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Mr. Secretary Lilley, supported by Mr. Secretary Portillo, Mr. Chancellor of the Exchequer, Mr. Secretary Heseltine, Mr. David Hunt, Mr. Secretary Lang, Mr. Secretary Redwood, Secretary Sir Patrick Mayhew, Mr. William Hague, Miss Ann Widdecombe, Mr. Roger Evans and Mr. Phillip Oppenheim, presented a Bill to provide for a jobseekers allowance and to make other provision to promote the employment of the unemployed and the assistance of persons without a settled way of life: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 5.]
Order read for resuming debate on Question [29 November] .
Motion made, and Question proposed ,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide--
(a) for zero-rating or exempting any supply, acquisition or importation;
(b) for refunding any amount of tax;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for relief other than relief applying to goods of whatever description or services of whatever description.--[ Mr. Kenneth Clarke.]
Question again proposed.
The Secretary of State for Employment (Mr. Michael Portillo): As Chief Secretary to the Treasury, I believed that the best way to create prosperity and jobs was for the Government to control their spending, borrowing and inflation, but times change and I am now Secretary of State for Employment. From my new perspective, I have come to the conclusion that the best way to create jobs is for the Government to control spending, borrowing and inflation because those are the only conditions for sustainable, economic growth. Interestingly, the hon. Member for Peckham (Ms Harman) believes that the only way to create jobs is for the Government to spend, to tax, to borrow and to inflate. In her previous job, her opinion was that the only way was to spend, to tax, to borrow and to inflate. The funny thing is that that was when she was shadow Chief Secretary. There is an inevitable symmetry between any object and its shadow. I am delighted today to congratulate my right hon. and learned Friend the Chancellor of the Exchequer on his Budget. It underlines the Government's absolute commitment to the fight against inflation. It ensures that the constraints on public spending are maintained and it charts the route to reduce the public spending borrowing requirement to zero before the end of the century. It is the reliability of those policies that gives Britain the prospect of a sustained recovery. We have created the framework within which prosperity and wealth are being generated by business and it is that framework that is attracting foreign investment to this country. It is by those means that jobs are created.
The Government believe in making it easy for one person to provide a job for another. We avoid imposing unnecessary regulations and restrictions. We do not deter
Column 1359employers from taking on extra people as their businesses grow. The Government do not believe in imposing on businesses in Britain costs that competitor firms elsewhere in the world do not have to carry. Costs must be contained if our firms are to compete, because the newly emerging tiger economies of Asia and south America increasingly have well educated and well trained work forces as well as a much lower cost structure.
However, the Government believe in helping those who would otherwise stand the least chance of getting a job, such as disabled people and people who have been unemployed for a long time. We must ensure that no one is denied the chance of getting a job simply because of prejudice among employers.
During the 1980s, the Government transformed Britain's employment laws. We brought the trade unions within the rule of law, we cut Labour's taxes on jobs and we swept away the unnecessary restrictions that made businesses unwilling to offer people jobs. As a result, Britain today has a flexible labour market, which means that, when the economy grows, unemployment falls quickly.
Within a few months of the recovery starting, unemployment began to fall. That is in contrast with the much longer time taken during the last recovery, when it was a full five years before the fall began. In this recovery there has already been a reduction of 450,000 in the number of people out of work, so that the total today is just above 2.5 million.
Recovery has reached other countries in Europe, too, but in most of those countries unemployment is steady or still rising. In Britain, it is falling because of the supply side reforms implemented by the Government, and consistently opposed by the Labour party, which has opposed everything that could give our people a better chance of work.
We recognised the need to give young people a better start in life, better education and better training. We did not think it good enough to have just 7,000 youngsters in training. But Labour did, because that was the number in 1979. We have increased that number to 277, 000. We did not think it right to let young people start out on a life on benefit at the age of 16. But Labour did. We thought it necessary to improve educational achievement, so we introduced the national curriculum, testing and league tables in schools. Labour opposed us every inch of the way.
In 1979, Labour thought it good enough that fewer than 25 per cent. of our young people got five good GCSEs or the equivalent. We did not agree, so now the figure is 40 per cent. The proportion of young people getting A- levels has just about doubled, and Britain now produces, proportionately, more graduates than any other country in Europe.
