Economic and Monetary Union
(Social Dimension)
The Committee consisted of the following Members:
† Baldwin, Harriett (West Worcestershire) (Con)
† Blenkinsop, Tom (Middlesbrough South and East Cleveland) (Lab)
† Clappison, Mr James (Hertsmere) (Con)
Connarty, Michael (Linlithgow and East Falkirk) (Lab)
† Gapes, Mike (Ilford South) (Lab/Co-op)
† Lord, Jonathan (Woking) (Con)
† McVey, Esther (Minister of State, Department for Work and Pensions)
† Paice, Sir James (South East Cambridgeshire) (Con)
Paisley, Ian (North Antrim) (DUP)
† Perry, Claire (Devizes) (Con)
Sheerman, Mr Barry (Huddersfield) (Lab/Co-op)
† Teather, Sarah (Brent Central) (LD)
† Timms, Stephen (East Ham) (Lab)
Anna Dickson, Committee Clerk
† attended the Committee
European Committee B
Monday 16 December 2013
[Sir Alan Meale in the Chair]
Economic and Monetary Union (Social Dimension)
The Chair: Does a member of the European Scrutiny Committee wish to make a brief explanatory statement about the decision to refer the relevant documents to the Committee?
Mr James Clappison (Hertsmere) (Con): I shall make such a brief statement on behalf of the European Scrutiny Committee, but before doing so may I say what a great pleasure it is to serve under your chairmanship this afternoon, Sir Alan?
In recent years, as members of the Committee are probably all too well aware, there has been increasing consideration and sometimes adoption of policies aimed at increasing economic co-ordination, convergence and governance in the European Union. One element was the presentation by the European Commission in November 2012 of a communication called “A blueprint for deep and genuine economic and monetary union—Launching a European Debate”. It was a contribution to the European Council’s consideration of the development of economic and monetary union, commonly referred to as EMU. Although the communication was primarily concerned with measures related to the financial and economic crisis, especially for the eurozone, it touched on the social dimension, saying particularly:
“Coordination and surveillance of employment and social policies should be reinforced within the EMU governance, and convergence promoted in these areas.”
The European Council has considered the development of the EMU on a number of occasions. In June, it concluded, among other things, that the social dimension of the EMU should be strengthened. With the communication before us, presented as a contribution to the debate on deepening the EMU, the Commission proposes strengthening its social dimension through initiatives in three areas: first, reinforced surveillance and policy co-ordination of employment and social policies; secondly, enhanced solidarity and action on employment and labour mobility; and, thirdly, strengthened social dialogue.
Before setting out its specific ideas, the Commission discusses the social dimension of the Europe 2020 strategy—a so-called strategy for growth—and rehearses the rationale for the social dimension. In essence, it is that, notwithstanding member states’ competence regarding employment and social policies, for the EMU to function well it must be able to take account of the social implications of the reforms needed to boost jobs and growth and to enhance competitiveness. That is the European Commission’s view. Furthermore, it states that there is a need to detect and tackle the worst employment and social problems in good time, as they might lead to negative effects in other member states or
cause consistent disparities between them. In October, the European Council discussed the matter and decided to return to the subject at the December European Council, which takes place later in the week.The communication canvasses ideas that may have significant implications for member states, especially those outside the eurozone, such as the UK. We therefore recommended that it be debated so that Members could explore, particularly, whether there is any risk to member state competence in relation to social and employment policy in the Commission’s ideas and, more generally, its aim of a eurozone fiscal capacity in support of enhancing the EMU.
The Chair: I call the Minister to make the opening statement.
4.33 pm
The Minister of State, Department for Work and Pensions (Esther McVey): It is a pleasure to serve under your chairmanship, Sir Alan.
Although the European Commission’s communication offers little that is entirely new, it brings together some important issues and sets out a number of initiatives aimed at strengthening the social dimension of economic and monetary union. The economic crisis exposed structural weaknesses in eurozone governance, with serious social consequences for some eurozone member states in the shape of high unemployment rates and sharply increasing poverty and social exclusion. The eurozone needs to address such issues. If eurozone countries want to do that through more co-ordination of social policies, we can accept that, provided that their actions are in line with the treaties and do not include the UK. I was clear at the Employment, Social Policy, Health and Consumer Affairs Council on 9 December, and the Prime Minister was clear at both the June and October European Councils, that measures to strengthen the social dimension of the EMU should be voluntary for member states outside the eurozone, including the UK.
The European Scrutiny Committee’s report admirably summarises the content of the Commission’s communication and suggests two areas for discussion, which I will try to address. The first issue is whether there is any risk to member states’ competence in the Commission’s ideas on social and employment policy. I welcome the Commission’s clear recognition that its long-term ambition requires treaty change. The European Council conclusions in both June and October make it clear that further measures to enhance the social dimension in the euro area are voluntary for those outside the single currency. Although further monitoring through the employment and social scoreboard is unwelcome, the data presented are already published and freely available and so do not encroach further on member state competence.
