Economic Justice Commission

Funeral Poverty – in Westminster Hall at 4:30 pm on 11th September 2018.

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Photo of Liam Byrne Liam Byrne Shadow Minister (Digital, Culture, Media and Sport) (Digital Economy) 4:30 pm, 11th September 2018

I beg to move,

That this House
has considered the final report of the Economic Justice Commission.

It is a pleasure to serve under your chairmanship, Mr Hollobone. I hope that you will forgive me if I start with a short hymn of praise to the Archbishop of Canterbury. It was actually at his behest that, two or three years ago, I and others founded the all-party group on inclusive growth, which I chair and in which I declare my interest. His Grace helped to inspire and mobilise the Institute for Public Policy Research’s Commission on Economic Justice.

I congratulate the commission on producing a seminal report. Michael Jacobs, Tom Kibasi and the entire team of commissioners deserve our gratitude for sharing with us in detail a blueprint for reconnecting wealth creation and social justice. The mission is ultimately a moral mission and a righteous ambition. His Grace reminded us in his first major speech to the all-party group that Jesus was a wealth creator:

“Jesus worked for his living and created wealth for ninety percent of his life”,

so he would be unlikely to be much impressed by a country that grows both the number of billionaires and the lines at our food banks. The Archbishop continued:

“the foundations of a Good Economy are given in the nature of human beings: creativity, gratuity, solidarity and subsidiarity”.

We do not have enough of that today.

Branko Milanović, the New York economist, recently published an extraordinary book in which he set out what exactly has happened to the fruits of growth over the past 30 years. The extraordinary statistic that he revealed was that an incredible 44% of the absolute gain in total wealth has gone to the world’s richest 5%. What that means for us here in Britain, as Oxfam and others tell us, is that the richest 1% of the UK population now owns more than 20 times the wealth of the poorest 20% combined. On the streets of my constituency, therefore, among the homeless, the hungry, the young people in despair and the disabled struggling for their social security, I see, feel and share pain—pain that should not exist in the fifth richest country in the world.

The point of the Economic Justice Commission’s report, however, is not to kick off a slanging match; it is to kindle a peace match, an adult conversation that might grow in strength and one day foster something akin to the cross-party consensus that we had on economic policy after the second world war. In that spirit, therefore, I want to begin my remarks with some self-criticism about the past to steer us in the future.

Labour achieved many fine things between 1997 and 2010 but, with a lead that was greater than Attlee’s, we left a legacy that was considerably less. In power, we failed to tame and reform capitalism, and to bend it to the people’s purposes. That is what we must seek to do in the future. There was of course the tragic scar of errors in Iraq, but elsewhere we rolled forward public finance instead of reinvigorating a new public ethos, and our party was too top-down when we should have renewed bottom-up. That, in part, explained why we acquiesced in too much financial engineering and not enough real engineering.

In the face of the China shock, therefore, which unfolded after China joined the World Trade Organisation, and of the doubling of the size of Europe after the Berlin wall came down, we let too many communities deindustrialise. Yes, we created jobs, but we did not create enough good jobs. Former manufacturing powerhouses such as Burnley or Barnsley fared very differently from Berlin or Beijing, which took a different way forward. We allowed too much globalisation without compensation. In the spirit of that self-reflection, I hope that Ministers will accept that we cannot go on with today’s economic muddle when what we need is to agree a new economic model, one that will take us to a different kind of country in which we are better at creating wealth and an awful lot better at sharing wealth.

Today we face a triple curse: growth is too slow, with rates that are far slower than the trend rate of growth achieved in the new Labour years; productivity is too weak, with rates of productivity growth lower now than they were at the end of the 1970s, when it was known as the “British disease”; and, despite today’s news, wages remain much too unfair, as we continue to face the largest squeeze on wages since the days of Charles Dickens.

Ministers need to confront what the capitalism around us has become. In our workplaces, our workers now face a smaller and smaller group of companies, the great technopolies created by the $20-trillion merger wave of the past 30 years. Those companies now power world trade and dominate world technology. They use that power of technology, trade, automation and outsourcing to hold down wages. Ultimately, that is why we need a different economic model in this country. Hitherto, we have failed to create what the IPPR commission calls “a new economic constitution”, and that is what Britain needs.

The linchpin of this very fine report is what the commission called a “mission-oriented industrial strategy”. This debate is the Minister’s first outing—we welcome her to her post—but I suspect that she will say that Her Majesty’s Government do indeed have such an industrial plan. However, we must be honest with ourselves in this Chamber: the industrial strategy that we have is nothing compared with the $300-billion “Made in China” programme, Narendra Modi’s “Make in India” campaign, or the new $100-billion Vision Fund of Japan’s SoftBank. We need an industrial strategy financed on a wholly new scale.