Mr. Portillo: I shall deal with that later in my speech, but I will give the hon. Lady a preview now. I am interested not in what we spend but in the results we get. I want to get people into jobs, and I measure Government programmes by what they do for people, not by how much they cost taxpayers. It is indicative of the mentality of the
Column 1360hon. Lady and her colleagues that all that they are interested in is what is spent, not what help is provided for people.
We have introduced modern apprenticeships. In the White Paper on competitiveness we set out a programme amounting to £325 million of investment in people, to boost training in small firms and to make our vocational qualifications rigorous and up to date, and to provide better careers education and guidance and at least one week's work experience for all young people before they leave full-time education.
We have started accelerated modern apprenticeships for 18 and 19-year-olds so that they can achieve the technical and supervisory skills crucial to Britain's economic success.
In the modern flexible labour market we also need to encourage individuals to take responsibility for managing their own training and development. To help individuals to make informed choices, I am making arrangements with the training and enterprise councils so that they can spend up to £40 million over two years on pump-priming adult information and guidance services.
It is business that knows what business needs. Most training must be conducted by business; and it is--business spends £20 billion a year. But even in areas where the Government need to contribute taxpayers' money, business still knows best how that money should be spent. That is why the TECs are run by business people.
Increasingly, the TEC budgets are being determined by outputs--by what is achieved--rather than by what is spent. The output that matters to most people on most of our programmes is that they actually get a job. Only about one third of the participants in the training for work programme get a job at present, even after some months' training. We can do better than that. We shall increase the proportion of people on that programme getting jobs to 50 per cent. That means that we can increase the numbers going into jobs but spend less on the programme.
The Labour party may portray that as a cut, but Conservatives recognise it as better value for money, better value for my Department and for taxpayers, and better for trainees, too. I want to deliver more jobs for less money. So should the Labour party, if it were not trapped in the spend, spend, spend mentality so well exemplified by its Front-Bench spokesmen. None the less, we have committed ourselves to modern apprenticeships and a range of other programmes under the competitiveness White Paper, which, as I have already said, amount to about £325 million.
Our spending next year on training, education and enterprise will be almost £2.2 billion, as it is this year. That is twice as much in real terms as what was spent under the Labour Government. Most significantly, the number of opportunities in the coming year will be 1.5 million, the same as this year.
The most effective opportunities for unemployed people are often not training but other help in getting them into jobs. There will be more money for those other programmes, such as 1-2-1, workwise, workstart, work trial, job match and jobfinders grants. There will also be new money for Community Action. For people on the longer programmes, we shall switch some of the money so as to enable them to search more effectively for a job while still members of programmes.
Column 1361The Budget continues to reduce the costs of employing people. It makes further changes to family credit to help people to return to work, and builds on the various successful pilot programmes that we have run over the past two years.
The Budget also focuses on the problems that people who have been unemployed for a long time face when they are offered a job. They often fear that they will be worse off in work, either permanently or at least for a while, so we have decided to give them the same help with rent and council tax for their first four weeks in a job, and to speed up the payment of housing benefit and family credit so that they can get quickly the benefits due to them when they are in work. As a national programme, we shall also provide grants for people who have been unemployed for more than two years if they need help with work expenses such as clothes or tools.
Ms Diane Abbott (Hackney, North and Stoke Newington): The Secretary of State says that the payment of housing benefit will be speeded up. As housing benefit is paid by local authorities, how can he guarantee that that will be done?
Mr. Portillo: My right hon. Friend the Secretary of State for Social Security will make arrangements with the local authorities to ensure that that can be accomplished. That will mean some changes in procedures.
We also want to encourage employers to take on those who have been out of work for a long time. We recognise that people who have been out of work for a long time undoubtedly face prejudice. We shall give them a chance to improve themselves. After April 1996, employers who take on a person who has been unemployed for more than two years will enjoy a 12-month national insurance contribution holiday. That will cut the average cost of employing such a person by more than £300. That provides a real incentive.
Ms Angela Eagle (Wallasey): Everyone in the House shares the concern about the long-term unemployed. I feel that the Government have allowed long-term unemployment to go too high for too long. If the Secretary of State has suddenly acquired a concern for the long-term unemployed, will he explain to the House why none of the schemes will start until April 1996?
