supposed to have national rates for pricing their goods?

[Phil Wilson]

My hon. Friend raises an important point. One reason why the previous Government did not introduce such measures is because the complexity of having different pay bodies, boards and regions would create unnecessary bureaucracy, which any Government should want to keep to a minimum.

In north-east England, average pay is £19,000 per year, but it is only that high because of public sector workers in the area. How low does the Minister want pay in north-east England to be? Public sector workers maintain the average salary at £19,000; without them it would be much lower. The differential in rates of pay is not a reason for cutting pay or suspending pay rises in the public sector. Instead, we should see how we can increase pay in the private sector.

[Tom Blenkinsop]

Again, my hon. Friend makes an excellent point, and it would be good to see the Minister thank and congratulate north-east England: although in the rest of the country the manufacturing economy is in the doldrums, the north-east is bucking that trend. Workers in the steel and chemical processing industries would undoubtedly be affected by any reduction in public sector pay.

[Phil Wilson]

My hon. Friend is absolutely right, and those workers will soon be joined by workers in the train building sector, in the factory in Newton Aycliffe. As I understand, the north-east exports more manufacturing goods than it imports.

The private sector has a major role to play, and we need an increase in private sector jobs. At the moment, however, 67,000 public sector jobs have been lost in north-east England, and unemployment has risen to 11.6%. Where are the private sector jobs? How can we say that the public sector is crowding out private sector jobs when unemployment is rising and there is no growth to make up for the loss of 67,000 public sector jobs? Figures from the third quarter of last year show that the number of private sector jobs in the UK increased by only 5,000. Many regions such as the north-east are losing out.

I am very worried about what will happen. There is a big pay differential between the south-east and the rest of the country. The differential between regions other than the south-east is minor; it is only 1% or 2%, depending on what goods we compare. We talk about social mobility, and about people getting on and wanting to move to different parts of the country; how will that be possible if pay rates are so different across the country?

Also, we will not create regions as we know them; we will create silos. If people work in the public sector in the north-east, that is where they will have to work, because if they want to move to south-east England or somewhere else, they probably will not be able to afford to buy a house there. There is great difficulty with that at the moment. Let us not forget that in London, where there is London weighting, there is a big problem with recruitment in the public sector as well.

The proposal is a knee-jerk reaction that has not been thought through. I know that the Chancellor of the Exchequer has said that this will not be regional pay as perhaps it was outlined in the past, and that it will be based on zones or localities. That may be so, and it may have been tried out in the Courts Service; let us say that it has been tried there. The fundamental point is that the previous Government did not want to implement it anywhere else, because they knew about the inherent contradictions involved in doing that.

North-east England is a great place to live. I have lived there all my life. I see it as a region of the country with a great identity. I do not want it to become a silo, such that if people work there in the public sector, they cannot work anywhere else. I do not want public sector workers in north-east England to have to face extended periods of austerity because they happen to be working in the wrong part of the country.

We need to look at the private sector. I want private sector jobs to come to the north-east of England, and I want those private sector jobs to have good pay rates. This week and over the weekend, every party has been going on about high pay among senior executives. Okay, let us consider that, but let us also consider low pay in the private sector and not just in the public sector, because private sector workers make up the majority of workers in the country. The answer to the problem is not regional pay or localised pay—it is a living wage for all our people.

Public Service Pensions

Tom Blenkinsop Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

I am very grateful to my hon. Friend for that comment. Over the last few months, I have sometimes felt less like a Chief Secretary than a chief negotiator. I certainly think that, in this as in every other aspect of our policy, the Government as a whole have indeed put the national interest first.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the Chief Secretary specify the actuarial reductions involved in all four pension schemes? Have they changed? What will the consequences be for shift-working public sector employees, whose life expectancy does not generally match the national average, if they opt out of schemes?

[Danny Alexander]

The actuarial factors have not changed. Early retirement pensions will still be calculated on an actuarially fair basis, although of course that in itself changes over time according to the actuarial assumptions. The only exception is the teachers’ scheme. There has been discussion about modest enhancements to early retirement factors at the cost of the accrual rate for retirement ages over 65, as and when the state pension age exceeds 65. The teaching unions made that a priority in their negotiations, and we have chosen to agree with them.