We must therefore have new fiscal rules to guide our budgeting, so that we drive up public investment in things such as infrastructure by an extra £15 billion a year. We need to leverage that with a £200-billion national investment bank with strong regional investment banks on the ground, much like the KfW model that was such a success in post-war Germany. We need new economic governance systems—such as the four new economic executives proposed for England—tasked with ending the regional imbalances that have cursed our country for decades. Crucially, we need to leverage that with change to the Bank of England mandate, as I have argued for a number of years now, so that it seeks not simply price control but unemployment and underemployment as low as possible.

Photo of Liz Saville-Roberts Liz Saville-Roberts Shadow PC Spokesperson (Home Affairs), Shadow PC Spokesperson (Women and Equalities) , Plaid Cymru Westminster Leader, Shadow PC Spokesperson (Justice), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

The right hon. Gentleman mentioned subsidiarity and the question of regionalism. One of the things that struck me on reading the full report, which he has on his desk, is that in terms of gross value added over the past decade Scotland has far outperformed all the regions of the United Kingdom except for London and the south-east. Scotland, of course, has control over economic development—it has economic powers—so will he join me in asking the Minister what assessment her Department has made of Wales’s potential to increase GVA if Wales had the economic means to do so, as is advocated in the report?

Photo of Liam Byrne Liam Byrne Shadow Minister (Digital, Culture, Media and Sport) (Digital Economy)

One of the great achievements of Labour’s time in office was the devolution that allowed different economic models to begin to emerge across the United Kingdom. Although there has been interesting and impressive growth in parts of the country, it is nothing compared with what we need for the years ahead. Let us be honest; it will be impossible to match what is happening in the east, in Asia, unless we put behind a strategy the real power of fiscal, banking and monetary policy.

To rewrite the rules of our labour market, the commission proposes a real minimum wage of £10.20, set 20% higher for anyone on a zero-hours contract—an important, interesting and innovative idea that should command our attention—and it proposes New Zealand-style rights of access for trade unions, crystal-clear rights to join a union and trials of auto-enrolment in unions for workers in the gig economy. Why are these things so important? They are important because of the power that is now exercised by giant firms in our economy. Over the summer, The Economist reported that the $5 trillion merger wave in the United Kingdom is, adjusted for scale, 50% greater than in the United States.

According to the International Monetary Fund—of all people—that rise in market power is much more pronounced in the UK than it is elsewhere. It looks at price mark-ups as a proxy to judge market power. The mark-ups it found in the United Kingdom are about 60% since 1980. That is way ahead of the average for the advanced economy. We are more dominated by technopolies than many other countries, and the price for that is paid not by shareholders or chief executives but by workers. That is why we need to rewrite the rules of the marketplace, to rebalance power in the marketplace.

In the boardroom, we should finally privilege those with a genuinely long-term perspective—also known as workers —by putting them on boards. The IPPR proposes at least two on every company board with more than 250 staff. Why is that important? The chief economist of the Bank of England recently reflected that once upon a time the average length of a shareholding in a British company on the stock exchange was something like six years. Now it is only six months. Shareholders are no longer the long-term stewards or guardians of a company’s interest. It is the workers, and very often suppliers, who have the longer term interest. We need workers on remuneration committees, to stop the ludicrous expansion of chief executive pay. Crucially, we need to change section 172 of the Companies Act 2006, which we wrote, in order to ensure that directors have a fiduciary duty to have regard to the long-term interests of a company and the welfare of all stakeholders, not simply the stakeholders known as shareholders.

In the capital markets we need new fiduciary duties for asset managers and priority rights for long-term investors, like the rights that are enjoyed by shareholders in France. America and Italy. We need new tests for takeovers, plus crucial reform of competition law to introduce a new public interest test to check today’s uncontrolled technopolies that are carving up the digital marketplace. Finally, to ensure that wealth is genuinely shared, we need a new £186 billion citizens’ wealth fund, in order to help redistribute wealth to our young people who are struggling under the burden of high debt, sky-high student loans and the challenge of saving to put down a deposit on a home.

To help rebalance the fiscal system and ensure that money is available, the IPPR proposes a total overhaul of our tax system, with German-style formula-based calculations of income tax. Crucially, we need the equalisation of income and capital gains tax—much as we had when capital gains tax was introduced in the 1960s—and new wealth taxes. It is extraordinary that the stock market is up by about 40% and the property market by about 25% since the financial crisis. The wealth of assets in this country has multiplied exponentially, yet wealth taxes are still only 5% or 6% of GDP—the level they have been since the early 1970s.

