Wages

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 10 September 2013.

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Photo of John Cryer John Cryer Labour, Leyton and Wanstead 11:30, 10 September 2013

What recent comparative assessment he has made of trends in real wages in the UK and in similar economies.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The hon. Gentleman asks about trends in real wages. The main deterioration in wages and salaries was from 2007 to 2009 when growth fell from 5.7% to minus 0.6%. This is a vivid reminder of the damage that the great recession did. The Government have taken continued action to help with the cost of living so that last year real household disposable income grew by 1.4%, the fastest growth for three years. Of course, however, these remain difficult times for families, and the only way to deliver improved living standards for the long term is a sustained, balanced economic recovery with low mortgage rates, more jobs and more income tax-free. Our economic plan is delivering that. The Opposition’s plan for more spending and more borrowing would make things worse.

Photo of John Cryer John Cryer Labour, Leyton and Wanstead

Well, that is one of the most vacuous answers I have ever heard, and that is against some very stiff competition. In the past three years real wages in this country have fallen lower than in any G20 country bar one—we are second from bottom. For how long is that going to be sustainable?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Let us be clear: this country had one of the deepest recessions of any of the countries in the G20 or anywhere else. We had one of the biggest banking crises and our country has had to recover from that, but I point out that in the hon. Gentleman’s own constituency there are now 12,000 more people in work than at the time of the election, and unemployment is down by a third.

Photo of Andrew Tyrie Andrew Tyrie Chair, Treasury Sub-Committee, Chair, Treasury Committee, Chair, Parliamentary Commission on Banking Standards (Joint Committee), Chair, Treasury Committee

What contribution has real wage restraint in the private sector made to the surprisingly low level of insolvencies in the UK compared with our competitors, which is now enabling more firms to take advantage of the recovery than would otherwise be the case?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is absolutely right that wage restraint in the private sector and the public sector has helped preserve jobs during the economic shock that we experienced under the previous Government. That is partly a credit to the labour market flexibility of the policies that previous Governments introduced in the 1980s and early 1990s and the last Government did not reverse. The wage restraint has helped us preserve more jobs than would otherwise have been the case in the public sector, which is why at least until recently it was supported by the Labour party.

Photo of Graeme Morrice Graeme Morrice Labour, Livingston

Will the Chancellor confirm, however, that after three years of flatlining growth and with prices still rising faster than wages, working people are on average £1,500 a year worse off than in 2010?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

People have been helped with their low mortgage rates which our credible economic policy is delivering. They are helped by the increase in the personal allowance—£600 this year, £700 next year. They will be helped by our tax-free child care, but above all they are helped by an economy that is turning the corner. The worst thing for living standards, the worst thing for household incomes, would be a return to the disastrous economic policies of the Labour party.

Photo of Julian Brazier Julian Brazier Conservative, Canterbury

Does my right hon. Friend agree that the trend in real wages further emphasises the need to hold down social security spending?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Of course, the key thing about social security and welfare is that it should encourage people into work. One of the remarkable achievements of my right hon. Friend the Secretary of State for Work and Pensions is that the number of workless households is now at a record low in this country. That is a huge achievement. Since the Opposition have been raising all these questions about living standards and wages, perhaps they would like to hear what Mr Byrne, a member of their shadow Cabinet, has been saying. He said:

“From 2004 onwards…families on ‘median incomes’—millions of workers--…were feeling the strain…people were working just as hard as ever—but were not getting on”.

He presented his findings to the Cabinet in 2010 but they got buried:

“We picked it up too late. It was very late in the day, is the truth”.

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury

The truth is that working families have paid the price for the three years of flatlining under this Chancellor. Prices have risen faster than wages for 37 of the 38 months that he has been in office. I have a quiz question for the Chancellor this morning. Can he tell the House which one of those 38 months is the odd one out and why?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

First, may I welcome the hon. Lady back and congratulate her and her husband Nick on the birth of their baby, Anna?

There has been wage restraint in the public sector, but I thought that, as shadow Chief Secretary, she supported that. When she gave her speech about fiscal discipline before going on maternity leave, she supported wage restraint in the public sector. I am not clear whether she has changed her policy.

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury

The right hon. Gentleman obviously does not get the bonus point. He might find the truth embarrassing, but I must tell the House that the only month in which real wages rose was the month when bank bonuses soared by 80%, as the highest paid took advantage of his tax cut for millionaires. Rather than cutting taxes for the richest, why does he not help families facing the cost of living crisis on his watch?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

When the shadow Chancellor was the City Minister, bank bonuses were £14 billion a year. They are now a fraction of that. Indeed, the income tax rate in every year of this Government is higher than in any year of the previous Government. By the way, inequality is now at its lowest level in this country since 1986. We have taken difficult decisions and tough action to ensure that our economy turns the corner. All those things were opposed by the Labour party, but as a result, because of low mortgage rates, because of the large tax-free allowance and because we are creating jobs in the economy, we can hold out the prospect of an improvement in the long-term living standards of the British people.

Photo of Mike Thornton Mike Thornton Liberal Democrat, Eastleigh

Does the Chancellor agree that taking 2.7 million taxpayers out of income tax through a higher allowance—a Liberal Democrat policy—will help improve living standards?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

It is a policy being delivered by a Conservative Chancellor and a Liberal Democrat Chief Secretary. The hon. Gentleman is right that together we have taken millions of the low-paid out of income tax. Of course, that is also delivering a tax cut to 25 million working people, and there is more to come next April. It is one of the ways that, by securing the economic recovery and having credible policies with the public finances, we can help people by, for example, increasing the tax-free allowance.