The Economy

Tom Blenkinsop Excerpts

Tuesday 6th December 2011 Commons Chamber

[Damian Collins]

The hon. Lady will be pleased to know that we are also behind Singapore, the United States and Japan, so there are more countries ahead of us than there used to be, and more than there should be. When we consider trying to create jobs in the economy, Opposition Members seem wilfully to ignore the fact that our competitiveness in an increasingly competitive world matters. To them, competitiveness is not worth talking about and is irrelevant to creating jobs. If we are serious about doing what President Clinton has called getting back in the future business—his criticism of the US economy can be applied to the UK economy over the past 10 to 15 years—we must recognise that we have not invested as we should have done to make our economy as competitive as it should be.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The common denominator in all the European countries to which my hon. Friend the Member for Edinburgh East (Sheila Gilmore) alluded is their manufacturing base, and Germany, Japan and China are of course also manufacturing surplus economies. Britain used to have such an economy, until 1979.

[Damian Collins]

I am not sure what the hon. Gentleman’s critique is of the party that was in power for 13 years and delivered these statistics. The point I made at the beginning of my speech is that after 18 years of Conservative Government Britain’s competitiveness in Europe was much higher than it is now. I do not know what sort of indictment he finds after 13 years of Labour Government, but it sounds pretty damning to me. The hon. Member for Bishop Auckland talked about the habitats regulations, which I will move on to because it is an important point. She was slightly dismissive, but I do not think that she meant to be.

--- Later in debate ---

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The plan of the Prime Minister and the Chancellor had been fiscal austerity coupled with an evacuation from the public sector, and it was initially assumed that that plan would by itself provide private sector growth. The plan has clearly failed because of its flawed logic and odd priorities. Under that flawed logic, more spending was planned for Post Office mutualisation than the original English regional growth fund.

Forecast growth has consistently been downgraded, while borrowing has been consistently revised upwards, from £46 billion extra to more than £158 billion extra and rising. While deficit reduction is highlighted by the Prime Minister, private sector growth was assumed, reliant upon foreign consumption at a time of international downturn in all consumption. That international downturn is nowhere more evident than in the eurozone, which the Government are at pains to attack politically at a time when the eurozone needs political union more than ever in order to provide fiscal credibility. Counter-intuitively, however, the Government undermine the required confidence, and in so doing only succeed in bad-mouthing the very export markets we so desperately need to retain in the interim until new market partners are developed.

Not until last week’s autumn statement did we hear an acceptance by the Chancellor that private sector investment requires confidence and a reduction in risk via the injection of public investment. That is either achieved directly by underwriting projects or, as we have seen, by off-balance-sheet lending on an unprecedented scale. That lending is, of course, premised upon Britain’s own position in respect of a now highly likely eurozone bank failure if no political union is established to reinforce fiscal union. The consequences of that will be extraordinarily grave for our financial institutions, given the potential for contagion. What is even more troubling is that the Office for Budget Responsibility believes the effect of the autumn statement’s attempt to rectify this situation is negligible.

The Chancellor will also be aware that the Bank of England has purchased 42% of gilt issuance, owning 30% of total gilt stock. Britain’s interest rates have been made lower as a result. That has been achieved by the independent Bank of England’s purchasing policy, not because of the Chancellor’s fiscal measures. It is interesting to note that this self-given “safe haven status” by the Chancellor has not led to increased international market ownership of British gilts. Indeed, international market ownership of gilts has not changed from 2008 levels.

Quantitative easing is also a reason for that. When the independent Bank of England buys gilts from banks and pension funds, some of the money is re-channelled into the sterling corporate bond market. That is great for the City, sterling and London property investment, but as yet there has been no trickle-down for regional small and medium-sized enterprises or regional high streets despite the much-hailed Project Merlin.

What have been the consequences of the Government’s counter-intuitive policy for manufacturing and industry? I should state that the Government’s aim to address our deteriorating balance of trade in order to create the surpluses we need is admirable. However, our balance of trade has deteriorated in the last 18 months under the Prime Minister’s and Chancellor’s watch. Last month’s Markit and Chartered Institute of Purchasing and Supply index slumped to 47.6, the lowest level since June 2009. Any figure below 50 is usually an early indicator of contraction.