Let me conclude with a reminder of how much is at stake in this debate. Globally, Oxfam estimates that about half of global wealth is in the hands of the richest few. That means that, globally, 85 families own as much as the poorest 3 billion of our fellow citizens on the planet. We can have an argument about how we share the wealth that is on the table, or we can think afresh about the wealth that is to come. If the richest 1% carry on accumulating wealth at the rate they have enjoyed since the financial crash, they will not own half the world worth by 2030; they will own two thirds—two thirds of global wealth will be in the hands of the top 1%. It will be impossible for us to restore any meaningful measure of equality in this century if we allow that situation to unfold. What will affect inequality in the years to come is not simply the exponential rise in the wealth and assets of the richest—a rise that is forecast as up to £217 trillion in the hands of the luckiest few—but what will happen to the poorest and the working poorest in our country.

We need to zero in on what is happening in the automation of the world of work. At the World Bank and IMF meetings earlier this year, the chief executive of the World Bank was very clear that automation will hit people in different ways. Some people will be hit harder than others—young people will be hit hard, and the working class harder still. My research, undertaken with the House of Commons Library, shows that among the poorest 25% of the labour market—someone who is on less than £9 an hour—2.1 million jobs are at risk of automation. Why? Because automation will hit retail, transportation and routine manufacturing, where most of Britain’s working class happen to work. If we lose those jobs, the impact will be five times bigger than the shutdown of the coal and steel industries put together. Think about how those communities are still scarred today by the seminal changes during the 1980s. We can see these changes unfold in our economy. Those workers will be left behind in tomorrow’s economy unless we change strategy.

We have to answer the question: are we prepared to stand by and watch this happen? We cannot and we will not. We need to have new ideas and turn them into action. We have a blueprint for those ideas today. I want the Minister to tell us just what she disagrees with in this seminal report.

Several hon. Members:

rose—

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. The debate can last until 5.30 pm. I am obliged to call the first of the Front-Bench spokespersons no later than seven minutes past 5. The guideline limits are five minutes for the Scottish National party, five minutes for Her Majesty’s Opposition and 10 minutes for the Minister. If the Minister would be kind enough to leave three minutes at the end, Mr Byrne may sum up the debate. Two Members are seeking to contribute and we have 20 minutes, so they may each speak for up to 10 minutes.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden 4:46 pm, 11th September 2018

Thank you, Mr Hollobone; it is a pleasure to serve under your chairmanship. I reassure you that I will not talk for 10 minutes. I congratulate my right hon. Friend Liam Byrne on securing this particularly important debate and on his mind-blowing speech.

I welcome the final report of the Economic Justice Commission and, in particular, its recommendations on the reversal of this Government’s damaging decomposition of workers’ rights. This decade is forecast to be the weakest decade for average real earnings in 200 years. One in 10 workers is said to be in insecure work. Many of my constituents tell me of employers who impose restrictions, withdraw hours and refuse their workers rights, without their having the status of an employee in return. Meanwhile, there are almost 1 million people on zero-hours contracts, with the toxic combination of falling real wages, frozen benefits and insecure work resulting in 8 million people in working households living in 21st century poverty. Given this reality, it is heartening to read the report’s notable strong stance for workers’ rights, hard-wiring justice into our economic system as opposed to treating it as an afterthought.

Over recent weeks, I have seen at first hand the urgent need for many of the report’s workplace recommendations. I place on record my ownership of a single Sainsbury’s share—a golden ticket to attend its annual general meeting. This is an organisation that goes against recommendation after recommendation in the report. All Sainsbury’s shop floor staff are currently in the final stages of a consultation over new “sign or resign” contracts that will slash the salaries of 9,000 of its most longstanding and loyal members of staff. They will lose their paid breaks, their Sunday premium will be removed, the night shift will be shortened and their bonus scheme will go.

Some Members may argue that that is an unavoidable cost-cutting exercise for a key player in the struggling retail sector. Sainsbury’s argues that it is an exercise in fairness, to ensure that all colleagues doing the same role are paid the same. But I argue that the organisation simply shows no regard for its lowest paid staff. Although he scrapped the bonus scheme for shop floor staff, chief executive officer Mike Coupe has just taken home a £427,000 bonus as part of his £3.4 million pay packet—and we wonder why he sings about how he is “in the money”.

Many of those staff have shown decades of dedication to the organisation. While their salaries crumble, their bills, mortgages and rent at the end of each month remain the same. Take Paul, a 53-year-old staff member of 29 years who this week resigned from his role upon facing a £1,300-a-year pay cut. He describes himself as angry and upset that his loyalty has been sacrificed for the company’s profits. We met the Minister last week to discuss Sainsbury’s and the wider issues with such “sign or be sacked” contracts.

I have no qualms about those at the top being well paid, but I call for consistency, fairness and parity, and for the importance of the contribution of those at the top to be recognised in tandem with that of those at the bottom. As the IPPR report states, remuneration committees should contain elected worker representatives who decide the pay, incentives and conditions of all company staff in one whole-company pay policy. It would be really hard for people to agree to a £500,000 bonus for the chief executive officer if they knew that would mean cutting the take-home pay of the people at the bottom.

