Matthew Hancock MP: A modern Conservative party must be on the side of the low paid

Matthew Hancock is the Member of Parliament for West Suffolk and Minister for Skills in the Departments of Business and of Education. Follow Matt on Twitter.

I used to be an economist. Worse, for a while I was an economic forecaster. My only defense was that I was young and naïve. But while forecasters may have been invented to make astrologers look good, there’s another aspect of the economists’ trade which makes me cringe: the idea that low pay is a necessary evil of globalised competition.

There are some on the right who argue, rightly, that Britain needs to be more competitive but then argue, wrongly, that lower labour unit costs are the way to get there. This argument makes the fundamental mistake of treating labour unit costs as a means to an end rather than an end in itself. After all, one person’s labour unit costs are another’s wages, so low labour costs are just a euphemism for low pay. But pay means prosperity - which is the whole point of becoming more competitive in the first place. Higher pay does not make a country less competitive, it makes it more prosperous.

Then there are those on the left who make the opposite mistake, they accept the importance of higher pay, but they reject competitiveness as the route to get to it. They argue that higher taxes or more borrowing are the route to higher pay. But this ignores the crucial question of where the pay – the prosperity comes from. We have no God-given right to pay and prosperity higher than most of the rest of the world. We have to earn it, not borrow it from our children.

Matthew Hancock MP: Insurance that works - a solution to the pressing problem of social care

Matthew Hancock is the Member of Parliament for West Suffolk. Follow Matt on Twitter.

Many of us have personal experience of the injustices of social care. Yesterday, the progress towards a solution got an airing in the media, and today, the Commons will debate this issue.

It's a pressing, long term, problem. For decades, people have been forced to sell their homes to pay for care, and we have failed to ensure vulnerable people live out their years with dignity. It's a challenge facing developed countries across the world, as each deals with major demographic changes. The UK’s current system, designed in 1948, is inconsistent, and does not support people who work hard and save hard their whole lives, with some losing up to 80% of their savings. It is no longer suitable for the 21st century.

The key question is, of course, who pays? The Dilnot Commission came forward with a package to end the most egregious unfairness, but without a consensus on who should pay the price tag of £1.5bn to £2bn.

Matthew Hancock MP: The Government's legal aid reforms protect the vulnerable and deliver justice for the taxpayer

Matthew Hancock is the Member of Parliament for West Suffolk. Follow Matt on Twitter.

“It’s not fair!” is often one of the first sentences a child learns. The vital role of fairness is embedded deeply in each of us. Injustice, and the battle for fairness has driven people into politics down the ages. Sometimes, in striving for a fairer system, we very naturally react to very specific, individual examples of unfairness. So it is with the changes to legal aid being put forward by the Government. Some argue that the changes to legal aid are a managerial change, started by Labour and taken forward by the Coalition. It’s true that the reforms were initiated by Jack Straw. But they are more than technical.

Others point to specific examples of their perceived effects, and argue it is always and everywhere wrong to limit anyone’s access to the very best-paid lawyer. But these objections miss the broader point, made acutely visible by the cuts: it is not just good economics, but a moral duty of government to get as much value as possible out of every penny of taxpayers’ money. Otherwise the money should be spent elsewhere or not taken in tax. Britain has the most expensive legal aid budget in the world. The £2.1bn we spend each year - £39 per head – is more than would be raised by a mansion tax, and more than twice the cost of second-placed New Zealand, at £18 a head. The current legal aid system manifestly fails to balance fairness to victims with fairness to taxpayers. The reforms redress that imbalance. That is what makes the reforms fair. Why?

First, because lawyers are too expensive. Like the rest of society, lawyers need to do more for less. Legal aid lawyers are among the best paid public servants in the land. Routinely, they earn over half a million pounds a year, with some topping £1 million of taxpayers’ money. Legal companies are netting millions for fighting immigration cases, planning application cases and even prisoners’ cases. Second, because of where the aid has been directed – or rather, in many cases, misdirected. Britain’s legal aid bill was originally intended to provide financial help for those who cannot afford lawyers’ fees. But just as Labour allowed our benefits system to become open to widespread abuse, so too legal aid ended up being spent on legal action that has been far from essential.

Matthew Hancock MP: The Conservatives must not be complacent in 2012, and keep winning the economic argument next year

Matthew Hancock is the Member of Parliament for West Suffolk.

With Christmas approaching, we Conservatives can reflect on a year which has seen our argument on the economy grow stronger as Labour’s has fallen apart.

But we must prepare to keep winning this argument. The success of our economic argument will be the factor that determines where we are this time next year.