However, the UK Government are concerned about the extended use of social indicators. For example, including social indicators in the macro-economic imbalances procedure will dilute its main focus, which is to detect potential macro-economic imbalances. We cannot assume that all further measures that the Commission brings forward under the social dimension of the EMU label will automatically exclude the UK. The Government will continue to make it clear that the UK will not take part in further measures to strengthen the social dimension of EMU.
Secondly, on the Commission’s aim of a eurozone fiscal capacity in support of enhancing EMU, the Government have been very clear that there should be no financial liability for non-participating member states and no relationship with the existing multi-annual financial framework.
The Chair: We now have until 5.30 pm for questions to the Minister. If Members could be brief, that would be very helpful. At my discretion, Members will be allowed to ask related supplementary questions.
Stephen Timms (East Ham) (Lab): I am delighted to be serving under your chairmanship, Sir Alan. Will the Minister let us know the UK Government’s position on the EU youth employment initiative referred to in the papers before us?
Esther McVey: Obviously, we welcome initiatives to reduce youth unemployment, but we have seen that the UK is reducing youth unemployment and has done so for the past 17 consecutive months. We feel that what we have put in place is working well, and better than what has been happening across Europe. Therefore, the mandation of a guaranteed job outcome after four months is not something we would look to impose here. We will look to ensure that we maintain what we are now doing domestically, because we are having positive outcomes through that method of support.
Stephen Timms: According to the most recent unemployment figures, there were 965,000 unemployed young people—not far short of 1 million—in the UK. Is the Minister satisfied with that state of affairs?
Esther McVey: Obviously, there is more to do; we know that. One third of those 900,000 are in full-time education. As I have said, we have seen a fall in the claimant count for the past 17 months and, since 2010, more young people in work. Through the Youth Contract, which involves a combination of wage incentives, the sector-based academies and work experience, we have brought employers together and are getting more young people into work. Yes, we have done some very positive stuff; and yes, there is still further to go.
Stephen Timms: I am grateful to the Minister, but I think that the Committee may well feel that almost 1 million unemployed young people is not an acceptable state of affairs. It is no doubt true that the claimant count has come down somewhat over a period, but according to the International Labour Organisation count—the real count, the one that has always been used—the figure was going up until, I think, last month. It came down last month, but had been going up previously. The Minister mentioned the Youth Contract and the wage incentives. What is the most recent figure for the number of wage incentives that have been paid out thus far?
Esther McVey: More than 20,000 have been paid out so far. As when we started the Youth Contract, however, we had questions to answer on what was the best way forward. Was it wage incentives, incentives for the apprenticeship, or a sector-based academy involving work experience, some extra education and a guaranteed job outcome? As it happens, the sector-based academy has delivered far more—more than 100,000.
At first, the wage incentives had a slow take-up of only 1,000 a month, but now it is more than 4,000 a month. As I said, we wanted to see what worked best with industry and the business sector, and support that.
Stephen Timms: What is the Minister’s and the Government’s view of the EU youth guarantee? What assessment have they made of that?
Esther McVey: The idea was to have a guaranteed job, if possible, after four months. However, through the sector-based academies and the wage incentive, we have seen significant take-up. Equally, we look at how our jobcentre support works, and how the people who claim benefits naturally get into work, and over what period of time. What is being offered through Europe would run contrary to our approach and what is working to best effect. We agree that we must support our young people as best as we can, but given that it appears that we are leading the way and people are coming to us from Europe to look at our sector-based academies, we do not believe that a mandation from Europe is the best way to proceed.
Stephen Timms: As the Minister knows, the Opposition have long argued for a youth guarantee to build on the success of the future jobs fund that was in place before the previous election. That was not, however a four-month guarantee and I have some sympathy with her suggestion that four months may not be the appropriate point in someone’s period of unemployment for the guarantee to kick in. In the Council of Ministers, which I understand is due to meet in the new year, will she argue for flexibility in the four-month period written into the guarantee as drafted, or will she not be at those discussions owing to the Government not planning to put that guarantee into effect?
Esther McVey: If we compare the future jobs fund brought in by the previous Government with our Youth Contract, for a 20th of the cost—£325 per participant instead of £6,500—we are getting a better outcome. I will be at those negotiations and we will be asking for subsidiarity. We need to remain firm on what we are doing well in the UK, and retain our right to deliver what is working here.
Stephen Timms: May I press the Minister to argue in those negotiations that four months is not necessarily the best point at which a guarantee should kick in, and that there should be either a longer period or more flexibility?