The need for such a policy becomes all the clearer when we consider exploitative “pay between assignment” contracts. In theory, such contracts are a sensible proposal, under which agency workers are guaranteed a basic level of pay between assignments and while they are out of work. However, in reality, workers are often kept on those lower paid contracts even when they are in the same job for years on end with no such gap between assignments. Such exploitative contracts can and must be prohibited, and I would be grateful if the Minister addressed the recent consultation on ending them. I congratulate BT and the Communication Workers Union on working together to end them in the near future, which will lead to an increase in the take-home pay of 1,200 call centre staff. I would also be grateful if the Minister told us what the Government’s response is likely to be to the recommendations of the Taylor report on work and the gig economy.

The Economic Justice Commission proposes putting fairness at the heart of the economy, because that would make it perform better and improve the lives of millions of people. Who would have thought it?

Photo of Justin Madders Justin Madders Shadow Minister (Health and Social Care), Shadow Minister (Business, Energy and Industrial Strategy) (Labour) 4:53 pm, 11th September 2018

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my right hon. Friend Liam Byrne on securing the debate and on his excellent synopsis of the report, which I hope most Members have read. Mr Hollobone, you will pleased to hear that I will not take my full 10 minutes. I prepared for having rather less time, as I expected there to be an awful lot of interest in the debate, such is the importance of the report. It is sad that so few Members took the opportunity to attend, but I hope this is the start of a dialogue about how we change some of the fundamental injustices in our country.

Like my right hon. Friend, I congratulate the members of the Economic Justice Commission on their hard work in the past two years on a compelling report that deserves the attention of all Members. People in my constituency have experienced not just a stagnation but a marked deterioration in their living standards. Average earnings have fallen in real terms while the price of housing has continued to soar, leaving many in my constituency to see home ownership as an unachievable dream, despite the fact that many pay more in rent every month than they would in mortgage repayments.

Many people who live in insecure and expensive accommodation have equally insecure jobs. As we heard, there has been a significant increase in agency and zero-hours jobs, in under-employment and in bogus self-employment, which is a stain on our society that creates many problems down the line for individuals and, ultimately, the state. Even those in permanent employment do not feel secure, due to the erosion of employment rights. For example, workers can now be sacked without any reason during their first two years in a job.

The UK ranks eighth of 140 countries for labour market flexibility. The report states:

“It is now possible for an employer to take on a worker with almost no attached responsibilities on the employer’s part, or rights for the worker, at all…It is this flexibility that largely explains the simultaneous occurrence of high employment levels and largely stagnant wages.”

It also explains the shocking fact that more people in poverty now live in working households than in non-working households, after housing costs are taken into account. Does the Minister think that state of affairs is something to be proud of, or does she agree that it is unjust and unsustainable?

The workers we have discussed also face the brunt of the coming force of automation. My right hon. Friend mentioned a number of statistics that show how those who earn the least will be hit hardest by automation. I have another for him: workers in jobs paying less than £30,000 are five times more susceptible to having their posts automated than those earning more than £100,000.

The report also sets out clearly the geographic inequalities we face. London is the richest region in northern Europe, but the UK as a whole contains six of the 10 poorest regions in Europe. That shocking imbalance comes as no surprise to those of us who represent parts of the north. We have grown accustomed to infrastructure investment being used to entrench rather than tackle that divide.

Even in a time of economic growth, unemployment has not fallen universally. Since the Prime Minister promised two years ago to tackle the burning injustices in our economy, unemployment in my constituency has increased by almost 50%. If that happened during a time of economic growth, when the hard times come—and they will—we will be even further behind. Of course, that is before we consider the impact Brexit may have on large employers, such as Vauxhall in my constituency. We heard today about the potential impact on the car industry if the Government do not get the right Brexit deal.

It is clear that we cannot go on as we are and that the report’s proposals cannot be ignored, but I wonder whether the Government have the political will to respond positively. It is clear from the report that there is a direct correlation between the decline in collective bargaining and the deterioration in working conditions. The only way to reverse that decline is to strengthen trade unions.

Photo of Liam Byrne Liam Byrne Shadow Minister (Digital, Culture, Media and Sport) (Digital Economy)

I did not expect to intervene, but my hon. Friend makes an incredibly important point. The case he makes has been rehearsed by the Opposition for some time, but it has now been endorsed by the International Monetary Fund, which reported over the summer that the dismantling of labour protections accounts for a huge slice of the fall in labour’s share of national income. That is not just our view—it is now the IMF’s view.