In the EEF’s last quarterly survey of more than 450 manufacturers the growth forecast for 2012 has been cut to 0.9% from 2.5%, a figure it predicted only a few months ago. There is obviously a contraction, and a contraction that prefigures the eurozone crisis. This contraction undermines the Government’s valid ambition to pursue export-led manufacturing growth. There is no manufacturing growth, and also an interim skills mismatch as any private sector manufacturing roles are being supplied with surplus labour from mass public sector redundancies and retail redundancies. In the 1980s there was the cultural phenomenon of mass long-term male unemployment due to a politicised attack upon unionised, largely male, manufacturing sites, and we now face the proposition of mass female unemployment as the public sector and retail sector shed employees, again in the public sector’s case due to a largely anti-trade union, dogmatic narrative mirroring the diatribes from the Conservatives in the 1980s.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is giving a powerful analysis of the situation the country faces. Does he agree that we desperately need demand in the economy from somewhere, whereas what he is describing is a situation of contraction, rather than demand to fuel economic growth?

[Tom Blenkinsop]

My hon. Friend will know the consequences of the policies so far. We have seen massive job haemorrhages at Scunthorpe steelworks, and there was the recent announcement about Llanwern, where nearly 200 steelworkers face unemployment as a result of the mothballing of that site. Another site in Scunthorpe, next door to the steelworks, has decided to move to a short-time working agreement. Those are the consequences of these economic policies.

Culturally and economically, these policies are counter-intuitive to the needs of the economy. We need not just to rebalance the economy per se, but to rebalance structural unemployment, which requires as large an investment as that proposed for the infrastructure. For example, in the steel industry, becoming a waterman—probably the most important job on a blast furnace, involving as it does ensuring that water does not mix with molten steel—requires a minimum of two years’ training. That is a considerable cost for the industry.

Unemployment is predicted to pass 9% next year, according to the “optimistic” estimate of the Office for Budget Responsibility—and at what cost to the Exchequer? Such estimates actually predate the autumn statement, which increased public sector unemployment by 200,000—from 500,000 to more than 710,000. My major concern, as the son of a British expatriate family that sought a future in Qatar during the early 1980s, when the previous Tory Government ratcheted up unemployment on Teesside, is another diaspora of British skilled manufacturing labour moving to other, far-flung nations. The promise of warmer climes and job certainty will be hard to resist for many, especially as a recent Experian study for BBC’s “Newsnight” showed that Redcar and Cleveland, and Middlesbrough are among the top three areas hardest hit by the Chancellor’s autumn statement.

It is not just the public sector cuts. The proximity of the north-east, which has no regional development agency, to Scotland is having severe consequences for our regional economy, as Scotland, which has its own RDA, is absorbing that manufacturing.

Women are losing their jobs at twice the rate that men are, and the Chancellor’s decision to freeze the working tax credit will hit women hard, especially working single mothers. That move, coupled with his decision to claw back money that would have been spent on the child tax credit, will have a significant impact on the well-being of the 36% of single mothers who claim working tax credit, and their families. What will happen to their incentive to work?

[Mrs Chapman]

My hon. Friend is making a fantastic speech.

[Tom Blenkinsop]

I thank my hon. Friend for that lovely intervention; it is an early Christmas present, in many ways.

What will be the consequences in benefit payouts to the Exchequer? The OBR tells us that by 2017, we can expect to have lost 710,000 public sector jobs. With 40% of women working in the public sector, making up 65% of the public sector work force, it is not unreasonable to assume that they will bear the brunt of these cuts, which could have potentially disastrous effects on the unemployment rate for women, with private sector growth not providing enough employment to compensate for these job losses.

Currently, 2,133 out of 6,622 Care to Learn claimants are aged 19 or over, including seven claimants each in the boroughs of Middlesbrough, and Redcar and Cleveland. As if young women in further education were not already facing massive financial challenges due to the education maintenance allowance being scrapped, I hear that the Government have recently consulted on the future of Care to Learn funding. These are the social consequences of counter-intuitive economic policies, which only beget further social consequences, further fiscal strain and spiralling social breakdown, without addressing any of the necessary economic rebalancing requirements.