Esther McVey: The right hon. Gentleman and I agree on the reasons why four months is not the best period. Equally, on the notion of a guaranteed job, neither of us could offer that. I am working with businesses to ensure that they can provide jobs, and we will support them as best we can to provide those jobs. We have found that potential wage incentives, apprenticeship incentives and the sector-based academies are the best ways forward.
Stephen Timms: I am grateful to the Minister for indicating that she will argue not for four months, but for a different period. That will be helpful. Of course, it is possible to offer a guaranteed job, as the future jobs
fund showed. My understanding is that each EU member state is required to submit an implementation plan for the youth employment initiative. Will she confirm whether the UK Government will submit such a plan?Esther McVey: One thing I can say is that the four-month period has already been agreed, so that is not something that I believe can be negotiated. We want to retain control of how the implementation plan works, but we will be delivering the Youth Contract initiative in certain parts of the country.
Stephen Timms: I am clear that the Minister will be delivering the Youth Contract, but my question was about whether she will be supplying—I understand that this is the Government’s intention—an implementation plan for the European Union youth employment initiative. Will she clarify whether that plan will be submitted by the end of the year, although perhaps it has already been supplied?
Esther McVey: We will be implementing it—I can give a firm yes there—but obviously we will do so as we see fit in the UK.
Stephen Timms: I think that the Minister is saying that the Government will be submitting an implementation plan. Will she indicate what will be in the plan? Given that the Government do not intend to implement a youth guarantee, what will be set out in the UK implementation plan?
Esther McVey: The implementation plan will deal with what is working in the UK and delivering that further. It will be supported in local areas to the best effect.
Stephen Timms: May I pursue a slightly different subject? There is a reference in the papers to a proposal for an EU scorecard with five indicators, including employment, youth unemployment and household income. What is the UK Government’s response to the scorecard proposal?
Esther McVey: We have said that that should be voluntary. We do not believe that member states that are not in the eurozone should have the scorecard imposed on them. However, as the relevant information is in the public realm, it would appear that we will be a part of the scorecard.
Stephen Timms: Presumably the information will be compiled—by EUROSTAT, I suppose—and published somewhere. Will she tell us a little about the plans for that publication?
Esther McVey: It will be delivered, although I do not know the exact timing, but I can say that, on youth unemployment and employment rates, the UK is doing better than both the EU and eurozone averages. That is why we believe that what we are implementing through the Youth Contract is the way forward, and it is why other member states are looking at what we are delivering.
Stephen Timms: We would all be interested to see the figures in the UK and those elsewhere in Europe with which the Minister makes her comparison. She says that the information will be compiled and published periodically, although I am not sure how frequently. Is she able to tell us when the first publication of the scorecard will take place so that we may make an assessment of the UK’s position compared with that of other EU member states?
Esther McVey: It will be published with the joint employment report alongside the annual growth survey. A draft was published in November 2013.
Stephen Timms: I understand why the Minister criticises four months as the period at which the guarantee will kick in. My understanding was that the time period was still to be determined by the Council of Ministers in the new year. As she said, it is certainly the case that the discussion so far has been about a four-month period. I will be grateful to her for correcting me if I have misunderstood, but I thought that that had not been decided by the Council of Ministers. If it has gone through a meeting of the Council of Ministers, as she is suggesting, will she tell us what position the UK took? I think there is agreement on both sides of the Committee that four months is not right period. If the Council of Ministers has already taken a decision, did the UK argue for a different period?
Esther McVey: I believe that the four-month period has already been agreed, and because we think that this is something that we should do domestically, rather than something that should be imposed by Europe, we have continued to maintain that what we do is the best way to support our young people into employment.
Stephen Timms: That response was slightly disappointing because it implied that the UK did not make representations against the four-month period, although the Minister indicated that that was what she intended to do. The UK interest should be represented by Ministers in such discussions, so does the Minister agree that, in such circumstances—when it is felt that the four-month period is not right—the case should be made to the Council of Ministers?
Esther McVey: We did argue for a six-month period, but we were overruled under qualified majority voting, so the four-month period stood.
Stephen Timms: Is the Minister able to tell us when that particular Council of Ministers was held?
Esther McVey: It would have been in April 2013.
Mike Gapes (Ilford South) (Lab/Co-op): May I take the Minister to the actual document produced by the Commission? I would like her to respond to a number of points. First, the Commission says:
“A crucial aspect of the social dimension of EMU is to put in place employment policies that improve the resilience of the labour market, preserve employment and competitiveness and support the creation of new jobs to replace those lost through economic restructuring.”
Esther McVey: The Government not only agree, but have taken significant steps to surpass most of Europe by delivering more than 1 million jobs since 2010. The Government are rebalancing, and they have helped more people into work.