Photo of Justin Madders Justin Madders Shadow Minister (Health and Social Care), Shadow Minister (Business, Energy and Industrial Strategy) (Labour)

I did not think I would quote the IMF today, but my right hon. Friend is absolutely right about the share of income that goes to labour. I found that statistic in the report staggering. It is clear that the direction of travel will only continue downwards. We must find a way of reversing that decline. We like to say in this place that economic growth is the answer to all society’s problems, but that growth has to be shared by everyone, and it clear that that is not happening. If we do not solve that puzzle, we will have failed our constituents.

We must also tackle the myth propagated from time to time that an empowered workforce are a barrier to growth when, in fact, as my right hon. Friend said, all the evidence shows that they are an enabler. Many of the countries that outperform us in productivity have better paid workers and stronger workplace rights. The report states clearly:

“If both productivity and pay are to be increased, power will need to be rebalanced in significant ways from employers to workers. This will require stronger labour market regulation and strengthened trade unions.”

Sadly, the Government seem to spend a disproportionate amount of time looking to stifle and inhibit trade union activity.

There has been a lot of soul searching in the past few years about why people voted as they did in the referendum. I think many of the answers are in this report. I always maintained that the arguments advanced during the campaign about the threats to our economic security from Brexit would never work with people who already did not feel economically secure. As the report makes clear, the issues that have created the rampant inequality that fuels division and discontent in this country can be solved only by a Government who are prepared to tackle the root causes of what is a very lopsided economy. The lessons of the past tell us that things will change only if there is a political will to make that change. We will fail this country if we do not take the lessons in the report seriously.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy) 5:01 pm, 11th September 2018

It is a pleasure to serve under your chairmanship, Mr Hollobone. Like others, I commend Liam Byrne on bringing forward the debate, and on the work he does as the chair of the all-party parliamentary group on inclusive growth. In his opening comments he mentioned a moral mission, and I certainly agree with that. Frankly, more politicians need to get behind this subject. I share the sentiment of Justin Madders, who thought that more Members would be present. This important subject needs more than a one-hour Westminster Hall debate.

I agree with the right hon. Gentleman on the issues he raised, including deindustrialisation, growth and the squeeze on wages, and the fact that the rich are getting richer meaning that we need a new economic model. I commend his reflection on Labour’s 13 years in power in which it did not address that. Labour has certainly moved on from the days of Peter Mandelson talking about having no problems with people getting filthy rich; that is progress. I also commend the work of the commission and its report, with its intention of stimulating debate about necessary changes to the UK economy. I also welcome how it considered Scotland in the round, not as an afterthought.

Who can argue against the principle that prosperity and justice should go hand in hand? As I said, I agree with the comments of the right hon. Gentleman, and I look forward to hearing the Minister’s response to his challenge to her to outline which principles in the report she disagrees with.

We are aware that the gap between the wealthiest and the poorest is increasing all the time, and I am concerned that the UK Government do not seem realise that or care about it. As the report sets out, the UK economy is not working and the nations and regions are diverging even further. Fundamental reform is required, and the ultimate aspiration must be a fair economy that has economic justice hard-wired into it. That in turn will make for a stronger economy.

The report also highlights issues that my colleagues and I have been going on about for a while. The UK economy is overly reliant on household consumption, excessive household debt and further increasing property prices—it is as if we never learnt the lessons of the financial crash 10 years ago. Sure as fate, another crash will come. The report also outlines that the UK has a serious investment problem, sitting at about 4% below the OECD average. Just today I was at a civil engineering briefing where it was noted that the UK is ranked 24th on infrastructure investment. We obviously need greater investment in infrastructure, and true regional and national investment in infrastructure would help to rebalance the economy. That must be looked at seriously.

Scotland has been playing catch-up, because before the creation of the Scottish Parliament we were always overlooked on infrastructure. I welcome the report’s call for greater borrowing powers for the Scottish Parliament to allow for greater investment in infrastructure. I am interested to hear what the Minister will say about that.

The report also outlines that there should be further devolution, as the UK is

“one of the most centralised states in the developed world” and, as was touched on, the “most geographically unbalanced economy” in Europe. These matters are connected, and they are particularly pertinent to me as just today I have received written answers from the Scotland Office saying that the Secretary of State for Scotland has no interest in devolving further powers to Holyrood. He does not even want the Scottish Parliament to have the same powers as the Northern Ireland Assembly when it sits. That is a sad indictment of the Secretary of State’s ambition for Scotland. Again, I look forward to what the Minister will say about further devolution of powers.

On the workforce and the balance between the working and non-working population, the report highlights the risks associated with an ageing population, which is a bigger issue in Scotland than in the rest of the UK. I agree with the recommendation that immigration policy should be devolved to Scotland. It is predicted that we will need an additional 860,000 contributing workers by 2041, so we need control over immigration.

