Social Security and Employment

Part of Orders of the Day — Debate on the Address – in the House of Commons at 5:59 pm on 24th November 1988.

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Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East 5:59 pm, 24th November 1988

Recently we have seen a credit-driven consumer boom. In the past couple of weeks I have received an unsolicited letter from a credit company offering me a plastic card which would solve all my earthly problems, an unsolicited letter from my bank offering me a large loan, and a letter from my building society offering to give me 90 per cent. of the difference between the valuation of my house and the rest of the outstanding mortgage. The covering letter was lyrical in stating that if I wanted a new car, a holiday in the sun or a conservatory, I was not to delay—the money was ready and waiting for me. I am certain that other hon. Members have had similar letters, and in every tabloid newspaper the public is offered credit.

As a result, we have had a big increase in demand. The Government have finished with monetarism and do not worry too much about the money supply, but demand has come up against capacity restraints. Because of deficient investment in past years, British industry has become debilitated and enfeebled, so cannot cope with the extra demand; and because of the lack of training as soon as the economy picks up, we run into skills shortages.

Manufacturing production has just returned to its 1973 level, but the British public are now buying 25 per cent. more manufactures than in 1973, so we are importing electronic goods, household appliances, motor cars and clothing and much else. That has led to a horrendous trade deficit and to a balance of payments crisis.

However, a part of that demand has gone into the domestic economy, which has led to a growth in employment and is welcome, but I wonder how much extra employment there has been. Some Government statements are exaggerated and it is difficult to get a clear picture. On 2 November, the Select Committee had as a witness Mr. Bernard Casey, who is a research fellow at the Policy Studies Institute. He said: The statistics have been mucked around with very badly and it is difficult, much more difficult, to know what is going on and that is a great problem. Britain counts unemployment differently from other countries. We count the number of people in receipt of benefit, whereas they count the number of people seeking work. Benefit figures bear little relation to the number of people looking for jobs. To be unregistered unemployed is as distressing as to be registered unemployed.

One of the changes since the previous Gracious Speech is that all 16 and 17-year-olds have been eliminated from the figures altogether because they are no longer eligible for benefit. Again, one would imagine that the drop in unemployment would be reflected in the extra number of people employed, but there does not seem to be much connection between the two. The number of people in employment has not increased as much as the decline in the number of claimants.

Full-time employment in manufacturing continues to decline, but there has been a growth in part-time employment. A large number of these part-time jobs are taken by full-time workers who take a second job, so are counted twice. Because only part-time work is available, many people do two or three part-time jobs, so we get double and treble counting. The picture is murky. Further evidence is that the number of vacancies has not increased. It is difficult to get at the facts because we are not necessarily comparing like with like as a result of the changes in the way in which statistics are compiled.

Ten years ago we had 90,000 people who had been unemployed for two years or more. Now there are seven times that. The number of people unemployed for over five years continues to increase, even according to the benefit figures. If the Secretary of State disputes that, he can give us the figures when he replies, but they are my figures. What is the future for the unemployed?

The trade deficit is unsustainable in the long term, so the Chancellor of the Exchequer is now squeezing the economy. Some of us can remember the days of stop-go, after which we had North sea oil which solved that problem. But the revenues from the oil have been wasted, and we are returning to a classic stop. Billions of pounds will be taken out of consumption if the Chancellor's measures work. If we are to end our overseas deficit, the growth is likely to slow to a rate which will be inconsistent with a growth in employment.

The Chancellor's weapon is increasing interest rates, but I cannot think of a cruder, blunter weapon than that. That is supposed to bear down on inflation, but it is more likely to bear down on investment. Borrowing may not be stopped because people will be encouraged to borrow more because the prices of their houses are rising so fast. Lenders, who are receiving higher interest rates and find larger payments going into their accounts, may spend that extra income, so we may get the worst of all possible worlds and the measure may be highly counterproductive. If interest rates push up the exchange rate higher that it would be otherwise—that is already happening—it will hit British exports and will not help us with our balance of payments deficit.