Mike Gapes: The document also points out that one of the impediments to employment is the lack of cross-border mobility within the European Union, which the Commission says is “still low.” It states:
“Only 2.6 % of the EU population has moved to live in a different Member State. In the euro area, less than 4 % of the working age population are nationals of a different Member State.”
What is the Government’s response to suggestions that we should be trying to make it easier for people to travel to work in other European Union countries? Presumably that means British people going to work in other parts of the European Union, and other European citizens coming to live, work and pay taxes here in the United Kingdom.
Esther McVey: I believe in free will and free movement.
Mike Gapes: So can I take it that the Government share the Commission’s concern about the low level of labour mobility in the European Union?
Esther McVey: Free will means that it is up to the individual and that it is not for a Government to tell anyone what to do.
Mike Gapes: But surely the Commission proposes the reduction of barriers to allow greater mobility. Do the British Government also believe that barriers to mobility should be reduced, thereby allowing people to go to live and work in other European countries?
Esther McVey: We are a member state that is part of Europe but, as I have said, it is up to individuals to do what is best for them; it is not for Governments to dictate.
Mike Gapes: Is the Minister saying that the Government have no role? Is she saying that labour market policies, social security policies and education policies have no role? Surely the matter is not simply for individuals; there is also a role for society collectively, working through Governments.
Esther McVey: Perhaps we can get back to the communication and the social dimension. We want to play a part as a member state, but not as part of the eurozone, of which we are not a member.
Mike Gapes: The document is clearly for those countries that are within the eurozone—of course, the United Kingdom is not a member. As I understand it, however, the United Kingdom Government and the Chancellor have said that they wish the eurozone to succeed and that it is in our economic interests for it to do so. Clearly one aspect of co-operation at the European level is the social one. The conclusion of the communication makes it clear that the aim of the Commission is:
“to reinforce the EMU, address some of the initial weaknesses of its design and make it more competitive and able to promote growth.”
The proposals to strengthen the social dimension are therefore put forward on the basis of strengthening European monetary union. Is the position of the British Government that European monetary union should be strengthened, and that therefore the social dimension within the European Union and the European monetary union should also be strengthened?
Esther McVey: Should those within the eurozone wish to strengthen that, they can do so. We are a member state, so we accept that, and we will do what we want to voluntarily.
Mike Gapes: This is an auspicious day, because the Germans have formed a new Government—the Social Democrats have just joined, taking over some important Ministries. One part of the approach of the new German coalition will be to strengthen the social agenda within Germany and its domestic policies, and presumably within the European Union as a whole. The German model involves social partners, and the Commission communication also refers to “social partners”. Do the British Government believe, like the Germans, that there should be enhanced dialogue with social partners, including trade unions and other organisations in society, about the way in which economic policy, including in the eurozone, should be developed?
Esther McVey: It is entirely right for those in the eurozone to discuss what they will, but I point out that the UK has recorded the second fastest growth in the G7—behind only the United States—and we are the envy of the countries that the hon. Gentleman is discussing.
Mike Gapes: The Minister has not answered my question. I referred to the social partners and the role of dialogue and communication between Governments and social partners, including the trade unions. Is the position of the British Government that social partners and trade unions have an important role in influencing the economic and social policies of member states?
Esther McVey: Dialogue is always positive.
Mike Gapes: I take that as a no.
The Chair: If there are no more questions, we will move on to debate the motion.
Motion made, and Question proposed,
That the Committee takes note of European Union Document No. 14102/13, a Commission Communication: Strengthening the social dimension of the Economic and Monetary Union; and supports the Government’s position that any measures to increase social and employment co-ordination should be voluntary for Member States outside the Eurozone.—(Esther McVey.)
4.58 pm
Stephen Timms: I am grateful to the Minister for the information she gave in answer to our earlier questions. The Opposition have long supported the proposition of a job guarantee, which we now learn is being implemented everywhere in the European Union except for the UK, where arguably its efficacy was most effectively demonstrated through the future jobs fund before the previous election.
I was grateful to the Minister for her confirmation that the Government will be submitting an implementation plan for the European initiative. Will she arrange for that to be distributed to members of the Committee, because it will be of wider interest?
