Employment - Motion to Take Note

Part of the debate – in the House of Lords at 4:33 pm on 6th June 2019.

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Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Opposition Senior Whip (Lords) 4:33 pm, 6th June 2019

My Lords, I too thank the noble Lord, Lord Leigh, for getting this debate off the ground, and I thank all noble Lords who have contributed to it. It has been much more interesting than I expected, and I do not mean that rudely. I feared we might get rather more Whips’ hand-out speeches, but in fact we have heard some very interesting speeches—that sounds more patronising than I meant it to be. I apologise.

Let me just dispatch a few of the points that were chucked in my direction first because I do not really want to play in the party sandpit too much. Just for the record, Labour did not cause the global financial crash, we do not hate business, we want people to work, we want work to pay, tax credits were not a disaster, UC is not going swimmingly and the Treasury is part of the Government. I hate to break that to noble Lords, but I am an ex-Treasury spad and I know that.

Having got that out of the way, I turn to the fact that the noble Lord, Lord Leigh, invited us to do two things: to celebrate the headline figures and to probe underneath them. I will do both. I am very happy to welcome the headline employment rate. It is good news and I am glad that we are in that position. However, I would like to probe underneath it and then go on to look at how to drive it up. How we do that matters. I could drive up employment very easily. For example, I could raise the state pension age to 90 and abolish the welfare state. Those would be very effective ways of driving up the employment rate; they just would not be good ways of doing it, and it would not be good for the country. Therefore, it matters.

I am also worried about some of the risks coming down the track. A number of noble Lords mentioned the recent spate of announcements about closures and redundancies in sectors from retail to steel. They have not yet filtered through to the employment figures because of the time lag involved.

I want to talk briefly about how weak business investment is—a point raised by my noble friends Lord Monks and Lord Haskel, and the noble Baroness, Lady Wheatcroft, among others. A very interesting speech was given last week by Dave Ramsden, one of the deputy governors at the Bank of England. I do not know whether noble Lords read it. In it, he commented on the fact that investment has fallen over the last three years. As he pointed out, it fell for four consecutive quarters in 2018 by a total of 2.5%. That has never happened before. He pointed out that normally business investment and employment rise or fall together. Now, we are seeing business investment going down and employment going up. That is unusual, so what is happening?

He offered two explanations. One, in common with what my noble friend Lord Haskel said, is that businesses are substituting labour for capital because it is cheaper and quicker to lay off workers than reverse capital investment. The other, he suggests, is that maybe demand is shifting away from capital-intensive, export-oriented businesses and into labour-intensive, domestically focused ones. The first of those explanations highlights a risk to jobs and employment levels from a shock coming down the track. The second raises some serious issues about the structure of our economy in the future, and it plays into some of the AI, tech and skills issues raised variously by the noble Baronesses, Lady Rock and Lady Kramer, and a number of other noble Lords.

We have some serious problems even in today’s labour market. My noble friend Lord Haskel, the noble Lord, Lord Shipley, the noble Baroness, Lady Wheatcroft, and others highlighted issues around insecure employment. The noble Lord, Lord Northbrook, might think that this is only a marginal issue but we have some 850,000 workers on zero-hours contracts and over two-thirds have been stuck on them for a year, suggesting that this is not just a temporary blip. The TUC commissioned a poll of workers on zero-hours contracts and found that more than half had had shifts cancelled at less than 24 hours’ notice; nearly three-quarters had been offered work at less than 24 hours’ notice; and, crucially, more than a third were threatened with not being given shifts in the future if they turn down work. That is serious. In addition, only 12% of them got sick pay; only 7% would get redundancy pay; 43% got no holiday pay; unsurprisingly, only a quarter preferred being on zero-hours contracts; and 47% did not get written terms and conditions. I say to the noble Lord, Lord Leigh, that if we want effectively to push up the fees for employment tribunals to the point where nobody can use them, it becomes meaningless to give workers the right even to have written terms and conditions. A right that one cannot enforce is not a right, and I worry very much about any move back in that direction.

Other TUC analysis found that if you are on a zero-hours contract you are twice as likely to work at night and twice as likely to work seven days a week. The average hourly pay rate is about 50% higher if you are on a fixed contract than if you are on a zero-hours contract. This is not good work.

The noble Lord, Lord Leigh, said that work should be a route from poverty to prosperity. However, I fear that for too many people at the moment it is simply a move from one kind of poverty to another, and that is a serious challenge for our economy. If a parent works full time, or potentially both parents work full time, and they cannot feed their kids, something has gone badly wrong with the state of our economy. We have to address this. I am not convinced at all that the Government have got to the bottom of it but I would be very interested to hear what the Minister has to say.