It is prudent, therefore, to expect that unemployment will remain static at about 2·5 million or 3·5 million, depending on the definition of the unemployed. The Government take that view and have taken it into account in their public expenditure forecasts. We have the so-called British economic miracle and so-called overheating, while about 3 million people remain unemployed because of the past lack of investment and training.

The Government's method of approaching long-term unemployment is employment training, which I fear is going off at half cock. The Secretary of State knows that the job training scheme, the previous programme which was similar, was a complete flop, but the Government have not learnt the lessons of that failure or rectified it. Employment training is grossly underfunded arid is an inadequate response to skills shortages and the plight of the long-term unemployed. As my hon. Friend the Member for Rotherham (Mr. Crowther) pointed out, the quality of training is also suspect. During the six-month courses, only two days a week are directed to training and the other three are for so-called work experience. The Government invest £17·50 a week in each trainee. What private training organisation would offer to train anybody for that sum?

There is a derisory supplement on top of benefit of £10 a week or £5 a week after removing travel allowances. Those who move from the community programme will see major cuts in the allowance that they receive. I cannot understand why the Secretary of State will not allow employers of the trainees on their three days' work experience to top up the allowance. Under YTS, an employer may top up the allowance, but under ET, he may not. It would not cost the Government a penny. It is perverse not to allow employers to top up. Work experience means doing what an employer tells one to do for three days a week, and if the employer wants to give a top-up I should have thought that the Government would have allowed it.

When the Select Committee on Employment interviewed representatives of the Training Commission, they suggested four reasons why the previous programme failed. First, there had to be realistic targets in the form of numbers. Secondly, there had to be adequate financial incentives. Thirdly, the programme had to be sold better to employers. Fourthly, and importantly, the Government had to win the co-operation of the partners necessary to deliver the programme. Those partners are employers, local authorities, voluntary organisations and trade unions.

The Government did not take that lesson on board and have not gained that co-operation. They have not obtained agreement. The programmes can be run only on the basis of voluntary co-operation and consensus. It is all very well for the Government to have a majority in the House and to push through measures here, but that does not solve the problem outside the House, where they must deal with the trade unions and obtain their co-operation. One of the main lessons that the Government must learn is that the trade unions are not the enemy within. If any of the programmes are to work, the trade unions must be regarded as an essential partner.

Recently I have been obliged to follow in the footsteps of the Secretry of State around various foreign parts. In Boston, Massachusetts, and in Sweden we spoke to the same people as he did. In each place that we visited in Sweden, the people said, "I have brought you some more people from England. You will remember that nice Mr. Fowler. Here are some of his parliamentary colleagues." The Secretary of State will agree that none of those countries regards the trade unions as enemies. In Boston, Sweden and Germany the unions are considered valuable and essential partners. The Government have got it wrong, and the schemes will not work until they change their attitude and work with the unions.

The new programme appears to be flopping because it is not attracting enough people. The target is 600,000, with 300,000 at any given time. The Secretary of State will tell us how many people are on the programme, but 1 doubt whether the figure is even 100,000. If I am right, that represents less than one third of the target. The programme will flop because the Government did not learn the lessons.

I wish to be constructive, so I shall give the Secretary of State some suggestions. When he announced the scheme, I suggested that he should double the allowance. That modest idea would cost £180 million. My second suggestion is that he should give a job guarantee to everyone who goes on the programme. Sweden had a temporary jobs programme. It is no longer necessary, because it has little unemployment. The figure of 1·8 per cent. is largely made up of people who cannot speak Swedish or who are severely disabled. But when it had what it considered to be serious unemployment, at 3·5 per cent., it had a temporary jobs programme in which local authorities and employers were given a subsidy to employ additional workers. In the previous Parliament, the Select Committee published a report advocating job guarantees for the long-term unemployed on that basis. We could start that type of programme for those who have been unemployed for two years or more, which would involve 600,000 people.

There is work enough to be done. One need only consider the state of our housing, house repairs and social services to know how much work there is to be done. I was told that the Secretary of State was impressed by what he saw in Sweden. I urge him to adopt a similar programme. If we gave a subsidy to the private employer to take on additional workers, it would mean that, instead of paying benefit to the unemployed person to do nothing, we would pay that money to the employer to take on an additional worker at the proper rate for the job.