One of the things that puzzles me is that a lot of this was discussed at a summit on youth unemployment in Paris a few weeks ago, which the Secretary of State attended. You might remember, Sir Alan, that that was when we had a debate in the House on the bedroom tax, and it was explained to us that the Secretary of State could not be present because he was attending that summit. When we saw the communiqué—the press release—from the summit afterwards, it listed every country’s response to the European youth unemployment initiative and confirmed that every country was going to submit an implementation plan, except the UK. It said that no implementation plan would be produced by the UK, so I am grateful to the Minister for what I presume has been some rethinking, and for confirmation that the UK will submit a plan. However, I must say that it was rather curious that the Secretary of State missed a very important debate in the House of Commons—an opportunity to defend the policies for which he has been responsible—in order to attend a meeting at which, as far as one can tell, he simply said that he was not going to implement the guarantee that was being discussed. That was not a particularly good use of the Secretary of State’s time. He ought to have been in the House defending—or attempting to defend—the policies of his Government.
We have nearly 1 million unemployed young people in the UK, and that figure has hardly fallen at all. Last month, if I remember rightly, it went down 7,000 or 8,000, but it is still far too high. As I said, one of the most striking successes in Europe of a job guarantee approach was the UK’s future jobs fund. It was introduced in the teeth of the recession, before the election, and it worked in bringing youth unemployment down. I must say that wherever I go now, people say to me, “The one thing that really helped unemployed young people and got them into work before the election was the future jobs fund.” In the election campaign, the then shadow Secretary of State for Work and Pensions—the current Home Secretary—was asked what her and her colleagues’ intentions were for the future jobs fund. She said that the policy would be to evaluate the fund and then decide on its future, but not to do so until such an evaluation had been undertaken. In fact, that proved to be one of the first of many broken promises. After the election, the future jobs fund was summarily scrapped, but to the Government’s credit, having already cancelled the fund, they went ahead with an evaluation, which I am pleased to say is on the Department for Work and Pensions’ website. It is a glowing evaluation, which amply explains why the future jobs fund proved to be such a popular measure and is so fondly remembered by those who were involved with it.
The evaluation showed that more than half the young people who went through the future jobs fund were still in work after the six-month wage subsidy ended. In fact, it was well over half, so that is a much higher proportion than the number getting sustained job outcomes from
the Work programme. Perhaps the most striking thing about the evaluation was its pointing out that more than half the gross cost—of course, there is a cost of doing such things—came back to the Exchequer within three years, because young people stopped claiming benefits and started paying tax and national insurance.By way of contrast, the Government’s approach has been pretty lamentable. The Minister expressed confidence in it, but I think it is quite difficult to justify that confidence when we still have 965,000 unemployed young people. The Work programme took months to get going when it started in June 2011. The Government made a very serious mistake, as we said at the time, by spending a large amount of money—tens of millions of pounds—to buy out the providers of the flexible new deal which was then under way, when instead, they could have introduced the Work programme in the rest of the country and allowed the flexible new deal contracts to see out their term. Instead, they bought them out for a very large amount of money, and for months in many parts of the country there was barely any employment support at all while the new providers got used to the new Work programme arrangements. According to Inclusion—the Centre for Economic and Social Inclusion, which is carrying out the official evaluation of the Work programme—the most recent Work programme data were still showing that the programme was not doing as well as the flexible new deal was before its cancellation. New Work programme data will be published later this week, and all of us must hope that the programme is finally doing rather better than that, two and a half years into its term. Without a doubt, large numbers of young unemployed people and older unemployed people were let down by that terrible start to the programme.
The Minister referred to Youth Contract wage incentives. I was grateful to her for the figures that she gave us, which I had not seen before, but let me just remind the Committee what the plan was for those wage incentives. It was that, from their introduction in April 2012, there would be 160,000 wage incentives paid out in three years. The most recent published data are for the first 14 months, and show that 5,000 Youth Contract wage incentives were paid out in that period. So that is well under 10% of the initially targeted amount. The Minister has told us that that figure has now crept up to 20,000, but on my calculation, we are now about 20 months into this three-year programme—well over halfway through. The original target was 160,000 and the Minister has told us that only 20,000 have been paid out. It has been a terrible damp squib, and that is not a surprise.
The Engineering Employers Federation surveyed its members, asking how many of them were using Youth Contract wage incentives. The response came back that about 1% of them were. The Recruitment and Employment Confederation surveyed about 200 employers earlier this year and found that not a single one of them was using the Youth Contract wage incentives, which is an even worse position than when it conducted a similar survey 12 months previously. It has been a half-baked initiative, which is badly organised and confusing for employers. They have no idea who to go to even if they want to take up the resources available under the Youth Contract wage incentives. So it is not surprising that only 20,000 of the incentives have been paid out, and we still have 965,000 unemployed young people.
Long-term youth unemployment is higher now than at any time for 20 years; 1993 was the last time that we had more young people unemployed for longer than 12 months than we do at the moment. That is the real measure of the failure of what the Government have been doing, and those of us who are determined that we should not have hundreds of thousands of young people out of work for a very long time can see that the job guarantee approach—which has now been taken up not only in the eurozone member countries, but in all the other member states except for the UK—works better.