The report shares the Scottish Government’s ambition to tackle the gender pay gap. Complementary policies on that and gender balance deserve further consideration. The report says that

“all firms above 250 employees should be required to publish their pay scales—both ranges and averages by role—to employees within their firms”.

Thanks to the Scottish National party, we have the Gender Representation on Public Boards (Scotland) Act 2018, which sets the objective that 50% of non-executive members of public boards should be women. It also requires steps to be taken to encourage women to apply to become non-executive members of a board. That gender balance will help us towards a fairer and more understanding economy.

On fairness, the report suggests that everyone aged 21 and over should be paid the real living wage, and I concur. In Scotland, a higher percentage of workers receive the living wage, but until Westminster takes action and provides legislation it will not become a reality for all.

The report says that it has

“already drawn on the Scottish government’s Fair Work agenda” in suggesting

“the establishment of a new national productivity agency, skills policies and a ‘good jobs standard’”,

which could deliver fairer working practices. The SNP Government are striving towards that, and it is time for the UK Government to do likewise and have a dramatic rethink about how the economy works. Otherwise, I look forward to the day when we have an independent Scotland, where a Government who have the correct will and desire can implement those policies.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy) 5:08 pm, 11th September 2018

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my right hon. Friend Liam Byrne for securing the debate, for his excellent work as chair of the all-party parliamentary group on inclusive growth, and for starting the debate with such a passionate and comprehensive call for a change to the economy.

I also thank the IPPR for bringing together such an amazing group of commissioners—Justin Welby, Mariana Mazzucato, Frances O’Grady and Lord Kerslake, to name but a few—to carry out such a far-reaching investigation into economic justice and to reach such radical and, at the same time, common-sense conclusions, as we have heard. That is such a contrast with the “same old, same old,” right-wing, neo-liberal policies of this Government and their Tory-led predecessors.

The British people are sick and tired of being told over and over again—largely by the same smug and privileged voices—that there is no alternative to the economy-wrecking, service-slashing, opportunity-destroying, soul-sapping austerity agenda. The Brexit vote and Labour’s surge in the polls in last year’s election were both, in different ways, products of the paucity of economic justice under the current regime.

As my hon. Friend Justin Madders emphasised, we need to address the challenges of Brexit, but also the causes of Brexit. We are experiencing the longest period of stagnant wages for 150 years, with 6% of the workforce on short-term contracts and 3% on zero-hours contracts. UK productivity is 13% lower than the G7 average and we are, as we have heard, the most regionally imbalanced economy in Europe.

My hon. Friend Siobhain McDonagh highlighted the plight of retail workers, but we see those kinds of conditions in other sectors across our economy. The commission’s assessment of those problems and of the need for the fundamental reform of the British economy matches the principles of Labour’s transformative economic programme. Indeed, many of the report’s recommendations are already Labour policy: a national investment bank with a regional network, compulsory diversity reporting for companies and a mission-oriented industrial strategy, as championed by leading economist and commissioner Mariana Mazzucato. Other recommendations we will look at closely as we prepare our programme for Government.

Having written before on the need for radical action to tackle our productivity crisis, I was struck by the commissioners’ detailed proposals here; their suggestions on data are a welcome attempt to take seriously the power of this new property that drives the new economy. We have heard that strengthening union participation, as recommended in the report, is good not only for workers but for companies, the economy and, ultimately, the country. On that, as well as a number of other areas, the commission has produced thoughtful and practical recommendations, in stark contrast to the total lack of action on the Government’s part. I hope that the Government will take the recommendations seriously. I welcome the Minister to her role and ask her to commit to publishing a full response to the commission’s report.

Two years ago, the Prime Minister stood on the steps of Downing Street and talked about building

“a country that works for everyone”,

but in reality she has clung to the discredited zombie economics of Mr Osborne. The relentlessly negative and unimaginative election campaign waged by the Conservatives last year was proof of that. Meanwhile, Labour offered a serious critique of our economic model, with positive and practical measures to build a high-wage, high-skilled, high- productivity Britain. It is no coincidence that the publication of our manifesto saw our party soar 20 points in the polls, while Tory support fell dramatically once people saw what thin gruel they were being offered.

I welcome this report as an important intervention in the economic debate that Labour ignited last year. It is a debate in which this Government have no meaningful voice or even ideas; but perhaps that is about to change. Perhaps the Minister will now pledge to give this report the attention it so richly deserves. If not, she should step aside and allow us to do so.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

If the Minister would be kind enough to finish her remarks no later than 5.27 pm, that will give Mr Byrne time to sum up the debate.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 5:13 pm, 11th September 2018

It is an absolute pleasure to serve under your chairmanship for my first Westminster Hall debate, Mr Hollobone.

