Income tax (charge) — House of Commons, 2020-03-16
Topic: Macroeconomics
John Eugene Joseph Dromey (Labour, Centre-left): A dark cloud is descending on our world, threatening the lives and livelihoods of millions of people across the globe. We have only to see what is happening in Italy to recognise just what could be coming to our own country. The health service, the police service and social care, already stretched by 10 years of austerity, are stretched even further. None the less, now is not the time to panic, nor is it the time to engage in politics as usual. There needs to be a unity of purpose across the House, particularly on two key objectives. The first is to protect our people, especially the elderly and vulnerable. The second is to minimise the impact on our economy, ensuring that, nationally and internationally, a global recession does not happen, and does not become a global depression Last week, the Chancellor said that manufacturing was going through a tough period. That may prove to be an understatement. We were facing a tough period before the advent of the virus. According to the Office for National Statistics, we started 2020 with a flatlining economy, and "yet another decline in manufacturing, particularly the drinks, car and machinery industries." That is why Make UK, the old Engineering Employers’ Federation, rightly called on the Government yesterday to step in to limit coronavirus damage to prevent further drastic decline in manufacturing and large-scale job losses There were a series of positive messages in the Budget, which I welcomed—no doubt about it. Crucially, though, the Government need to do more during the next stages. It was welcome that the Budget included measures relating to the environmental transformation of the automotive industry, by which I mean the move to electric cars. For the next stage, it is important that we see further significant moves, of the kind that the Society of Motor Manufacturers and Traders has called for, on tax-free electric vehicles—£5,000 off VAT on vehicles alone—which would greatly boost the production and sale of electric vehicles. It was my own experience that led me to that view. During the global crash in 2008, when I was deputy general secretary of the old Transport and General Workers’ Union—we later became Unite—Tony Woodley and I were involved in negotiations with the then Labour Government on emergency measures, one of which was the scrappage scheme. As a consequence of that scheme, 400,000 cars were built. That avoided what could have been a catastrophe in the automotive industry. In the first six months of the scheme, notwithstanding what was happening in the global and domestic economy, we saw a 31% increase in the registration of new cars. Had it not been for that scrappage scheme, we would have seen the closure of those car plants. With my right hon. Friend the Member for Wentworth and Dearne (John Healey), I was also involved in the negotiation of the Kickstart programme, which saw 115,000 homes built, some 110,000 jobs safeguarded and the saving of thousands of small and medium-sized businesses that would otherwise have gone to the wall. Those big measures were critical at the time. This Government need to think big going forward. Crucially, they need to bring together the voice of the world of work. The employers and the trade unions need to discuss the key next stage objectives especially, as the right hon. Member for Tunbridge Wells (Greg Clark) said in his excellent speech, in relation to short-term working. That has been called for by the SMMT, the aerospace, defence, security and space industries, Unite, the TUC, and the GMB I am talking about employers’ organisations and unions coming together to argue that such arrangements have the ability to protect the industrial capacity of British manufacturers. In particular, they pray in aid the German model, which was first used in 2008, significantly expanded and then followed by other countries such as Japan, Belgium, France, and Austria. That scheme created a fund to pay workers up to 60% of their foregone net wages if factory production were temporarily cut. The scheme allowed employers to cut production temporarily without cutting jobs, thereby maintaining vital capacity. It was credited by the OECD for saving 500,000 jobs in German industry. Back then, unemployment held at 7.5% in Germany—a rise of just 0.2%. The country therefore managed to preserve the capacity to undertake the rebuilding of the economy. Jobs were saved, pay continued, and experience and skills were retained That model is being used successfully in response to covid-19 in Denmark, where the Government have brought together unions and employers’ associations, and agreed a deal for affected industries whereby the state pays 75% of workers’ wages and employers pay 25%. Workers also give up five days of paid holiday, and in exchange there are no lay-offs. In the words of the Prime Minister of Denmark: "If there’s a big drop in activity, and production is halted, we understand the need to send home employees. But we ask you: Don’t fire them" Only this afternoon, a major employer in my constituency that has invested massively in increasing its capacity—I cannot name the company—has said that it desperately needs short-term measures to preserve that capacity, if it is to be able to rebuild after the immediate challenges posed to the economy Although there are welcome measures in the Budget, the Government need to be more ambitious at the next stages and to work with the world of work. There is no question but that the threat posed is enormous and real, not only to life and limb, but to our economy and ability to recover. What we do now will determine whether we have recession or depression. The role of the Government, working with the world of work, is key to that process. I urge the Government to rise to that challenge.