I will not dwell on this because my noble friend Lord Haskel and the noble Baroness, Lady Meacher, made some very good points about working poverty. However, we have to ask why it is happening. Poor pay growth is clearly part of the story. Like the noble Baroness, Lady Kramer, I was very pleased to hear comments from around the House about pay ratios and extremes, because those really do not help. Although pay is beginning to creep up, median pay is still not back to pre-recession levels in real terms.

My noble friend Lord Monks made some very interesting points on how we might go about developing the economy in this area in the future, his prescriptions for the future, and the impact of losing collective bargaining. Given my role, I need also to lay down a marker about the incredibly damaging effects of significant cuts to social security for people in work. After five years of cuts to benefits in real terms, the Joseph Rowntree Foundation estimates that already 200,000 people have been dragged into poverty simply by that benefit freeze, which is not finished yet and will run for another year.

It certainly has not helped to have universal credit repeatedly slashed before it was even brought into being. In particular, the reduction in work allowances—although they have been partly restored—has really damaged trying to make work pay. These were terrible decisions and I wish the Government would revisit them.

I also worry that the benefits of employment are being unevenly distributed; this is partly geographical—a point made by the noble Lord, Lord Shipley, and touched on by the noble Baroness, Lady Kramer. I live in Durham. In the north-east, the employment rate is 71%, according to the latest statistics; in the south-west it is 80%. In the north-east, unemployment is 5.4%; in the south-west, it is less than half of that at 2.4%. This makes things feel very different if you lose your job somewhere like Country Durham, especially given its history.

On job creation, I worry. It is estimated that between September and December last year, workforce jobs in the south-east increased by 59,000, while in Wales they decreased by 9,000. Something is going on and, notwithstanding the comments made by the noble Lord, Lord Willetts, in a very interesting speech, it is significant that parts of the country have struggled and are struggling now. I want to know what the Government are going to do about that.

Finally, I want to touch on a few other sources of inequality. The noble Baroness, Lady Meacher, and the noble Lord, Lord Addington, made some interesting points about disability. Eighteen per cent of our working-age population report that they have a disability; 51% of these people are in employment, compared to 81% of non-disabled people—that is a 30 percentage point disability employment gap, which is an absolute disgrace. I was pleased to see that, in their 2015 manifesto, the Conservatives pledged to halve our disability employment gap. Unfortunately, by 2017, that had been watered down to talk of getting an extra million disabled people into work; that is good but I fear that quite a bit of it will come from demographic changes, as we have an ageing population.

The DWP has introduced a new Work and Health programme, but it is much smaller than the programmes it replaced. Learning and Work Institute analysis suggests that it will support only some 10% of out-of-work disabled people. If that is right, we are talking about a 2 percentage point movement in the participation rate, which does not seem very strong. I am also worried that most employment support for disabled people is now generalist, provided by generalist coaches in jobcentres. The Work and Pensions Select Committee at the other end pointed out that support for specialist help for disabled people getting into work had been slashed from around £1 billion to little over half that across the lifetime of this new programme. Meanwhile, a million sanctions have been imposed on disabled people since 2010. The fact that the disability employment gap is not closing suggests that this is not a very effective strategy for helping disabled people into work. So, can the Minister tell the House how the Government’s plans will make serious inroads into the disability employment gap?

I have two more quick comments. First, the TUC found that, compared to white workers, black and minority ethnic workers are more than twice as likely to be stuck on agency contracts, much more likely to be on zero-hours contracts, more likely to be in temporary work, and twice as likely to report not having enough hours to make ends meet. What are the Government doing about that?

Secondly, on young people, 15% of all unemployed 16 to 24 year-olds have been unemployed for over 12 months. The unemployment rate for 18 to 24 year-olds is 10% compared to 3.8% for the whole population. What the Government have done about this is to create something called the “youth obligation”. If you are aged 18 to 21 and you make a claim for universal credit, you are put into the scheme, given help and you have to do things. Centrepoint has just carried out a longitudinal evaluation of the youth obligation. It found that, after a year, only 24% of those young people were in employment and almost half were doing informal, cash-in-hand work such as babysitting, ironing or cleaning; 31% were not working and were claiming benefits; and 35% were neither working nor claiming benefits. Most worryingly, 45% of young people left before the programme finished because they just could not cope. It seems that many were people who had serious issues; they were homeless, had mental health issues, or had drug or alcohol problems. It became clear, the report said, that they would never be able to cope with the programme. Has the Minister read that report? If so, what are the Government going to do about addressing the challenges facing young people in this area?

There is much more that I would want to do. I simply say that I would welcome it if every time the employment statistics came out, rather than just going for the headline figures, the Government took a deep breath, looked down the track and thought, “What kind of country are we trying to create?” If we want to bring people together again, we have to find a way for everyone to have a stake in this country. If we want capitalism to be the future, it has to work for most people. For that to happen, if you go to work and do a job, you should be able to feed your family. Is that not the basic that you should expect?