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In order for established companies to fund growth, we looked at the idea of having regional stock exchanges, which would be based on the same principles as national ones, but would be localised and geared up for smaller companies. They could use the regional stock exchanges to get cash for equity without the long-winded and exacting due diligence that would otherwise preclude
them from entering the big boys' national stock exchange league. I hope that the new coalition will still consider those ideas at some point.
There are great things in the agreement that, if properly implemented, will make a huge difference to the ability of business to do what it wants and needs to do, which is get on with the job. On regulation, I am greatly looking forward to seeing a system of one-in one-out, sunset clauses and an enforcement regime that seeks to help business meet regulatory requirements in a speedy and efficient way. I am glad to see that the Government will create a Star Chamber to bring those policies into being. Having been a member of the Select Committee on Regulatory Reform for three years, I know how easy it is for civil servants to focus on the smaller issues, and for the regulators and the regulated to cosy up in mutual congratulation. The star chamber must work on the plank, not the mote, in the regulatory eye.
Other welcome policies are simple but very important to those they affect, such as IR35, which has been an issue for micro-businesses for a long time. We will not let business avoid tax, but we will make the system simpler and more straightforward, and take away the anxiety of someone not knowing whether they are covered by the rules or not. We welcome the automatic rate relief for small businesses, as it will bring relief to the very businesses that will benefit most: those least conversant with the system.
One coalition Government policy-our plan for local enterprise partnerships-has been met with dismay by the regional development agencies, but RDAs that have done a good job can continue to work for enterprise in their regions. However, the policy will mean that we will have a form of organisation that is more accountable to the region that it serves and more flexible to its needs. Obviously, there are cuts in the proposals, but business knows what it means to cope with changing, more difficult circumstances and has been dealing with those since the beginning of the recession. RDAs must now deliver service to business more efficiently than ever before.
Mr Love: Is this not simply another fudge by the coalition? The Liberal Democrats wanted to keep RDAs and the Conservatives wanted to get rid of them, and what we have got is a hotch-potch.
Lorely Burt: The hon. Gentleman is entirely mistaken. In fact, the policies of the two parties were almost identical. They were so similar, I wondered whether someone had been talking to someone else. We are at one on that.
Procurement is a big issue affecting the ability of businesses to survive and grow, and it was great to hear in the debate on the Humble Address the aspiration to contract 25% of Government procurement to small business. That will take some enforcing, and we must first get the bodies that spend our taxpayers' money to take account of the size of companies from which they procure. While they are doing that, would it not be great to get them to have a look at whether the people from whom they are procuring look like the people they supply? Are we utilising the rich diversity of supply that we could utilise, including businesses owned by women and ethnic minorities?
I come from the west midlands, which is possibly the UK region that has been hardest hit by the recession. However, we in the west midlands do something special, and we do it well: we make things. We are very clever at making highly technical, high value-added products, many of which we export to the world. Although our car industry has suffered badly, not only do we produce two of the most iconic marques in the world-Jaguar and Land Rover-but they are thriving, both in the export and home markets.
I shall conclude on this point: for far too long, financial services-I understand that they are important-have held the Government in thrall. If I have anything to do with it, that will no longer happen. Despite the fact that manufacturing has been allowed to wither, the UK is still the sixth largest manufacturing country in the world. The time has come to talk manufacturing up, create a climate in which it can thrive, allow it access to finance, which is the lifeblood of business, and create a fair regulatory playing field. Then, we should get off the pitch, and let team Great Britain compete on the world stage.
5.8 pm
Frank Dobson (Holborn and St Pancras) (Lab): At the recent general election, the Tories gleefully asserted that under the Labour Government, inequality had increased. That was true, and it was a major embarrassment to Labour candidates and supporters, but in fact, the gap widened despite the Government's introduction of the national minimum wage and tax credits, and their targeting of health, education and pre-school resources on the most deprived areas and families. The gap widened not because the Labour Government ignored the plight of the worst-off, but because the best-off kept paying themselves more and more.
The Prime Minister has said that his Government's proposals will change our way of life, but they are very unlikely to reduce inequality. His Tory-Lib Dem Government are positively drooling at the prospect of slashing public services, when we all know that the living standards of the poorest in society are, as they always will be, the most dependent on public funds and public services. Cutting pay and pensions and slashing public services will not narrow the inequality gap, but widen it.