Northern Rock

Tom Blenkinsop Excerpts

Monday 21st November 2011 Commons Chamber

[Mr Hoban]

My right hon. Friend makes an important point. As someone who was born and brought up in the north-east, I understand how important Northern Rock is to the fabric of the region, and how important it is as an employer and as a sign of prosperity. That is why I was keen to ensure that we got a good deal, not only for the taxpayer but for Northern Rock and the north-east. I am disappointed that so few voices from the Labour Benches have spoken up in support of what is a good deal for Northern Rock and its employees.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

It is amazing that the Government find the ability to mutualise public services but not to remutualise a former mutual. Will the Minister put evidence in the House Library over the next 25 months proving that this was, indeed, a good deal for the taxpayer now?

[Mr Hoban]

I have made it very clear that we acted on the advice that we had received from our independent advisers. They put forward the case that it was better for Northern Rock to be sold to Virgin Money than for us to sit on it or have it remutualised in one form or another, and I think that that is the best outcome for Northern Rock and its employees. I also think that Labour Members should recognise their role in the circumstances that led up to the failure of Northern Rock and show some contrition about the regulatory system that they left behind.

Fuel Prices

Tom Blenkinsop Excerpts

Tuesday 15th November 2011 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

On that point, I was looking at the AA website this morning and comparing unleaded fuel prices in my region of the north between May 2006 and May 2010. Over that four-year period, the price increased by 24.2p, yet in just one year between May 2010 and May 2011, we have seen a 16p jump. That is two thirds of the increase that we saw under four years of a Labour Government.

[Mr McCann]

That gives us the real picture. I shall say more about that in a moment.

My constituents know that the price of oil is linked to the complexities of production, of exchange rates and of international stability, and that interference in one or more of those factors can cause prices to spiral out of control. They lose comprehension, however, when they see little evidence of price reductions when those factors are reversed. I remember well that in 2008 the price of oil was $147 a barrel and the price of unleaded in my town was £1.15. Yesterday, the price of oil was $114 a barrel, and the price of petrol £1.35.

--- Later in debate ---

[Rosie Cooper]

I do indeed, because the general public are simply not interested in any more words, any more knockabout, or any more “he said, she said”. They have signed up in their thousands for action to reduce the cost of fuel and its impact on families and businesses. Study after study shows that transport is integral to an individual’s ability to access employment opportunities and to take part in social and cultural activities. For many people, access to transport is the difference between social exclusion and social inclusion. I could give examples from my West Lancashire constituency that illustrate that the cost of fuel has a significant impact on people, whether they live in urban or rural areas.

The sixties town of Skelmersdale was designed with the car as king. There is no railway station or pavement system to allow people to walk across town, and public transport services are limited. That means that residents rely on their car to get to work and to get around. In many cases, workers are forced to use taxis to travel to work, and if fuel costs increase, residents in those hard-pressed areas must decide whether travelling to work is financially viable.

[Tom Blenkinsop]

Is my hon. Friend concerned, as I am, that the policy of the Department for Work and Pensions of forcing unemployed people to look for work within a radius of 90 miles might be undermined by the fact that fuel costs are so high?

[Rosie Cooper]

In my constituency, to be forced to look for work within 9 miles is darn near impossible because there is no transport infrastructure.

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[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I want to address this debate from the perspective of a low-paid part-time worker. Working families will be told to earn at least £212.80 a week or face having tax credits removed. In my constituency, particularly in places such as rural east Cleveland, as well as suburbs such as Hemlington and Coulby Newham in Middlesbrough, many women work part-time at or just above the minimum wage. After recent public transport cuts by the Government affecting over 90% of local authorities outside London, those women are forced, in the main, to travel by private car. This will become even more the case next year when the Government remove the subsidy for bus fares, further increasing by 20% the cost to the customer of public transport in the form of buses.

[Nic Dakin (Scunthorpe) (Lab)]

Does my hon. Friend agree that women are particularly badly affected by fuel prices?

[Tom Blenkinsop]

That is precisely the point I am making. The lack of a Government growth strategy is making it even more difficult for women to exist within or get into the labour market.

Those women and other workers, particularly in my constituency, need affordable transport, and the Chancellor’s 20% VAT rate is counter-intuitive to that requirement. The economic climate is such that growth in private sector jobs is flatlining, and such jobs are mainly part-time and low paid. The problem is that people who want to work full-time can only get part-time jobs. Part-time employment cannot fund the everyday necessity of a car, and part-time workers are increasingly reliant on a diminishing—

[Jim Shannon]

Is the hon. Gentleman aware that over the past 50 years car ownership has increased from 5% to some 51%, and that those in a lower income bracket are most affected? Does he not think that that clearly underlines the case that we need lower prices?