Mr. Portillo: The hon. Lady is misinformed. I should say, incidentally, that if she has any concern for the long-term unemployed I hope that she feels a deep sense of shame at being a member of the party which imposed the national insurance surcharge, thus destroying millions of jobs in Britain. The hon. Lady is wrong. I have told her about the jobfinders grant, jobmatch, workstart and work trials. All those programmes will begin within that period. The hon. Lady refers to only one scheme--the national insurance contributions holiday. That will come in with the job seeker's allowance. It will be part of the Bill. It will be introduced in a timely way in April 1996.
We understand that employers may need to be convinced that people who have been unemployed for a long time can work properly. We are giving them the incentive to try people who have been unemployed for more than six months in a job at no cost to employers.
Column 1362Such a three-week trial gives employees the opportunity to prove themselves in a job of work. In the pilot programmes that we have run, six out of 10 people in work trials have been kept on in jobs. We must also improve the motivation and self-confidence of people who have been out of work for a long time, especially the young. People aged under 25 who have been out of work for more than a year will be offered interviews and short courses. In the pilot programmes that we have run, the interviews and courses have produced good results. They help young people to improve their employability. For that reason, they will be made compulsory.
We must ensure that people with disabilities and illnesses who are capable of work have a good opportunity of getting a job, and we shall protect their opportunities under the training for work programme. We recognise that when we introduce incapacity benefit some people will switch from benefit and become jobseekers again. We will give them special help to find work.
I am delighted that some of the ideas that I have talked about have found their way into Labour party policy or, should I say more exactly, into the report of the Social Justice Commission. The House will recognise that the Social Justice Commission does not represent Labour policy. Labour accepts the kudos for anything that is suggested in the commission's report, but refuses to say how those ideas would be paid for.
None the less, the Social Justice Commission has looked at our pilot schemes and what we have done with national insurance contributions and adopted our ideas. For example, it suggested that there should be work trials for employers with long-term unemployed people. It forgot to say that we already had such work trials up and running as a pilot scheme. We welcome the conversion of the Labour party, but I hope that it will now take the next logical step. If it is true that employers can be encouraged to take on extra staff by reducing employment costs such as national insurance contributions, they would obviously also be deterred from taking on extra people if we added to their costs by introducing a training levy, a national minimum wage or the social chapter. One cannot admit that reducing NICs helps create jobs and then pretend that adding costs does not destroy jobs.
Mr. Denis MacShane (Rotherham): The Secretary of State is a doughty opponent of a statutory minimum wage. Is he aware that one country which has boasted record employment creation in the past 20 years--the United States of America--has a statutory minimum wage, variable from state to state, and that the states with the highest statutory minimum wage have some of the best job creation records? If the Secretary of State is so proud about the Social Justice Commission taking up ideas that he says are Government policy, does he accept that almost every measure that he has just mentioned has been put into practice in France since the late 1980s? As leader of the Tory party's Europhobe wing in the Cabinet, is he not ashamed--
Column 1363further that many hon. Members wish to speak in the debate and that interventions must be brief or I shall intervene in them.
Mr. Portillo: I had the honour of meeting my French colleague the other day. I found him in a slightly depressed state because unemployment in France was still rising despite--or rather, because of--many years of socialist presidency. The reference to the United States is interesting. For a decade, it failed to uprate its minimum wages, and the current Secretary of State, Secretary Reich, has recognised that raising the minimum wage could have adverse consequences for employment. So most of us are in agreement around the world, but as usual the Labour party is not.
Excessive employment costs of any sort destroy jobs. That is why we must keep our costs down. It does not mean that we must have low wages. Indeed, the opposite is true. If we keep down the non-wage costs we can be more competitive. That means that businesses will prosper, productivity will improve and wages will rise. That has already happened.
In the past 15 years, take-home pay for a married couple with one worker on male average earnings has risen by 46 per cent. more than inflation. By contrast, between 1973 and 1979, take-home pay for the same couple fell by 2 per cent. after taking into account inflation.
Mr. Doug Henderson (Newcastle upon Tyne, North): How does the Secretary of State think that market forces will lift the real wages of people such as laundry workers and contract cleaners in the private sector in Britain?