Of course, that approach has been maintained in some parts of the UK beyond the closure of the future jobs fund. The Jobs Growth Wales programme is ahead of its targets, and that programme is adopting a very similar approach to the one adopted by the future jobs fund. What is interesting about that is that the Welsh Assembly Government report that about 80% of the placements for unemployed young people into jobs in Wales are being made into small firms—so, not into the public sector, as was the case with the future jobs fund, nor indeed into the voluntary sector, which was also a significant player in the future jobs fund. In Wales, 80% of those young people are being placed in small firms—private sector enterprises. Nearly 80% of those young people are also staying on in their jobs after their six-month wage subsidy has ended, because if a small company has made a significant investment of time and effort into a young person who has been newly recruited into the business, it is in everybody’s interests for that young person to stay in that job. We are seeing in Wales a very telling indication of the strength of that approach, and I am not surprised that it is being taken up widely across the EU in the guarantee that we have heard about.
I also looked at the document compiled by the Commission in its report on the developments in the UK. I think that a report is produced on every country. The report on “the United Kingdom’s 2013 national reform programme” was published by the Commission on 29 May. It is “delivering a Council opinion on the United Kingdom’s convergence programme for 2012-2017”, and it makes very interesting points about what is going on in the UK. I must say that it is a rather less rosy picture than the one given to us by the Minister. It tells us, for example, in paragraph (12) that the
“unemployment rate of low skilled 15-25 year olds”
“is 37.2%, significantly above the EU average.”
In the next paragraph, the report tells us this:
“At 17.3%, the proportion of UK children living in workless households is the second highest in the EU.”
I thought that was one of the big prizes the Government were expecting to deliver—a reduction in the number of children living in workless households—but it turns out that that proportion is still among the highest in the EU.
The report also makes the point about the need to address weak work incentives in the UK. Paragraph (13) states:
“The authorities plan to address this with the introduction of the Universal Credit, which will allow individuals to keep more of their benefit income as they move into work. Whilst Universal Credit could have a positive impact…much will depend on effective implementation”.
That is certainly true. Sadly, as we have now discovered, implementation is not being effective. Some Members in this Committee will recall that when the welfare reform legislation was being debated, I and others pointed to the fact that the implementation time scale that Ministers at that time told us would be achieved could not possibly be achieved, and unfortunately we have been proved right. Universal credit on any significant scale has now in effect been shelved until after the general election. The assurances we were given on that have proved to be very ill founded, so the Commission is right to highlight how much depends on effective implementation, which sadly we have not enjoyed.
Also in paragraph (13), the report makes this point:
“Early results from the Work Programme suggest scope to improve the delivery and outcomes.”
I agree with that as well. There is a lot of scope for improvement. Sadly, there is a list of observations about the position in the UK that are rather more realistic than those that the Minister put to us earlier.
I am grateful that the Minister was able to tell us a little about the scorecard proposed for publication by the European Commission, and that the UK will be included in it. The papers before us set out the five measures to be included in the scorecard. They include unemployment, youth unemployment—the numbers of young people not in education, employment or training—the “at risk of poverty” rate and inequality. Those will be interesting statistics when they are published, but I want to say a few words about the other measure—the change in real gross disposable income of households. That is a very interesting indicator. It will be very interesting indeed to see how we compare with the other EU member states when that figure is published, because of course, we have seen the real disposable income of households in the UK fall in every single month bar one since the general election. The one month in which it went up was the month in which the 50p rate of income tax was reduced to 45p and a huge wall of money went to highly paid people in bonus payments, so that they could take advantage of the lower rate of tax. The bonuses were held back until that reduction took effect, and once it did, the bonuses were all paid. That was the one month in which household income went up more than prices. In every other month since the general election, real gross disposable household income in the UK has fallen. That is what has led to the cost of living crisis, which affects households in every part of the UK. It will certainly be interesting to see those figures published next year, as the Minister indicated they would be, and to see the picture across other EU member states in comparison to ours.
Finally, I am disappointed that it was not possible for the Minister to secure a change in the point at which the youth guarantee will kick in. I am grateful to her for telling us that Ministers attempted to shift the period from four months to six. My understanding is that there still is an opportunity to make that change. If there is a further such opportunity, the UK should press again the argument for the guarantee to kick in later than the EU youth guarantee currently proposes.
5.16 pm
Mike Gapes: One of the most important sentences in the Commission document is on page 18 of the bundle:
“The free movement of workers is one of the cornerstones of the EU and its Single Market.”
Therefore, measures proposed to restrict or impede the free movement of workers in the European Union will have implications for the single market and its effectiveness.