[Tom Blenkinsop]

Yes. We have heard today the very good arguments about the differences between rural and urban areas, but in certain rural communities in my constituency there is less than 30% car ownership, so there are also class and income issues, as well as a diminishing public transport system that is becoming more and more expensive because of Tory cuts and rising fuel prices.

Female part-time workers often visit two or three workplaces. I used to cover, as a community trade union official, Teesside Cast Products, a steelworks in Redcar. I also represented those in OCS, who worked not only as cleaners and canteen staff but elsewhere as carers on a part-time basis. One of the women I knew did a total round trip of approximately 40 miles a day between two or three work sites. Her employers frequently attempted to remove or decrease her company subsidised fuel costs through unilateral variations in terms and conditions. The Government’s attack on her tax credits and their policy of 20% VAT made it almost impossible for her to work on a day-to-day basis. If it were not for the union fighting for her terms and conditions on fuel payments from her employers, she would undoubtedly have become a Department for Work and Pensions statistic and have been downgraded into a burden on the state rather than the hard-working unionised woman I know her to be.

The Office for National Statistics has demonstrated that in 2010 the poorest 20% of households spent 3.5% of their disposable income on petrol and diesel, compared with 1.8% in the case of the richest fifth of the population. Meanwhile, in the same period, Shell’s profits more than doubled to £4.3 billion, Exxon Mobil made £6.5 billion, and BP made £3.2 billion. We must take note that the squeeze caused by the Chancellor increasing VAT from 17.5% to 20% has added 3p to the price of a litre of petrol. Diesel keeps industry, and the vital service sector that it requires, flowing, much like capital and skills. More than this, public services, including Royal Mail, such as it is—it is going to be fractured and regionalised by privatisation—police vehicle response units, ambulances, fire services and councils incur increased costs via the 3% VAT increase.

[Christopher Pincher]

I know that the hon. Gentleman is a decent man, but will he explain why, if he really wants to see fuel price reductions, he fought the general election on a manifesto to support the fuel duty escalator that would have put 5p on a litre of petrol this April and increased the duty every year for the next three years?

[Tom Blenkinsop]

That was not in our manifesto, although the Tories’ manifesto clearly stated that they would not raise VAT.

Budgets in Middlesbrough, Redcar and Cleveland have been most severely cut by this Tory-Liberal Democrat Government, with cuts of up to 10% for those local authorities. Leafy areas in the south-west such as Dorset have had a 1% budget increase, and we are feeling the pain the most. Our area provides the manufacturing-led recovery for this country, but we are not getting the financial benefits from this Government. The 20% VAT rise and its effect on fuel is hurting us.

The public organisations that I have spoken about consequently reduce their contracting of car and van fleet services, which hurts small businesses in communities such as mine. Those small businesses in turn reduce their staff numbers as they are squeezed by the direct increase in fuel prices due to VAT and the indirect negative multiplier effect of public service cuts.

As Opposition Members predicted, killing off public services will not, in and of itself, evacuate space for the private sector to fill. It has simply intensified the pain of already difficult budget cuts. That has happened because of the Chancellor’s economic decisions before the eurozone crisis. The statistics from the Office for National Statistics and the Office for Budget Responsibility show that the cuts were happening before the eurozone crisis, despite the Government’s attempts to use it as a smokescreen for their failed economic policies.

--- Later in debate ---

[Tom Blenkinsop]

Will the hon. Gentleman give way?

[Mr MacNeil]

I cannot give way.

Many hon. Members, including the hon. Members for Worcester (Mr Walker) and for Beverley and Holderness (Mr Stuart), pointed out that tax was up, but revenue was down. As the hon. Member for Camborne and Redruth (George Eustice) said, it is a regressive tax, which is something that we should change. Three years ago, Iceland had a huge crash, but today it has lower unemployment and a greater growth rate. Interestingly, the cost of its fuel is about two thirds the cost in the UK. The UK has the highest petrol taxes in Europe, with Greece in second place. The message is surely going out to the Treasury and the Chancellor: no tax rises in January.