As polling shows, the majority of the population know that dealing with our debts is necessary. People understand that there is no easy path for a quick fix. That rather, we must make the difficult decisions to do difficult things so that we live within our means as a country.

The internal anguish of the Labour party shows that they know they are losing the argument. Ed Miliband has limped towards Christmas with his reputation sliding, while Ed Balls’ interview in the Independent emphasises the complete lack of credibility Labour have on the economy. The Shadow Chancellor preaches that Labour "have got to make the argument for the alternative", but proceeds to practise the opposite. He promises yet again an empty pledge to set out as yet unspecified cuts at an unspecified time. The row within Labour shows just one thing: how far and how fast they have gone backwards in the last year.

Matthew Hancock MP: With turmoil in the Eurozone, it has never been more important to increase trade with emerging markets

Matthew Hancock is the Member of Parliament for West Suffolk.

With impeccable timing after the Prime Minister’s tough defence of Britain’s national interest last night, today’s trade figures (pdf) are great news for the British economy. They demonstrate the importance of trading with the whole world, not just Europe.

In October, the UK exported goods and services worth £41.9 billion, and we sold goods to non-EU countries worth £26.5 billion – the highest figures ever recorded. The trade deficit, the amount more we buy from overseas than we export abroad, fell from £4.3 billion in September to just £1.5 billion in October. We sold £895 million of goods and services to China, up £101 million in the last month, meaning China is now our 7th largest export market, over-taking Spain and Italy. These are clear signs that despite the economic gloom in Europe, British businesses are not just still selling overseas, but are selling more than ever before.

British companies are selling tea to China, naan bread to India and canoes to the Eskimos. Firms all over the country - for example in Haverhill in my own constituency - are fulfilling a growing demand for high tech manufacturing goods like pharmaceuticals, and top end services like insurance an accountancy from fast-growing nations. The UK is at its best when our companies are competing around the world. And we are doing all we can to support this, cutting red tape, lowering taxes for businesses, and helping get credit flowing again. We start from a low base. We still export more to each of Germany and France than to Brazil, Russia, China and India combined. It won’t be easy, and under Labour, Britain slid down the rankings of competitiveness.

Matthew Hancock MP: For markets to work properly, we need a change of culture at the top of big companies

Matthew Hancock is MP for West Suffolk and co-author of "Masters of Nothing".

The free market is the most powerful force for prosperity in the world. The fast-growing nations that we used to call the emerging markets are living testament in our times to its power. Over just two decades, billions of people have connected to the global economy for the first time, and their prosperity is catching up, fast. I grew up in a small business. I know from very personal experience the pressures on businesses, and how businesses create valuable products and jobs.

As well as being a practical force for good, the free market embodies some of our most important values as a society. Foremost among these is fairness: the idea that people should be rewarded in proportion to the effort they put in and the value they create.

These principles are connected. For markets to work, they need strong frameworks – a strong rule of law, for example – to ensure that effort is fairly rewarded.

Matthew Hancock MP: Ed Balls and Ed Miliband are still going backwards

Matthew Hancock is Conservative MP for West Suffolk.
Follow Matt on Twitter.

This week Labour's two Eds told us they wanted to establish economic credibility. All they asked for in return was our credulity.

In a a pair of speeches, they went backwards, and drove Labour still further from reality.

After Ed Miliband's speech, Labour abandoned any pretence of supporting growth and jobs. How can you support growth and jobs if you oppose the businesses who create them?

Worse still was Balls' performance.

At Conference Balls was heard to say ‘It's not right to describe this as a traditional boom-bust crisis...’ on this at least, Balls is right. This is a vast debt crisis. Yet Balls' past and present are addicted to debt.

We all know about Balls and Miliband's central role in building up the largest deficit in peacetime history. They cannot escape that past.

But what was extraordinary was their refusal to acknowledge this failure, and their insistence they would make the same mistakes again.

Matthew Hancock MP: Labour's Ed Balls still thinks you can borrow your way out of debt

Matthew Hancock is MP for West Suffolk.

Sometimes the debate about the economy can seem technical, full of jargon, and somehow separated from the real world. Crucial debates that will affect all our futures, for example about British exposure to Greek debt, or the size of the deficit, are conducted in abstract terms and cold figures in the billions.

Occasionally, the clouds part, and a politician says something that doesn't just have an abstract meaning, but can be translated into the direct impact on people's lives.

Frustrated at his lack of impact in the big argument about the future of our economy, Ed Balls announced that he wants to see an unfunded, open-ended VAT cut. It would add £3,000 to the national debt for every working family in the country.