In the current ongoing debate about restrictions, changes to benefits and possible changes to regulations either unilaterally or potentially on a Europe-wide basis, the Commission’s words need to be taken into consideration. Although this country is not in the eurozone, we are clearly an integral part of the European single market. If we try to impose measures unilaterally in this country, they will have implications not simply for the single market but I guess for the more than 1 million British people who live in other EU countries, including many within the eurozone, but some outside.
My second point relates to sections 5.2 and 6 on pages 22 and 23 of the bundle. They clearly set out the importance of social partners in framing and implementing economic and employment policies. It is important that we recognise that that is in the existing treaty on the European Union. Therefore, the question of social partners and the relationship of Governments with trade unions and other social partners, such as employers’ and small business organisations, is a fundamental part of the relationships of all member states in the European Union operating within the terms of the European treaty.
I was therefore disappointed by the Minister’s grudging response to my questions on those matters. It is as if the British Government are embarrassed by the fact that we are part of a European Union that talks about social partners. Perhaps we should learn from the successful German model, to which I referred earlier. Of course, the German model was created in 1949 by the British Labour Government, the Americans and the French, when we effectively wrote the German federal constitution and created a structure of co-operation and partnership in Germany, which led to its rebuilding and to a democratic West Germany becoming the successful economy it became.
I do not wish to diverge from the document before us, but it is time that the British Government shifted from their grudging, apathetic approach towards the European Union and started to discuss seriously the implications of the enhancement and strengthening of the economic and monetary union that is taking place. Even if we are not part of it, it will have profound implications for the UK’s role in the single market and for the mobility of people from different European Union countries coming to live and work here, just as British people live and work in other EU countries.
If we unilaterally introduce restrictive measures that are contrary to the European treaties, as the Home Secretary seems to be considering, we will potentially do great damage to the rights and the role of British people living in other EU countries. Although I welcome the report before us, it raises fundamental questions about the future relationship of the United Kingdom to the other EU countries, and about the future of British people living and working in those countries, if we choose unilaterally to introduce restrictions over the coming weeks and months.
5.20 pm
Esther McVey: There are many points to respond to and many things to set right for the record, because we have heard information that the Commission acknowledges is incorrect. I will clarify the latest information, because Opposition Members referred to data that have now been corrected.
Let us start, however, by considering the position faced by the new coalition Government as we came into office. Under the previous Government, youth unemployment went up by 40%—not 14%, but 40%—peaking at 1 million in February 2009. That shows the huge scale of the task we faced. It was not just that there was youth unemployment, because in one in four houses there were kids living in workless households. Yes, there had been a financial crash in 2007-08—we do not half know about it, because we hear from the Opposition that it was the only reason for the problems. However, it was not the only reason, because overspending since 2002 had added to the UK’s dilemmas, making us financially vulnerable. At one point, the previous Government were spending £4 for every £3 coming in, so it was no wonder we inherited such a gloomy predicament.
We had to reshape and rebalance. We had to put the strong foundations that had been removed back into the country and we had to rebalance an economy. We were told that everything we proposed would not be possible, yet it has been. We now know that more than a million people are back in work. We were told about double dips and the 1 million people who would be unemployed, but all that was considerably wrong. It never happened; in fact, the complete reverse happened.
Things have shifted considerably, but what we have done has not been easy. One of the toughest things to deal with was the scale of youth unemployment that was handed to us, which was no doubt one of the Opposition’s biggest regrets. That occurred despite the previous Government introducing a youth contract just before the general election. Some £6,500 per young adult was spent as a desperate attempt to get them into work for a six-month stint. Some people might say that that was a general election stunt, but I would not be so harsh. I think it was a desperate move that the Opposition tried because of the high level of youth unemployment, but it did not work to great effect because no one can guarantee a job. The best we can do is to try to make the environment right for business to take on employees, and that is what we have done. Our aim and ambition is to be the country with the best tax system in the G20 so that businesses can flourish and take on more staff, and to have a public sector that is strong and robust and that has the money and staff to deliver all the services that we require.
How did we shape our support for business and the young unemployed? We did not come up with an idea and say, “This is what we are doing; take it or leave it,” and then find that most of the jobs were created in either the public sector or the charitable sector. We said that we would deliver a £1 billion Youth Contract, within which were many incentives and initiatives. We thought that wage incentives might take off better than they did, but the contract included not only wage incentives, but sector-based academies and work experience. We did not necessarily know which of those things businesses would want, but we gave them the choice. As it happens,
work experience has taken off, as have sector-based academies, and there has been a more than 50% delivery of jobs at the end of the process.Yes, the take-up of wage incentives started slowly, as people needed to know about it. Although there was a slow start of 1,000 instances a month, that has now risen to more than 4,000 a month. Sector-based academies and work experience have taken off. At a 20th of the cost of the future jobs fund—the Opposition’s initiative cost £6,500 per person, whereas the coalition’s costs £325 per person—our policy has had a better outcome. However, that is always the problem with Labour Members: they spend, spend, spend and think they can solve any problem with money, but we know that that is not the case.