Mr. Portillo: The massive programme that I have described to improve educational standards, which the hon. Gentleman's party has opposed, and to create youth training opportunities will raise the value of what people can offer.
Mr. Portillo: The hon. Gentleman talks about ordinary workers. He has the patronising attitude that ordinary workers cannot be upskilled or enabled to achieve more. That is a typical patronising socialist attitude-- the idea that people can be levelled down and that they cannot be achievers. We believe that they can; we want to raise the skills level in Britain so that people can make a higher contribution and earn a higher wage.
Mr. Bernard Jenkin (Colchester, North): Is it not a bit rich to hear all this advice about youth unemployment from the Labour party when it advocates the very policies practised elsewhere in Europe which have resulted in significantly higher youth unemployment there?
Mr. Portillo: My hon. Friend will know that in Spain, tragically, youth unemployment is three times as high as in Britain. That is in a country with a minimum wage. Returning to Britain, pay here is now as high as almost anywhere in Europe. Take-home pay for a manufacturing worker in Britain in 1993 was higher than in Italy and France and pretty much the same as in Germany. That is because Britain's economic performance has been
Column 1364transformed. We have set out on the road to sustained prosperity. We are creating a high-productivity, high-wage, high- tech, highly competitive economy.
Ms Abbott: My gratitude to a fellow immigrant is undying. Does not the average figure for take-home pay conceal the fact that the vast majority of net new jobs created by the Government are part-time, low-wage jobs?
Mr. Portillo: No. This economy is creating every sort of job--full- time jobs, jobs with overtime, and part-time jobs. The hon. Lady's intervention is odd, for her. I do not know much about it, but I take it that the hon. Lady is a feminist. Recently, we have witnessed a tremendous return of women to work--women who are able to work at the same time as fulfilling their family responsibilities and who are looking for part-time work--and we have an economy that is flexible enough to respond to that sort of demand. I am surprised to hear the hon. Lady laying about her and denigrating part-time work, when that is what so many women need and want.
The economic revival that I have just described would be ruined by the social chapter. The Prime Minister refused to sign up to it at Maastricht because it gave the Community significant new powers to legislate on employment and social matters, mostly on the basis of qualified majority voting.
The social chapter would lay the United Kingdom open to new and damaging Community-level interference. It would threaten the Government's achievements in restoring a fair balance in industrial relations and freeing up the labour market. It would jeopardise existing jobs and inhibit the creation of new ones. Authoritative commentators, such as the Organisation for Economic Co-operation and Development, have repeatedly pointed out that the European Community needs fewer regulations and not more, if it is ever to match the job creation performance of our competitors.
The Community can deal with its unemployment problems, but only by deregulating its labour markets and cutting employment costs. That was recognised by a gentleman who will be well known to you, Mr. Deputy Speaker --Herr Gunther Rexrodt, the German Economics Minister. He said that Britain's achievements in deregulation, privatisation and reducing the burdens on business are "outstanding" and that Britain has
"achieved exceptional results in breaking down bureaucratic obstacles to starting up new businesses".
I thank Herr Rexrodt for that generous compliment.
Unfortunately, the Labour party is rather less objective: its beguiling, but dishonest, argument is that, instead of paying money to the unemployed we should spend it paying them to work. Obviously, that idea is superficially attractive, but it does not work. It cannot create real jobs. If there were such a simple socialist answer, France and Spain would have full employment today; instead, their unemployment figures are far higher than ours.
Column 1365they came to office? Would he not be more inclined to take advice from the Opposition if there were such an Administration, or is that most unlikely?
Mr. Portillo: I can reassure my hon. Friend on that point. There never will be such an Administration. Were there to be, I imagine--I know something of the Opposition's so-called policies--that they would again drive up unemployment because such policies have always done so when applied elsewhere in the world.
The idea of spending one's way out of unemployment has always attracted the Labour party. At Employment Question Time on Tuesday, the hon. Member for Bow and Poplar (Ms Gordon) urged us to allow local authorities to push up the level of public borrowing. During the Budget statement, when my right hon. and learned Friend the Chancellor reached that excellent passage in his speech in which he looked forward to very much reduced levels of public spending borrowing requirement in future years, the hon. Member for Bolsover (Mr. Skinner) immediately said,"We will soon get those up."
