Cameron is taking families back to the future - Labour will move them forwards

The PM has hit families with a triple childcare whammy of falling places, rising nursery costs and cuts to support. Labour will show there is another way.

The reports published today by the Joseph Rowntree Foundation on family breadwinners and poverty are a wake-up call to a government hell bent on turning back the clock on child poverty and family opportunity.

The NatCen and IPPR reports for the JRF show the true depth and extent of those on the breadline, with many working families struggling to make ends meet as David Cameron’s cost of living crisis bites. The reports show that the risk of poverty is greater for children in couple families with one traditional breadwinner, with single-earner families comprising 30 per cent of the families with children in poverty in 2011/12. The reports show that 55 per cent of families in poverty have someone in work, a shocking indictment of a government allegedly committed to making work pay.

Under David Cameron many families are finding one income alone is not enough to balance family budgets at the end of each month. He has hit families with a childcare triple whammy of falling places, rising nursery costs (up six times more than wages last year) and cuts to support of up to £1,500 for some families. The JRF rightly highlight affordable, quality childcare as a key driver for tackling low maternal employment and boosting family income. Labour’s new agenda does just this.  

Labour in government made headway on these issues. The IFS has shown that during our time in office both absolute and relative poverty fell markedly. Increases in employment helped to raise family income alongside tax credits, the national minimum wage, support for childcare and investment in the early years.

David Cameron is taking us back to the future with prices rising faster than wages in 40 out of the 41 months he’s been in power. The Tory-led government is pushing families into poverty and many low paid women can only access poorly paid part-time jobs because of a lack of accessible and affordable childcare. Universal Credit will create further barriers to work for some second earner households and some women will actually pay to work if they increase their hours. Under Universal Credit, as soon as a second earner enters work, 65p of every £1 earned will be lost to withdrawn benefits. This could affect 900,000 potential second earners disincentivising work and perpetuating poverty and inequality.

Labour’s new agenda will make a difference for working families making work pay and helping parents balance work and family life. Giving parents a primary childcare guarantee to help them manage before and after school childcare will ease the logistical nightmare some face and give parents more flexibility to work. Labour will legislate so that parents can access childcare between the hours of 8am and 6pm through their local school. Extending the provision of free childcare for three and four year olds from 15 to 25 hours a week for working parents will help mums, and it is still mainly mums, to work part-time without having to worry about childcare costs. This is worth around £1,500 per child for hard pressed working families. Shared parental leave is important as well. It is crucial in giving women the choice and the chance to return to the same job and retain their earning potential, rather than taking time out of work after they have children which, for many, means they will never again have the same pay and status.

Affordable high-quality childcare, make work pay contracts for companies paying the living wage and better family-friendly policies are all part of the new agenda Labour is developing. Our new agenda is a sign of our intent for a better future for families and children.

Ed Miliband speaks to an audience on living standards at Battersea Power station on November 5, 2013 in London. Photograph: Getty Images.

Lucy Powell is MP for Manchester Central and Shadow Secretary of State for Education. 

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation