Social Mobility: Treasury Reform

I beg to move,

That this House has considered social mobility and Treasury reform.

It is a pleasure to serve under your chairmanship, Mr Robertson. I called this debate because I passionately believe that this country’s most powerful and most important resource is its people, and it is simply unacceptable that in the 21st century we still do not have equality of opportunity for people in Britain.

I am someone who knows what it is like not to have all the opportunities you want on the doorstep and not to be connected to those opportunities. I came into politics to get change on the ground for people, not just to debate what needs to happen. That is why about a year ago, with the Harrison Centre for Social Mobility, I established the social mobility pledge—to get action on the ground, working with businesses.

Hundreds of businesses have now stepped up to the plate to provide more opportunity for more young people, by getting into schools and helping to raise aspiration, talking about careers, allowing young people to come into the workplace to get work experience or apprenticeships and, crucially, looking at recruitment practices. Those companies are making sure that their approach on recruitment means they are open to all the talent out there. Hundreds of companies are involved. Already, social mobility pledge companies collectively employ more than 2.5 million people.

That work has taken me all over the country, from Sunderland to Hull, from Bradford to Manchester. With those companies and organisations, we are a coalition of the willing. We are finding out what works on the ground and are then spreading that insight and knowledge further and faster and creating a race to the top. The social mobility pledge is doing practical work to get more opportunity to millions of young people. I thank the businesses and organisations that are part of it, and part of this push.

This is a debate about social mobility and, of course, I noticed the announcement from the great leader, Jeremy Corbyn, at the weekend, ditching improving social mobility. I am sure the shadow Minister will want to respond on that, but clearly social mobility is just a distraction from the class war that Corbyn’s Labour party is engaged in.

Order. Could the right hon. Lady please refer to Members by their constituency?

Of course. The right hon. Member for Islington North (Jeremy Corbyn) has the sense, I think, that aspiration is a dirty word and is therefore not something that other people should feel is a good thing. That is wrong.

I was going to wait until my contribution to respond to the right hon. Lady, but it is quite clear that that is not the policy of the Labour party or of my right hon. Friend the Member for Islington North (Jeremy Corbyn). We want as many people as possible to do well, not just a chosen few in a grammar-school society of the type the right hon. Lady proposes.

I thought the hon. Lady would probably say that. Unfortunately, that illustrates that the Opposition have not understood what social mobility means. It means equality of opportunity. It would probably be better—this is why I raised the point—if we stopped arguing about semantics and started talking about finding common ground on how to get change for the better for millions of young people and communities currently disconnected from opportunity or too far from it. If this just becomes a debate on semantics, which is what I worry the right hon. Member for Islington North is trying to turn it into, we will not get anywhere fast. I will come on to why that is a problem, but the topic of this debate is that, while there are broader problems around how we debate achieving social mobility, which is why it has not happened, there is a bigger problem, which is about how the Government approach social mobility and the Treasury’s place within that.

Let us be absolutely clear: achieving social mobility means we achieve equality of opportunity for everyone in our country, irrespective of where they start, who they are and what their background is. It is not—I repeat, not—just about the gifted few.

I want to see system change. I have talked about the practical work I am doing on the ground with businesses and organisations through the social mobility pledge, outside of the Government, but if we are to finally crack the nut—unlike the Labour party, I do not believe we should give up trying to achieve social mobility—we have to ensure change inside the Government. To my mind, that starts with the Treasury, and that is why I called this debate.

After eight years in government, overwhelmingly as a Cabinet Minister and running three different Departments, my conclusion is that we effectively need to abolish the Treasury in its current form. What we have right now is dysfunctional and not fit for purpose. It does not achieve the transformation in opportunity and social mobility that Britain needs.

I congratulate the right hon. Lady on securing this debate. She has a long interest in the topic. She referred to the abolition of the Treasury. Has she indicated that to the 10 Conservative hopefuls for Prime Minister?

I will set out my wider strategy on why I think the Treasury in its current form is not fit for purpose. I hope in holding the debate that some of the arguments will get cut-through. If we are here to improve lives, for young people in particular, and to connect those young people to opportunity, things have to radically change, including in government. We need fundamental change in how the Government look at and invest taxpayers’ money, and that means the Treasury.

I congratulate my right hon. Friend on securing this debate and on her work on social mobility over many years. I think, like me, she was comprehensively educated—like many on the Conservative Benches—and joined the Conservative party precisely because we are the party of opportunity and aspiration. On the point raised by the hon. Member for East Londonderry (Mr Campbell), does she agree that we need to put pressure on the Conservative candidates to make sure that investment in education, which is a key enabler of social mobility, is a hot topic and something that every single one of them should have as a top priority should they become leader?

I agree. I am setting out how to fix the underlying problem of why we are underinvesting in people in our country and their potential. That starts with the Treasury. In my view, the Treasury has a twofold problem—first, how it operates across Government and, secondly, its policy approach.

On how it operates, it starts going wrong with the Treasury—UK plc’s finance department—having its own separate strategy from the Prime Minister, the chief executive. We have seen this down the years. It is traditional to see Chancellors at loggerheads with their Prime Ministers. We would never see a finance director able to countermand the CEO and undermine their strategy in any other organisation, yet that is exactly what we see, year to year and day to day. It has happened under Governments of every colour with the Treasury, as it is currently set up. Time and again, we end up with a Prime Minister, who is meant to be running the country, with one strategy, and a Chancellor with a different one, and both at loggerheads and going nowhere fast. It is no wonder that Prime Ministers do not get to deliver their strategies when the finance Department has an entirely separate one.

Parliament has a Budget speech every single year; it is essentially the Government’s strategy statement to Parliament and MPs for the year. It is not, however, the Prime Minister who delivers the strategy statement; it is the Chancellor. That does not make sense at all. Of course, these Budget statements are traditionally packed with politically driven, willy-waving, “look-at-me” projects for the Chancellor. Most are not even Treasury ideas. The best ideas are hoovered up from every other Secretary of State running Departments across Government, and they are generally not even the Treasury’s. Worst of all, most of these excellent policy announcements—for example, the one that we made a couple of years ago on vocational education and T-levels—are held up in order to wait for the Chancellor to announce them in a Budget statement. That is entirely dysfunctional, and it has to stop.

The right hon. Lady is making a compelling point on longer budgets. Does she agree that short-term budgets cause huge uncertainty for the responsibilities of devolved Administrations, who rely on knowing when the Budget will come and what the spending will be?

Indeed I do. Of course, not being able to plan ahead is a hugely inefficient way to manage resources. We spend efficiently when we can get long-term deals from suppliers and contractors, and when we can plan into the future. The inability of any of us to do this is absolutely an inefficient, sub-optimal way to manage finances. If we were to have the spending review, it would be a three-year spending review, but even a three-year or five-year spending review is not long term for a country. The companies that I spent 15 years working in did three-year to five-year spending reviews, but they were not Britain, which needs to invest for the long term.

How on earth are we going to invest long term in people and unlock social mobility if we will not even look beyond the next two or three years? If we will not even look beyond the next 12 months, it is absolutely impossible. This is a failing strategy, and a functioning department or ministry of finance should know that. The fact that the Treasury does not know that tells us everything about why it is not fit for purpose and should, as it stands today, be abolished.

The way in which that failing extends, operates and works on policy in practice—I speak as a former Secretary of State who ran three spending Departments—is that unless a departmental policy area is demonstrably and critically failing on the ground, the Treasury’s attitude is to turn a blind eye and hope that it all gets better. The Treasury’s technical explanation for this is that it hopes that that will drive efficiencies; that the system will have to work harder and deliver the same for less money. That might be true in some cases, but we are set up to fail because the Treasury has no way of understanding when that point has been long passed, and we do not have enough resources to deliver the Government’s plan—possibly the Prime Minister’s plan, but often it is the Chancellor’s plan.

My right hon. Friend is being very generous in giving way. Does she agree that enabling young people to reach their full potential is a core responsibility not only of the Treasury but of the Government? I suspect it is one of the key reasons why we got into politics in the first place. Will she join me in appealing to the Prime Minister, before she leaves office, to make a strategic and big move on education and education funding, which would ensure that the future leader, whoever it is, is obliged to deliver incremental, significant increases in funding for education in order to deliver on the key promise that she made when she first entered Downing Street three years ago?

If the Conservative party is to be taken seriously as the party of opportunity, it is important that it has a clear, articulated and well-funded strategy on developing our nation’s talents, and of course that means investment in schools. One of the problems is that, because the Treasury does not have an approach on valuing human capital, it does not understand how to look at valuing investment in schools alongside investment in physical capital. It does not have any sense of how to invest in human capital, which is perhaps the most powerful form of capital, but it is all over how to value the long-term returns on physical capital infrastructure projects, such as High Speed 2. The reality is that it is the capacity and talent of the people who get on those trains, log on to the broadband, get on the tube—like my constituents—or get into the cars that go on those roads that will determine whether Britain is successful in the future.

A functioning Treasury would understand that that is how to maximise long-term tax receipts and the effectiveness of public investment, because of course improving lives is the best way to take the pressure off public spend, so much of which is invested in lives that have gone wrong. Instead, the Treasury effectively just manages cash flow year to year—I am a chartered accountant with 15 years of experience in business, so I am as qualified as anyone to comment on this. We see reports saying that tax receipts and growth have been a bit better, so the Chancellor has a bit more money in his pocket. That is cash flow management, not managing the nation’s books for the long term. It is the polar opposite of a long-term strategy.