Mr. Stephen Byers (Wallsend): It would be informative if the right hon. Gentleman could give us some of his personal views on these matters. Does he agree that taxpayers' money should be given to employers to take people off the register of long-term unemployed?
If it were so easy, why did unemployment double when Labour was in power? It was because, as at least the left-wing Members of the Labour party admit --I pay tribute to their honesty--higher public spending requires higher taxes or borrowing, higher interest rates and probably higher inflation, all of which destroy jobs. New public sector jobs would be created at the expense of jobs lost in the private sector. As the private sector tends to be more efficient, high productivity jobs would be replaced by lower productivity jobs. Indeed, that seems to be a central part of Labour economic policy. The right hon. Member for Kingston upon Hull, East (Mr. Prescott)--the deputy leader of the Labour party, no less--urged that public services be run inefficiently to create jobs. Such a policy would destroy jobs. The economy would suffer as the wealth-creating sector would bear the burden of public sector inefficiency and the economy would be less able to generate new jobs. The net effect is that unemployment would rise.
One cannot increase demand in the economy by increasing public spending. One can do so by providing the conditions for sustained economic recovery, which is what my right hon. and learned Friend the Chancellor of the Exchequer has done.
Job subsidies can play a part in helping some people, such as those who have been out of work for a long time, to compete in the labour market, but that is not a cost-free option. Usually, one is paying employers to take on people when they could have taken on extra people anyway. One merely encourages them to take on subsidised workers in the place of the unsubsidised.
Column 1366Companies who get subsidised workers get an advantage over those who do not, which damages job prospects in competitor firms. Let us be honest. One cannot spend one's way out of unemployment. Subsidies have to be paid for by someone else's taxes and, unless the economy is growing, subsidising one person's job is likely to lead to someone else having to wait longer to find work.
Mr. Jenkin: Is not the really important feature of this Government the fact that we have achieved the three-card trick in the social security uprating? We have reduced the overall burden of social security, continued to target help on those who most need it and had money available to help people back to work, to get rid of some of the poverty traps. All that the Social Justice Commission advocates is higher public expenditure, which would damage the economy in the long run.
Despite the Opposition's dishonesty on that issue, they are ever-mindful of Conservative successes at general elections and like to pretend that their policies are similar to ours, but while we build the economic foundations for job creation, they are in the demolition business. Their job demolition policy number one is a minimum wage. Attempts to increase wages through legislation do not work. We know from those countries that have a national minimum wage what happens and we know that the young are the worst affected, as they are prevented from beginning work.
The right hon. Member for Kingston upon Hull, East, being uncharacteristically coy at the time, admitted that a minimum wage would cause a "shakeout". In plain speaking that means job losses and jobs destroyed. For the victims, avoiding the hard words would not soften the blow.
A minimum wage would bring the Labour party's trade union friends scurrying out of the woodwork to tell us that pay differentials had to be restored. It would make the cost of employing people more expensive at every level. The better-paid would gain the most and the low- paid the least. As those pay rises would not be justified by higher output, jobs would be lost. Those who would suffer most would be those who were thrown out of work and, even more, those who are already out of work, with the lowest level of skills.
The minimum wage is a ban on job creation. It forbids companies to create jobs for those who would like to work and have something to contribute to a company, but not enough to justify being paid the minimum wage. Labour's espousal of that policy is deeply cynical. As the words of the right hon. Member for Kingston upon Hull, East demonstrate, the Opposition know that it would destroy jobs. It is a sell-out to the unions--a despicable deal to boost the wages of those who have jobs by smashing the chances of those who do not. Labour's job demolition policy number two is the social chapter, which Opposition Members try to pretend would not cost jobs. It has cost jobs in Germany. Black and Decker is closing its manufacturing unit at Limburg, and moving production to the United Kingdom. The hon. Member for Peckham ought to ask them why, but I shall save her the trouble. They moved because costs there were too high. In the words of one of the Limburg workers,
Column 1367"industry is flexible . . . the social chapter is not". Where have Black and Decker moved those jobs to? They have moved the jobs to Spennymoor, county Durham in the constituency of Sedgefield--the constituency of the Leader of the Opposition, who would sign up to the social chapter tomorrow if he were given the chance. Let the Labour party tell the people of Spennymoor--the extra 300 people who have a permanent job, the shopkeepers in whose shops the workers will spend their money and the house builders who will build homes for the workers--exactly how they would be better off with the social chapter and without jobs. Labour's rhetoric is full of promises about full employment, but the reality is that its policies destroy jobs--a cruel deception from a party more interested in appearing to care than in actually helping people.