As we all know, increasing the share of national wealth going to the worst-off is not of itself sufficient to narrow the inequality gap. We must at the same time reduce the share going to the wealthy. The principal target for such a reduction must be the bloated finance sector, which has been taking an ever greater share of the nation's wealth while devoting a great deal of talented effort on tax avoidance to benefit the people who work in it. Indeed, in the recent banking crisis, far from being a wealth creator, the financial sector proved to be a wealth destroyer. Its record was deplorable. Today, KPMG has given us the benefit of its wisdom on how to improve efficiency in the public sector. I do not know why we give any credence to KPMG, however; after all, it was the auditor of HBOS and Bradford & Bingley and it did not spot that anything was going wrong when those outfits were going bust, even though that was its primary task.
Banks are supposed to act as a conduit between savers and borrowers, providing capital for individuals and firms who want to produce useful goods and services
for the rest of us. Over the years, that function has increasingly taken a back seat to speculation that is referred to, in deferential terms, as "the market". These markets, both national and international, often have nothing to do with supply and demand, however. Fluctuations in the price of oil are a good example. In July 2008, the price of Brent crude reached $146 a barrel; by December that year, just five months later, the price had fallen to $36 a barrel, almost exactly a quarter of its top price. That was not the product of changes in supply and demand; it was the product of speculation.
The price of rice shot up from about $280 a tonne to $1,015 a tonne in April 2008. Apologists for "the market" denied that that was the product of speculation. They said it was because the Chinese were eating more rice. If so, the Chinese must have started eating something else since then, because the price of rice has halved to $500 a tonne today. Such speculation always hurts the worst-off and lines the pockets of the people who are already rich. The G20 should be taking concerted action to tackle such speculation, because while it does not do so everybody else in the world will be vulnerable.
Of course, the main sources of wealth for the finance industry are the costs it imposes on the rest of us for its services-its handling charges and transaction costs, or what would be referred to in any decent above-board casino as the "croupier's rake-off". All large financial transactions involve a host of advisers, consultants, lawyers, fund managers and the like, all pocketing a percentage. Let us consider the recent abortive effort by the Prudential to buy part of AIG at an original estimated value of £25 billion. If the scheme had gone through, the transaction costs had been expected to total about £1 billion, or about 4% of the value. Although the proposal has fallen through, it has still cost the Pru approaching £500 million, including a lot of fees for expensive City advice-presumably bad advice.
The current proposal to sell off the channel tunnel rail link and St Pancras station illustrates how the finance industry failed in its self-proclaimed task of providing private capital yet is now creaming off some of the value. No City institutions were prepared to invest in the channel tunnel link, so the taxpayer had to step in and take the risk. Now that it is operating successfully however, the private sector is sniffing a profit, and it is to be sold off. Citigroup and UBS are involved. They did not design the link, transform St Pancras or manage the building project, and they certainly did not take any of the risk, but they are now advising on the sale and will pocket substantial fees for that advice. One can only hope, on behalf of taxpayers whose assets are being sold off, that those two firms will do a better job than they did in the banking crash, when Citigroup lost $55 billion and UBS lost $44 billion. We need to ensure that the drain of finance and of talented graduates into the City is stopped, so that the money can be devoted, and those people can devote their lives, to doing something a lot more useful and promoting British industry. That is what we all want to see.
5.15 pm
Mr James Clappison (Hertsmere) (Con):
This is my first opportunity to make a contribution in this Parliament, and it is a pleasure, as always, to follow the right hon. Member for Holborn and St Pancras (Frank Dobson), although I will not go down the same route as him. I
wish to say a little about the work and pensions side of this debate, but before I do so may I deal with a subject that is somewhat associated with it: the proposal in the Gracious Speech for a limit on economic migration from outside the European Union? I warmly welcome that sensible proposal. Strangely, it was part of the Opposition amendment to yesterday's motion, although it was not mentioned in the speech of any Opposition Member, including the Front Benchers. One can only speculate as to the internal problems in the Opposition on that matter.