Everyone knows that Labour maxed out the nation's credit card in Government. We all know that Balls was behind every one of Gordon Brown's initiatives. His personal papers released earlier this month showed that he was personally behind the doubling of the 10p tax, and he personally knew that millions of low earners and pensioners would lose out.

Matthew Hancock MP: We can ensure growth whilst making cuts to reduce the deficit

Matthew Hancock is MP for West Suffolk and has contributed to the Social Market Foundation's new book, The Class of 2010, which is published today and includes contributions from a variety of new MPs.

The pundits and political soothsayers got it wrong. As the coalition was formed, almost all predicted the Coalition Government would be short and weak. Even now, most people think its strength is a surprise given the difficult times. Yet from my new seat in the Commons, I find that these difficult times do not weaken the coalition, but strengthen it.

These political dynamics are underpinned by a clear economic analysis: that it is only by following a credible plan to restore the nation’s finances to health that growth can sustainably be restored. Political opponents of the UK’s plan to deal with the deficit do not themselves have a plan to put in its place. Instead they raise questions about the cause of the fiscal hole we find ourselves in, the timing of action to deal with it, and where the growth will come from. These questions must be answered head-on.

Deficit Denial
Firstly, some deny the scale and cause of the problem. Too often, this includes a wilful attempt to confuse the deficit with the debt. The annual deficit, by which the debt rises each year, is the gap between what the nation spends and what it takes in taxes. At 11% of national income, the UK’s deficit was the highest in the G20 going into the crisis, rose fastest, and became the highest in our peacetime history.

Clearly before we can even touch the debt, the first act must be to tackle its growth: the deficit. After all, even while dealing with the deficit, the Government’s current plan will leave the debt rising every year of the current Parliament. Acting more slowly would leave the debt rising in the next Parliament too.

For those who accept the need to act, some then argue for delay. Taking longer to deal with the deficit would leave us with higher debt, so permanently higher interest costs, and greater cuts in other government spending. The indirect costs of delay are higher still, in terms of the loss of confidence and private sector growth.

Evidence is put forward about the likely number of job losses from dealing with the deficit. Yet even those who have estimated the likely cost in terms of jobs argue that inaction would be worse. A further argument is sometimes made that by reducing public sector employment, costs actually rise due to unemployment benefits and lost tax revenues. For anyone losing their job it is very difficult. But for this argument to be valid, the cost to the state of not employing someone must be higher than the cost of employing someone. Were this “redundancy fallacy” true, it would be a terrible indictment of the system. Thankfully it is not.

Sometimes they say that only deficit-funded growth will get the deficit down. So let’s go through the logical steps. They say increase the deficit to help growth, then the growth will help deal with the deficit. That collapses to saying we should increase the deficit to deal with the deficit. The argument so obviously defies logic it’s a surprise anyone serious uses it.

Matthew Hancock MP: Ed Balls was the architect of Britain's economic problems

Matthew Hancock MP was Chief of Staff to George Osborne during his time as Shadow Chancellor.

Ed Ball’s first pronouncement as Shadow Chancellor was to deny the deficit, and extraordinarily say that you don’t get the deficit down by getting to grips on spending.

It removes any vestiges of credibility from Labour’s economic position.

Alan Johnson at least admitted that Britain needs to deal with the deficit so we don’t leave our children burdened in debt.

But this is just the latest bad judgement from a man with a long history.

First, Ed Balls wrote the fiscal rules that brought Britain to the brink of bankruptcy. He was at the Treasury when they loaded PFI off balance sheet, and took a strong position of falling debt in 1997, built up the biggest deficit in the G7 before the crisis, and left Britain with the worst deficit in our peacetime history.

Second, he wrote the banking regulations that so spectacularly failed. He took away from the Bank of England the power to regulate the banks. Then at the height of the boom he was the City Minister who encouraged the banks to keep on borrowing.

Third, and much more recently, in August he said that the Coalition was wrong even to start getting to grips with the nation’s finances.

Now his argument is that we should spend our way out of debt. It has no credibility.

Until today, Ed Miliband had his first choice Shadow Chancellor, who was trying to pull him into the zone of economic credibility.

His second choice Shadow Chancellor Ed Balls by contrast is in denial about the deficit. He denies his part in causing it, and he is in denial about the sort of action needed to deal with it.

The British people know that our economy is in difficulty. They know Labour maxed out the nation’s credit card, and that unless we deal with it our children will be left in with our debts. With Dougie Alexander and Yvette Cooper in tow, Labour are led by Gordon Brown’s B team. They have lost credibility on the economy. We need to make sure they pay the political price.