I congratulate Liam Byrne on securing this debate. The IPPR’s Commission on Economic Justice has produced a thoughtful and wide-ranging report on our economy, and it is absolutely right that this House should debate it and its recommendations. I thank him for bringing it to the House and for introducing it, and I congratulate the IPPR and the commission for their contribution to the public debate.

We can all agree that the issues raised today are of fundamental importance. Tackling low pay, boosting equality and putting fairness at the heart of society, while building on the strength of our jobs market and on economic growth, are issues that affect all our constituents. I will start by simply reflecting on where we are now. We have a deserved reputation for being a great place to do business, with high standards, respected institutions and the reliable rule of law. We are an enterprising and successful economy, built on firm foundations: the skills of our workers, the quality of the infrastructure, and a fair and predictable business environment.

The Government are committed to building an economy that works for everyone, to raising living standards and to growing our national wealth, not just for today, but for future generations. That commitment is demonstrated by our progress since 2010: near-record levels of employment, with more than 3.3 million more people in work than in 2010, unemployment at a record low, income inequality down, fairness in the tax system—the right hon. Gentleman spoke about the wealthiest 1% in this country, but the top 1% contribute 28% to income tax and the top 5% contribute nearly 50% of income tax—and absolute poverty falling.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy)

In terms of rebalancing the economy and an economy that works for everyone, can the Minister explain how cutting the rate of inheritance tax and cutting capital gains tax help the poorest in society?

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

One of the things we have absolutely seen is that putting wealth back into the system creates wealth. That is one reason why we have these measures and why we take some of these fiscal decisions—to ensure that we are fuelling wealth to be spent in order to benefit the lowest in our society.

We recognise the progress that has already been achieved in improving the life chances of millions around the country, but the right hon. Gentleman is right that we must not be complacent. For all our many strengths, we have businesses, people and places whose level of productivity is well below what can be achieved. That is why the Government have launched ambitious and transformative plans for our economy and for employment. The industrial strategy deliberately strengthens the five foundations of productivity: ideas, people, infrastructure, the business environment and places. It is a strategy that is being implemented with, not just for, British enterprise. It provides a template for the partnership between Government and the private sector that is required to solve productivity issues. Through the “Good Work” plan, the Government are supporting people to seize those opportunities as the labour market is changed by technological advances. I will talk about those today.

The Government’s industrial strategy is our long-term plan for building a Britain that is fit for the future. It sets out how we will help businesses to create better, higher paying jobs in every part of the UK. It focuses on the necessary investment in the skills, industry and infrastructure of the future. It ensures that our country and its citizens can embrace and benefit from the opportunities of technological change. We need to prepare to seize those opportunities. That would be necessary at any time, but Britain’s decision to leave the European Union makes it even more important.

Technology is transforming the world of work. That means we must invest in our workforce. We have committed to establishing a technical education system that rivals the best in the world, to stand alongside our already world-class higher education system. As part of wide-ranging reforms, we will invest an additional £406 million in maths, digital and technical education. Technological progress and a faster pace of change create opportunities but also challenges for those who may find themselves needing to learn new skills to find a job. We will therefore embed a culture of career-long learning through a new national retraining scheme that supports people to re-skill and grow their earning power throughout their lives.

We should not forget that it was the Conservative party that introduced the national living wage, delivering the lowest earners their fastest pay rise in 20 years. In April this year, we increased the national living wage by 4.4%, from £7.50 to £7.83. That increase is expected to benefit more than 2 million people and means that a full-time worker on the national living wage will see their pay increase by over £600 over the year.

Our industrial strategy also sets out what we are doing to make sure that the UK is the best place in the world to start and grow a business, which will create new jobs. We firmly believe in business as a force for good in society.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I will make some more progress.

Our corporate governance reforms are driving changes in how our largest companies engage, at board level, with employees and external stakeholders. Significant changes to the corporate governance code will strengthen workers’ voices in boardrooms by requiring boardrooms to put in place robust employee engagement mechanisms, while new laws will require companies to report how they engage with employees and have regard to their interests. Amplifying the voices of employees and external stakeholders will improve boardroom decision making, deliver more sustainable business performance and build confidence in the way businesses are run.

We are also introducing pay ratio reporting, requiring quoted companies to compare CEO pay with average worker pay, supported by an explanation of why the ratio is consistent with pay, reward and progression policies in the wider workforce. Under the revised UK corporate governance code, remuneration committees will have to engage with the workforce to explain how executive remuneration aligns with wider company policy. These changes will help to ensure that boardroom pay is connected with wider workforce pay and not set in an artificial bubble.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy)

I thank the Minister for setting out the Government’s industrial strategy proposals. Does she intend to deal with the proposals in the report? Specifically, does she agree with the report’s underlying assertion—that our economy is currently unjust?