For clarification, when the Secretary of State was in Europe, the people there wanted to know what we were doing and how we were managing to get things right. They wanted to know how we had reduced the claimant count for 17 consecutive months and how were we supporting our young people into work. They were taking ideas from us, which I think was positive.
The hon. Member for Ilford South talked positively about Europe and suggested that the Government might be embarrassed at being a member state, but we are absolutely not. We are proud of what we are doing but, equally, we understand the difference between member states and the eurozone. I think that he sees himself as a great European strategist, but when Conservative Members were voting to give the Great British public a referendum on Europe, he was hiding in the Lobby as an attempt to delay and stymie the vote, and the Serjeant at Arms had to go and get him out. He was trying to deny the UK public a vote in a referendum, but we believe in democracy and giving the Great British public a say.
Let me make a couple of clarifications. The right hon. Member for East Ham would not know about them, but changes have been made to correct various mistakes. The Government disagree with the assertion that the UK has the highest at-risk rate for lone-parent households in the EU28—that is factually incorrect. According to the EU’s own EUROSTAT statistics on single parents with dependent children, the UK rate is 33.5%, which is lower than the EU28 average of 34.6%. The UK scores better than Germany, Spain and France on that measure. Additionally, the UK figure for real year-on-year growth in gross household disposable income was 2.2%, which is better than the EU or eurozone averages—[ Interruption. ] That has been clarified on the record, and I can hand a copy of the information to Labour Members. The number of workless households is the lowest since records began.
Labour Members cite the age-old adage of who is paying the most. They ask whether the rich are being taxed enough and if they are supporting the rest of the population. They will be pleased to know that the top 1% of income tax payers pay almost 30% of all income tax, while the top 5% pay nearly half of all income tax. The rich are now contributing a higher proportion of income tax than at any time under the previous Government. They are also paying more capital gains tax, more stamp duty and more tax on their pensions. Labour Members do not seem to register that such people are paying more under us. Tax avoidance has been tackled, too, so a further £3.5 billion will come to
the UK during the forecast period. All that is significant, but it is often portrayed incorrectly to the wider public, so the information needs to be on the record.Stephen Timms: While we are putting things on the record, may we set out that youth unemployment is higher now than it was at the time of the general election?
Esther McVey: The number of people claiming benefits is down since the election. As we want to get the numbers correct, I should say that Labour Members know as well as I do that a third of those classed as unemployed are students. Yes, the figure is high, but it is not as high as it was.
Stephen Timms: It is worth putting the figures on record. According to the most recent figures, 965,000 young people are unemployed; at the time of the general election, 929,000 young people were unemployed. Those two figures were, of course, worked out on exactly the same basis—they are directly comparable—so the number is higher now than it was then.
Esther McVey: Perhaps the right hon. Gentleman will agree that youth unemployment went up by 40% while his party was in office—[ Interruption. ] That left us in a difficult position, and we were left to pick up the pieces.
Claire Perry (Devizes) (Con): In a period of economic growth.
Esther McVey: Absolutely; that was at a time of economic growth—[ Interruption. ]
The Chair: Order. Perhaps the Whips can desist.
Claire Perry: I was responding, Sir Alan—[ Interruption. ] The hon. Member for Middlesbrough South and East Cleveland started it.
Esther McVey: We have bounced numbers back and forth, and we have also heard statistics about the Work programme. A group of 1.4 million people had been significantly overlooked, but we do not believe in that. We believe in helping everyone as best we can, which was why the Work programme was put in place. The fact that nearly 200,000 people have found lasting work is something to be praised, and we are continuing our work because Government Members never write anyone off. We believe that everyone can be supported to fulfil their ambition and to live their life as best and as prosperously as they can.
We all need comprehensively to address Europe’s growth challenge, overall low productivity and its lack of economic dynamism and flexibility. Britain has long argued for a pro-business, pro-growth agenda that completes the single market and fosters greater competition throughout Europe. There needs to be a step change in structural reforms across Europe. High-deficit, low-competition countries on the periphery must continue to address their problems. We will endeavour to deepen the single market, including by the completion of the single market in services. As a member state, however, we will do what
we can in our own way. We believe in subsidiarity, and we will advance our employment as we have successfully done while leading the way on reducing unemployment.That the Committee takes note of European Union Document No. 14102/13, a Commission Communication: Strengthening the social dimension of the Economic and Monetary Union; and supports the Government’s position that any measures to increase social and employment co-ordination should be voluntary for Member States outside the Eurozone.