Let us have honest answers from the hon. Member for Peckham in her new position. I will ask her five straight questions, but I am sure that I shall not get one straight answer. At what level would she set a minimum wage? How many jobs would be destroyed by the minimum wage that she would introduce? Would she include young people in a minimum wage? If so, we can look forward to 35 per cent. youth unemployment in this country. What would she do to reduce unemployment that the Government have not done? What does she mean by full employment--500, 000 people unemployed, 1 million, 1.5 million? I suggest that the House should award points to the hon. Lady for her answers, and that we should mark her answers on the basis of three categories: candour, economic coherence and arithmetical accuracy.
The route to more jobs and fewer people out of work is clear: it consists of sound economic policies based on permanently low inflation, a deregulated and flexible labour market and help for those who need it most, such as young people and the long-term unemployed. Those policies are in place today, and they are working. Output is growing by about 4 per cent., inflation is steady at 2 per cent., unit wage costs are falling--enabling British business to compete in world markets--and exports are up by 10 per cent. We have achieved export-led growth. Britain's recovery is generating growth with jobs, in stark contrast to the jobless growth which has been a feature in Europe over the past three decades.
Britain has 70 per cent. people in work, one of the highest proportions in Europe and well above Germany, France and Italy. Across Europe, some Governments have chosen Labour's route of high spending, subsidies, adherence to the social chapter and a minimum wage. Those countries today have high unemployment. In Britain we have pursued educational improvements, sound public finances and targeting help at special groups, and our unemployment is falling. The Budget continues those consistent policies, and makes sustained growth possible and probable. I therefore look forward to a sustained fall in the number of our people out of work.
Ms Harriet Harman (Peckham): The Budget should have addressed the central employment issues that are facing this country. Some 2.5 million people are without work, and those who are in work feel insecure about
Column 1368falling living standards. It should have dealt with investment in skills and industry and with the lack of investment in the economic infrastructure, but it failed to do so.
The Government are out of touch and are failing to recognise and address the central concerns of employers and employees. They wonder why there is no "feel-good factor", but it is obvious to everyone else. People feel not good but fearful, insecure and worse off. The true position was spelt out clearly two weeks ago and was in sharp contrast to the rosy picture painted by the Secretary of State for Employment. While the Government trumpet the recovery, people do not think that the recession has ended and they still fear unemployment. People still feel powerless and insecure about jobs, housing and the health service, and they have no vision of where the Tory party is heading. Tax increases mean that real take-home pay is falling.
Before the Secretary of State disagrees, and says that I am "talking Britain down", I must ask whether he agrees with the views that I have just expressed, because they are not my views but those of the Tory deputy chairman, John Maples, who was reporting the view of the British people--a view that the Secretary of State does not want to hear.
Cabinet Ministers say publicly--as the right hon. Gentleman has just done-- that everything is rosy, but their own deputy chairman tells them privately that Labour has been right all along. It has been right about the fear of unemployment, about insecurity and about falling living standards.
Mr. Jenkin: Before the hon. Lady reminds me of my election address, as Opposition Front Bench Members usually do, I remind her that I stood on a platform of urging lower taxation, which, in due course, I am sure we will achieve. Does she agree with the Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), who told the House recently that the recession has ended?
Ms Harman: We hope that the recession has ended, and there are signs that growth is picking up, but what we and the people of this country are concerned about is that yet another recession will be just around the corner as the Government pursue boom-and-bust policies.
The hon. Gentleman asked whether I would quote his election address. He well remembers that he promised his constituents that the Government would cut taxes, whereas in fact their taxes have gone up by the equivalent of 7p in the pound. Since this is a debate about employment and unemployment, I remind him that unemployment in his constituency has risen by 156 per cent. in the past five years. Those are the Government's own figures.