Question put and agreed to.

Resolved,

That this House welcomes the 1p cut in fuel duty at the 2011 Budget, the abolition of the fuel tax escalator, the establishment of a fair fuel stabiliser and the Government’s acknowledgement that high petrol and diesel prices are a serious problem; notes that in the context of the Government’s efforts to tackle the deficit and 5 put the public finances on a sustainable path, ensuring stable tax revenues is vital for sustainable growth; however, believes that high fuel prices are causing immense difficulties for small and medium-sized enterprises vital to economic recovery; further notes reports that some low-paid workers are paying a tenth of their income just to fill up the family car and that high fuel prices are particularly damaging for the road freight industry; considers that high rates of fuel duty may have led to lower tax revenues in recent years, after reports from leading motoring organisations suggested that fuel duty revenues were at least £1 billion lower in the first six months of 2011 compared with 2008; and calls on the Government to consider the effect that increased taxes on fuel will have on the economy, examine ways of working with industry to ensure that falls in oil prices are passed on to consumers, to take account of market competitiveness, and to consider the feasibility of a price stabilisation mechanism that would work alongside the fair fuel stabiliser to address fluctuations in the pump price.

Oral Answers to Questions

Tom Blenkinsop Excerpts

Tuesday 1st November 2011 Commons Chamber

[Miss Smith]

It is indeed a very good question. I am, sadly, aware that many costs are associated with such a policy, but I would be very happy to discuss such things with the hon. Lady.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

16. What recent discussions he has had with the Secretary of State for Business, Innovation and Skills on funding for the regional growth fund.

[The Chief Secretary to the Treasury (Danny Alexander)]

I regularly discuss the regional growth fund with the Secretary of State for Business, Innovation and Skills. Yesterday we announced the outcome of round two of the fund. In total we expect the regional growth fund to support more than 325,000 jobs in the private sector over the next three years.

[Tom Blenkinsop]

Teesside has not yet received any of its promised RGF funding. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk) says that is down to due diligence, which takes an average of between four and six weeks. No one doubts the need for due diligence, but how much is the Chancellor charging businesses that receive RGF funding for seven months of due diligence limbo?

[Danny Alexander]

The hon. Gentleman will be aware that well over half the projects that were given funding in round 1 are under way, mostly with the private sector funding to start with; the public sector funding will come in later. But I should have thought he would want to welcome the fact that two specific round 2 bids were successful in Middlesbrough in the round that we announced yesterday.

Jobs and Growth

Tom Blenkinsop Excerpts

Wednesday 12th October 2011 Commons Chamber

[Mr Osborne]

I guess that is called an “Ed Balls endorsement”—that is what the last Chancellor and Tony Blair got used to. We increased the R and D tax credit for small businesses in the Budget, so we have taken that idea—which we came up with—and introduced it. I am very pleased that the Labour party now supports it, but what about this idea that a Labour Chancellor would sit there in No. 11 with his home-made scales of justice weighing up the companies he likes and those he does not like and levying different levels of tax on them? What happened to that? It was the centrepiece of the Labour conference two weeks ago, and it shows why Labour simply cannot be trusted to run the economy of this country and why it has become the anti-business party again.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I thank the Chancellor for giving way. It is interesting that he brings up those points, but can he please tell us where the ghost—or the ghoul—of the regional growth fund is? It has now been six months and the north-east is still waiting for the regional growth fund money that it was promised. Businesses are hanging on the wire for that money. Will he please tell us where that cash is?

[Mr Osborne]

Again, that was another opportunity to talk about Labour’s big economy idea. The hon. Gentleman did not take it, but I am glad that he raised the regional growth fund, which has allocated money to the north-east and other parts of the country. That money is flowing and those projects will get going. We are also setting up enterprise zones in Teesside and Tyneside, and doing what we can to get the north-east economy, which also suffered in recent years, on the front foot, creating private sector jobs so that that region, too, has prosperity.

--- Later in debate ---

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Today we are talking about this Government’s 18 months of turning growth into stagnation and how they are essentially borrowing to cut. “A manufacturing export-led recovery” is the Government’s phrase—something I agree with—but those words sound as hollow as the Tory conference floor during the Prime Minister’s conference speech. The industrial production numbers for August coupled with a quarterly poll from the British Chambers of Commerce point to the reality of long economic stagnation. Industrial output was up 0.2% between July and August, but that was entirely due to volatile energy and utility sector prices. Manufacturing output was down 0.3% month on month—much worse than predicted—with export order prospects at their worst for two years according to the BCC.