Although I welcome the proposal, I note that the coalition agreement says that it is to be subject to consultation on the "mechanism" by which the limit is achieved. I urge my hon. colleagues to bear in mind that an important consultation has just taken place; call me old-fashioned, Mr Deputy Speaker, but I think that the most important consultation takes place when the voter goes into the voting booth and puts his or her cross on the ballot paper. Therefore, I respectfully invite my right hon. and hon. Friends to take account of the considerable concern expressed about immigration during the campaign.
It is right to engage in some consultation about implementation and, doubtless, the Government will have a queue of employers come before them. When I served on the Select Committee on Home Affairs we examined this very question. We heard from restaurant owners, farmers and people involved in the IT industry, and they seemed to be under the impression that the resident working population of this country was incapable of working on a farm, in a restaurant or in the IT industry. I suggest to my hon. Friends that when they hear such submissions from employers they gently point those employers towards the unemployment statistics, particularly those relating to young people in this country.
Those statistics show one of the most baleful inheritances from the previous Government. Given the speeches that we have heard today, Labour Members seem totally oblivious of the plight that they have left so many young people facing. We have heard a lot about child trust funds, but we have not heard so much about the lack of opportunities for young people who are about to enter their working lives and find themselves facing the prospect of the dole queue. After 13 years of a Labour Government, almost 1 million young people are out of work and there is a structural problem of youth unemployment. I say that because the level of youth unemployment was rising long before the recession took hold. All that has occurred under a Government who had promised at their outset to reduce unemployment among young people by 250,000.
A further 1.5 million older workers are out of work, and standing behind them, although not of course recorded in the formal unemployment statistics, are the many millions of people of working age who languish on out-of-work benefits. We cannot expect some of them to work because of the nature of their condition, but many of them are capable of work and indeed want to work but under the current system they are not receiving the help that they need, be it medical help, encouragement or training, to enable them to work.
In many cases-this is an important part of the problem-such people also lack the incentives to work. We talk a lot about providing incentives for better-off people to work-I am all in favour of that, because I support enterprise and hard work, seeing it as the way
forward, unlike some Labour Members, whose view is to rely on the state for everything. However, we must consider also providing incentives for poorer people on benefits to get into and remain in work. All too often, the poorer person on out-of-work benefits, who may not have many skills and may have a patchy previous employment record, can find only low-paid employment. Under the current system, a large part of their money-their housing benefit and council tax benefit-is withdrawn from them the moment they start work. The moment a poor person who has been on out-of-work benefits gets into work they, in effect, face a marginal tax rate of 80% or 90%. They then find that out of the meagre proceeds left for them they have to pay the normal costs involved in getting to work, being prepared for work, dressing for work and so on. In addition, they have the fear of not being able to rely on the benefits system in the future for housing and all their other needs.
Mrs Anne McGuire (Stirling) (Lab): Will the hon. Gentleman recognise that the previous Government implemented a proposal that meant that people could move into work from receiving benefits and still retain for two years their right to move back to receiving benefits? He is misrepresenting the current situation.
Mr Clappison: I am not misrepresenting it in any way. Labour Members were prepared to have a system in which 80% or 90% of income was withdrawn from people who went into work, through the withdrawal of council tax and housing benefit, and not very much has been done about that. I recognise that some Labour Members were aware of the problem, including the right hon. Member for Birkenhead (Mr Field) and some who have now left the House such as James Purnell and John Hutton. They were aware of the problem, but I suspect that they were blocked when they wanted to do something about it. The result is that 2 million people now say that they want to work but are on out-of-work benefits and are not included in the formal unemployment statistics, which amount to 2.5 million.
Labour Members have presided over a welfare system that is incredibly effective at trapping people on benefits once they get on to them, and it is a challenge for my hon. and right hon. Friends to devise a better system that will get people off welfare and into work. They are having to undertake radical action on this front at a very unpropitious time, when we are facing, as we all know, the appalling deficit that has been inherited. I urge them to turn their hands to this task, because it is too important to fail or to put in the drawer marked "too difficult to undertake". It has to be undertaken, particularly for the sake of the younger people who are languishing on out-of-work benefits and are formally recorded as unemployed. This is a challenge for the future for my right hon. and hon. Friends; it is a challenge that has been neglected by the Labour party and so left for us to take up. It will contribute to solving the problem of the deficit, but we have to take the bold action that has not been taken for far too long-for 13 years of wasted opportunities, which have led to wasted lives and people who have been left, after a Labour Government, languishing on unemployment and out-of-work benefits.