The fiscal rules should be scrapped and reworked on the basis of debt and deficit, how we deliver and measure long-term value and whether policy measures are creating or destroying it. In Cabinet, I regularly pointed out to the Chancellor the Treasury’s inadequate approach to valuing investment in people. An example of that is that we spend literally hundreds of thousands of pounds on the children and young people who end up in alternative provision and out of mainstream school. About 6% of them come out of alternative provision with a credible, strong or standard score in GCSE maths and English. That is no sort of strategy. A functioning Treasury would insist that it be reworked to deliver not only better lives but a smarter approach to spending. Those are some of the most challenging and vulnerable young people in our country, and they are often dealt with by children’s services. Those are the kids who have had the toughest starts and often face the bleakest futures. There is an opportunity cost to them in the failure that lies ahead of them in their lives if we do not help them get on track, and to the public finances, too. I have met lots of those young people. I have been up to the Beacon of Light—a fantastic place in Sunderland that helps young people to get on track and works with local businesses to slot them into careers. It turns their lives around and gets them on track. That is transformational not just for them but for Britain’s long-term public finances. Those young people generate more tax, which contributes to our economy and our society. The spend on welfare, the justice system and health due to continued family breakdown is less.

I thank the right hon. Member for Putney (Justine Greening) for securing this debate and for setting the scene so well. It is always a pleasure to speak on matters of such importance, and I support and sympathise with her remarks. I am pleased to see that the Democratic Unionist party is the second-largest party represented in the Chamber today, just slightly behind the Conservative party numerically.

I thank the right hon. Lady for her hard work on this issue and for the work she did as a Minister. I completely agree with her assessment of the Augar review, and I enjoyed reading her piece in the Financial Times earlier this month on that very topic—it was helpful for a better understanding of the debate, for which I thank her. Something that jumped off the screen was this:

“Its figures show that graduates going on to earn the highest salaries among their peers will see their overall repayments reduced by £18k—a third compared with now. However, for lower to middle-earner graduates, it is the opposite—Augar raises their overall repayments by £12k, almost double.”

I sincerely believe that that reinforces the view that the rich get richer at the expense of the lower class, who become stuck in a mire, as the right hon. Lady mentioned. We should also put on the record our thanks to the Library for providing a briefing pack with information and examples of the issue to help us.

It is important to look at the different opportunities for social mobility for women compared with those for men. There have been changes, which we must recognise, but later I will give an example and tell the story of a constituent who I think exemplifies the issue from a gender point of view. We must also address the fact that ethnic groups have experienced differing life chances over time. In her concluding remarks, the right hon. Lady referred to the need to give everyone the opportunity to maximise their potential, and I want to see that as well. There is also the issue of social mobility opportunities across the country in business and industry.

Does my hon. Friend agree that part of what we need to do is to further incentivise people, particularly young people, through the tax system, so that they can save? Personal allowances, for example, have risen in recent years, but we also need a rise in the national insurance threshold, so that people—particularly young people and those in part-time employment—can earn a higher net income, then work through the system with greater training and skills, and enter a higher earnings bracket.

My hon. Friend and colleague so often brings to debates an overarching view of where we and young people in our constituencies and across the whole of the United Kingdom need to be.

I will give an example that came my way only last week—although I know the young lady concerned—while I was researching for this debate. She has four children, works in retail, and her husband works in manual labour. Both are on low incomes and receive tax credits to supplement their income. Tax credits have been a great boost for many people. They are okay as long as they are going all right, but whenever they go wrong—if there is an overpayment, for example—they become a real noose around recipients’ necks. When done right, they are a bonus.

The young lady’s eldest child suffered a traumatic brain injury a number of years ago—he survived, thank God, although his life is altered as a result. The reason she came to my staff was to ask for help understanding the benefits system. Probably for all MPs, including the Minister, the most important issue in our constituency office is benefits—it outstrips by far all other requests to our office.

My constituent had decided that she would like to go back to college to get the qualifications necessary for her to enter higher education, with the goal of being an intensive care unit nurse providing the assistance for which she was so grateful in her life. That lady is everything that we might associate with the job: caring, compassionate, intelligent and dedicated. I believe that nursing is a calling, and she certainly has it. She just needs the opportunity—the social mobility for the human capital referred to earlier, to get the opportunity to advance herself and to do well.

In order to answer that call, however, my constituent needs to have her children minded. Her parents have passed on and her in-laws are both still working full-time. She gets tax credit for the few days that she works to help. That would all change if she became a student to provide a better life for her family. This young lady wanted to do better, but found herself in a system that almost holds her back, as my hon. Friend the Member for East Londonderry (Mr Campbell) was saying. What the right hon. Member for Putney said in her introduction is therefore exactly the issue that we have to address.