In retail, consumers are spending less than a year ago, as domestic spending runs below inflation. For all the talk of an export-led manufacturing policy, the Government are still completely reliant on an ever-falling pound in relation to the dollar. However, that is by no means an industrial strategy, and it is certainly not industrial activism, especially as LEPs—another Government growth policy—still have no discernible powers. Nor do they have budgets or money, making them easy to organise, as they do not need accounts departments. Enterprise zones are vague, while funding for the regional growth fund nationally in England is, as we all know, lower than the pot of cash for the Post Office mutualisation fund. Indeed, we have waited six months for the RGF to be financed, but we have still received no answer from the Government Front Benchers about when that money will come through.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I am not taking any interventions because of the time.

Those on the Government Front Bench talk about an employee having to work for 24 months before being eligible for employment rights, but that might give the Government some difficulty, because it would run counter to the interests of new starters—young people seeking work, as well as apprentices. If the Government elongate the time to 24 months, it will be easier for a company to sack an apprentice.

Today in the north-east, we have seen a reduction in employment of 17,000, an increase in unemployment of 19,000 and a 1,500 increase in those claiming jobseeker’s allowance. We have seen the highest UK unemployment since 1994. What is the cost to the Treasury and the taxpayer in benefits? The situation also damages demand in the economy.

[Chris Heaton-Harris (Daventry) (Con)]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I am going to continue.

Industry is withholding spending. Small businesses seeking capital cannot get it except at exorbitant rates, and those that do have capital are holding it as cash and not investing. Large industries with access to the money markets are still holding off, as there is no national state capital underwriting or guarantees. This all comes down to confidence. In an article in The Times yesterday entitled “Here comes the double-dip, say finance chiefs”, Ian Stewart, Deloitte’s chief economist, was quoted as saying:

“Although corporates have the firepower to expand, at the moment their trepidation is with growth, so they are cycling back to exactly what they were doing in late 2008, which is cutting costs and building up cash.”

The most troubling factor is the Chancellor’s deficit reduction plan. It was predicated on 3% growth, but we have had less than 0.2% growth since May 2010. This means that his plan is out of kilter with reality. The Office for Budget Responsibility predicted £46 billion extra borrowing by this Government, but that figure is now rising. Sure enough, this Tory-Lib Dem Government will have to borrow half a trillion pounds. However, unlike the Labour Government, who borrowed for growth, this Government are borrowing to cut, and they are cutting too fast and too deep.

The hon. Member for South West Norfolk (Elizabeth Truss) referred to savings surplus economies such as China, Germany and Japan. They are also manufacturing surplus economies. We were one of those, back in the 1980s, until the decimation of the coal, steel and chemical industries, all of which used to exist in my area. Under the 13 years of Labour government, we saw record investment in industry. I speak as someone who worked, and got his hands dirty, in industry. That Government invested in industry at record levels. We set up organisations such as NEPIC—the North East of England Process Industry Cluster—and One North East, which had a budget of £2 billion. We gave businesses leadership, and we gave those organisations the cash to bring businesses in. We saw more than 60 chemical companies come to Teesside, but now we have seen the closure of the Teesside Beam Mill and the loss of 1,500 jobs in the steel industry from Scunthorpe to Teesside. Job losses at BAE Systems and Bombardier are also just round the corner. This Government need to reassess their policy very fast.

Independent Banking Commission Report

Tom Blenkinsop Excerpts

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

I agree with my hon. Friend that London and the United Kingdom constitute a very attractive place in which to locate a universal bank. We have what I think will be the best regulatory regime in the world, with the best regulators. We also have a good rule of law. This is a good place in which to live, and it happens to have a good time zone as well. All those factors make it a very good place from which to run financial services.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The Chancellor may recall that the coalition agreement called for net lending targets for the nationalised banks. Why did the Project Merlin deal involve much weaker targets for gross lending?

[Mr Osborne]

Net lending targets were tried by the previous Government, and when we looked at that in detail on coming into office, we saw why they had failed so spectacularly, and decided not to repeat the mistake.