5.22 pm
Kate Green (Stretford and Urmston) (Lab): I am hugely proud to be giving my maiden speech this afternoon as the new Member for Stretford and Urmston. I think that mine is the first maiden speech today. My constituency is, of course, very special. I am deeply privileged to represent it and I hope to serve my constituents well.
My first act in Parliament must be to pay tribute to my predecessors, starting with the right hon. Beverley Hughes. Hon. Members will be aware of Bev's tremendous contribution to public life as a Minister, and I especially want to acknowledge her contribution as children's Minister and her achievement in bringing forward the implementation of the Sure Start programme. Bev was immensely respected locally as a first-rate constituency MP, and I think that mattered more to her than anything she achieved as a Minister, despite her many successes in that role. I am delighted, as I know all hon. Members will be, that she is to remain in Parliament as a Member of the House of Lords.
I should also pay tribute to my hon. Friend the Member for Manchester Central (Tony Lloyd). He first entered the House as the Member for Stretford in 1983, and he retains the great respect and affection of my constituents to this day.
My constituency is special for many reasons. It typifies what is best about our country, such as hard-working, neighbourly people who are determined to do their best for their families and their community-people who are down-to-earth but who have ambitions, hopes and dreams. Old Trafford is world-famous well beyond the constituency boundary as home to both Lancashire county cricket club and Manchester United football club, whose stadium will be known to many hon. Members as the aptly named "theatre of dreams". To us locally, Old Trafford is just as exceptional for its success as a vibrant, friendly, welcoming and supportive multicultural community. I believe that it is a real showcase for the strengths that we gain from different cultures and communities living, working and enjoying life together, celebrating their distinct identities, values and cultures but in doing so creating an exciting, caring and diverse neighbourhood where people live in harmony and peace.
The local neighbourhoods of Flixton, Urmston, Stretford, Partington, Ashton on Mersey and Carrington are also well settled, stable and tight-knit. They too foster dreams and aspirations and share pride in local success. Just the other day, Urmston resident Danielle Hope was chosen as the BBC's new Dorothy, to the delight of local people who had cheered her on.
The constituency has a proud tradition of public service. It was to what is now Trafford general hospital in Davyhulme in the heart of the constituency that Nye Bevan came in 1948 to announce the birth of the NHS. That bold and unapologetic commitment to our public services remains important in the constituency to this day.
We are pleased too that the Imperial War museum has its northern base in the constituency-a reminder, as our troops show great courage today in seeking to bring peace in some of the most troubled parts of the world-of the proud tradition of military service.
Importantly too, the constituency has a proud working tradition as the home of Trafford Park, once the largest industrial estate in Europe and still home to many local
and global businesses, and the Trafford Centre, with its many retail jobs. My constituents are proud of the contribution that we make to the UK and the regional economy, and they know the value and the dignity of work.
In the thousands of conversations that I have had with local people, they have repeated the importance of young people gaining the skills that they need, and getting into good jobs, as they start out in life. I was proud to be able to answer that, thanks to Labour's investment in employment and skills, unemployment in this recession has up to now been lower than in the past two recessions, and that our future jobs fund would guarantee every young person training for a job.
Some hon. Members are perhaps a little younger than I am, and they may not have experienced growing up with the fear that there would be no work. My grandfathers knew that fear. My generation began our adult lives at the beginning of the 1980s facing the same fear. I am deeply concerned to prevent young people from facing the same fear today. A robust economy, a thriving business sector and an enabling welfare state are certainly part of the answer, but if work is to be a secure route out of poverty, we must both protect jobs and pay attention to dismantling the barriers that prevent people from taking up paid work.
My challenge to the Government, as they take forward their welfare reforms, is that they must guarantee that there will be adequate support. If they want to ensure that work pays, my challenge is that they must lead the way in the public sector, where a quarter of low-paid workers are employed, by adopting the living wage.
I ask the Government now to invest in the future. Good jobs, investment in our young people, a sustainable recovery and fairness in the economy are what my constituents want. I am determined that I will always speak out for them, and I hope that they will hold me to that.
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