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

The premise of the report and some of the measures it suggests are already being considered by the Government, and I am outlining the actions we are taking in those areas. I am committed, and so are the Government, to providing fairness and high-quality jobs in the workforce.

The Government are investing. We plan to deliver £20 billion of investment in innovative and high-potential businesses by establishing a new £2.5 billion investment fund, incubated in the British Business Bank, and we will continue to support businesses to grow by accessing international markets. We aim to create a business environment well equipped to meet the challenges and opportunities of new technologies and new ways of doing business.

Across Government we are making huge strides towards rebalancing the economy and empowering local government. Through devolution deals we have strengthened local leadership and devolved powers and funding away from Whitehall, so that they are exercised by those with the strongest understanding of the needs of their communities. We are absolutely committed to this continuing.

Photo of Liz Saville-Roberts Liz Saville-Roberts Shadow PC Spokesperson (Home Affairs), Shadow PC Spokesperson (Women and Equalities) , Plaid Cymru Westminster Leader, Shadow PC Spokesperson (Justice), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

The Minister must forgive me for presuming that she will refer to the UK shared prosperity fund; she already referred to the importance of regionality and understanding the regions. Will she explain why a devolved English Ministry—namely the Ministry of Housing, Communities and Local Government—will administrate the shared prosperity fund? Its history has involved dealing with English issues, rather than, for example, deprived communities in Wales.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

As I have outlined, the Government are committed to devolution and to giving local people the power to take decisions. There is a Minister responsible for the shared prosperity fund in that Ministry, but we feed into it across Government.

However, we are committed to delivering for the whole UK, including England, Wales and Scotland. That is why we are implementing the industrial strategy and why we are working with local communities to come up with, for example, local industrial strategies, which will build on their strengths and deliver on the economic opportunities that every region in the UK requires. Leadership and ambition for the future are key, and we recognise that there are individuals in those regions who can deliver those. The Government also continue to support the northern powerhouse strategy and have invested more than £3.4 billion directly into it for locally determined projects. Public support, combined with private sector dynamism, is enabling the region to flourish.

Technological change presents both challenges and opportunities for the world of work. New ways of working have a part to play in a modern, flexible labour market, but it is absolutely right that we look at what we can do to support people through these changes. In response to Matthew Taylor’s review of modern employment practices, the Government published the “Good Work” plan, in which we commit to reporting annually on the quality of work in the UK, with the first baseline report to be published later this year. I am clear that quality of work should take equal priority to quantity of work. Through the plan, we are also supporting workers by introducing a right to request a more predictable and stable contract, to tackle issues around one-sided flexibility, and by introducing enforcement of holiday pay.

I will pick up on some of the points raised by hon. Members. I again thank the right hon. Member for Birmingham, Hodge Hill for bringing the debate before us. I also thank Siobhain McDonagh, who has a strong interest in this area and is extremely committed to tackling the injustices that affect her constituents.

On the point from the right hon. Gentleman about AI, robotics and the potential loss of 2.4 million jobs, the report by the Royal Society for the Encouragement of Arts, Manufactures and Commerce, “The Age of Automation”, suggests that technological advances would not necessarily lead to job losses in the medium term but would actually improve opportunities for workers.

I must also clarify a point around zero-hours contracts. We often hear that they are all bad contracts and that people do not want them. In reality, we need to keep up with modern practices, and people want the flexibility that these contracts provide to work around childcare or other home commitments. That is why it is important that we are truthful about the benefits of zero-hours contracts.

On the Taylor review, we are analysing the responses to it and we will come forward with proposals in the relatively short term. I am committed to that.

I thank the IPPR for its report. I am committed, as the Minister responsible, to delivering fairness and quality of work for the people of this country. I must mention that I am not smug and I am not wealthy. I am a working-class girl who is a Conservative MP. I am absolutely committed to delivering for the people of my country.

Photo of Liam Byrne Liam Byrne Shadow Minister (Digital, Culture, Media and Sport) (Digital Economy) 5:27 pm, 11th September 2018

A vote is imminent, so I shall be brief. I am not entirely convinced that the Minister has read the report. She did not say much about what she had learned or what she disagreed with; we heard a defence of everything in the Government’s platform. I do not think that the British public want an economic policy that is a nudge here and a nudge there. I think that they are looking for a much more radical transformation.

The Government have an opportunity at the G20, which is focused on the future of work, to make good on the commitments that they made when signing up to the 2015 sustainable development goals and the communique at the 2016 Hangzhou G20 summit. Those commitments were to creating a much more inclusive economy than today. That will not be delivered by a nudge here and a nudge there; it needs the radical transformation proposed in the report. I hope that the Minister reflects on the debate in preparation for another debate after the G20, when we will test her conclusions.

Question put and agreed to.

Resolved,

That this House
has considered the final report of the Economic Justice Commission.

Sitting adjourned.