Tackling Short-term and Long-term Cost of Living Increases
(Limited Text - Ministerial Extracts only)
Read Full debate18:58 - The House divided: - Ayes: 248 / Noes: 310 - Question accordingly negatived.
The Chancellor of the Exchequer (Rishi Sunak)
I am proud to speak today in support of a Queen’s Speech that will both ease the cost of living with billions of pounds of support for families and grow the economy, creating more jobs, more investment and higher wages.
The International Monetary Fund, the OECD and the World Bank have all warned that high inflation is the most acute challenge facing not just the UK, but the global economy. We are not alone in facing these challenges: covid has disrupted supply chains; Putin’s invasion of Ukraine has exacerbated the shock in energy prices; and businesses are facing shortages. The causes are indeed global, but, of course, the consequences are being felt here at home. Families up and down the country are being hit hard by the rise in prices of fuel, of food and of heating. I cannot say to people that this will be easy; the next few months will be difficult. There is no measure any Government can take and no law we can pass that can make these global forces disappear overnight. No honest Chancellor could stand here and promise that prices will not rise further, or that the Government can cover every extra pound on people’s bills.
Several hon. Members rose—
Rishi Sunak
I will give way in a second.
To suggest that no help is available, as some have said today, is both misleading and irresponsible.
Stephen Timms (East Ham) (Lab)
The other day, the Chancellor said that he could not increase benefits because of IT problems. At the start of the pandemic, quite rightly, he increased universal credit by £20 a week. Will he do that again?
Rishi Sunak
Given the right hon. Gentleman’s experience, he will know, perhaps better than me, that there are multiple different benefits on multiple different systems, and while universal credit does have the flexibility of being changed at different times—a policy, by the way, that the Labour party opposed at every step of the way—the remainder of benefits and pensions cannot be uprated mid-year. I am sure that my right hon. Friend the Secretary of State for Work and Pensions will speak to that later.
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
indicated assent.
Rishi Sunak
None the less, I am glad to see that the right hon. Gentleman supports universal credit. That is one thing that the Government are proud of introducing. The benefit can respond in a crisis, as it so admirably did.
John Cryer (Leyton and Wanstead) (Lab)
The Chancellor has just admitted that he could increase universal credit by £20, so why does he not do it?
Rishi Sunak
Because we want to make sure that we get support to everyone in a way that suits them. What we did do—and we heard this from the right hon. Member for Doncaster North (Edward Miliband) when he gave a case study on universal credit—is cut the universal credit taper by the biggest amount ever. That was the biggest tax cut that we have seen for people on low incomes, which is in contrast to the cherrypicked example that we heard from right hon. Gentleman. What does that mean for a single mother on universal credit, working on the national living wage, renting, and with two children? It means that that mum will be £1,600 a year better off this year. That is what this Government are doing. Help is there, and anyone seeking to pretend otherwise is simply causing more worry and more anxiety.
Robert Halfon (Harlow) (Con)
There is no recognition from Labour Members of the £22 billion that the Government put in to help with the cost of living, particularly the 5p cut in fuel duty. However, I do have one ask of my right hon. Friend. The oil companies are not passing the cuts to the pumps. They take ages to reduce the prices when the international oil price falls, but oil bosses are earning multi-million pound salaries and getting multi-million pound bonuses. They are, in essence, the new oligarchs. I urge him to consider both a windfall tax on the oil companies, which we can then use to cut taxes for the lower paid or to cut energy bills, and a pump-watch monitor to make sure that there is fair competition and that consumers get a fair deal at the pumps. None the less, I genuinely recognise all the work that he has done thus far to cut the cost of living.
Rishi Sunak
I thank my right hon. Friend for his advice and support, and I will come on to both of his points momentarily. He is right to remind the House that so far we have provided £22 billion of direct support. That is not a trivial figure; it is £22 billion of support to help families up and down our country at a time of challenge. We have taken action, as we heard, to cut people’s bills, starting with fuel duty—I commend him for his campaigns on that. It has been cut by 5p a litre, which is worth £100 this year together with the freeze, and council tax, cut by £150.
What the right hon. Member for Doncaster North did not mention was that that £150 of support, which, as we heard from my right hon. Friend the Member for Harlow (Robert Halfon), has made a huge difference to families, came faster than any support the Labour party was offering in its proposal, and it went to a far broader group of people than their proposal, because we wanted to support those on middle incomes as well.
Rishi Sunak
VAT would have been worth about, I think, £8 a month at the time. This is £150 in people’s bank accounts in April.
We also cut the taper rate on universal credit, giving an extra £1,000 to the average household. The warm home discount increased to £150, the national living wage increased, giving low-paid workers a pay rise of £1,000, and we will go further.
David Linden (Glasgow East) (SNP)
I want to take the Chancellor back to what he said earlier in his speech about the Government’s acting quickly on the covid crisis. Does he recognise that many of our constituents are in a crisis now? I know he is installing a new swimming pool in the house he lives in, but I can tell him that people in Glasgow East are struggling and his Government need to do more.
Rishi Sunak
This Government have always acted to protect this country at times of challenge; we have done so through the past two years and we continue to do so now. As has been said, £9 billion of support on energy bills was announced in February at the same time as the price cap was increased, and it covered 50% of the rise in bills—accepting and being honest with the House, as we discussed at the time, that no Government could cover every pound of an increase when we are in a situation with global inflationary forces, and that it would be both irresponsible and misleading to pretend to the British people that that was possible.
But we are going further: in October, a further discount on energy bills worth £200 and, in just a few weeks’ time, a massive tax cut for workers when the national insurance threshold is increased to £12,500. That is a £6 billion tax cut for working people, the biggest increase in a personal tax threshold ever, and it will mean that everyone in this country can earn £12,500 without paying a penny of income tax or national insurance. That means, in contrast with what we have heard, that 70% of working people will pay less tax this year than they did last year.
Taken together, all the measures I have just mentioned equate to a £22 billion plan to help cut costs for families and help people with the cost of living. Of course, as the situation evolves, our response will also evolve. I have always been clear that we stand ready to do more.
That brings me to the topic of a windfall tax. Unlike the Labour party, we Conservatives do not believe that windfall taxes are the simple and easy answer to every problem. However, we are pragmatic, and we want to see our energy companies, which have made extraordinary profits at a time of acutely elevated prices, investing those profits back into British jobs, growth and energy security. I have made it clear and said repeatedly that, if that does not happen soon and at significant scale, no option is off the table.
Global economic forces are indeed hitting the British people hard, and that is why the Government are stepping in to help. Ultimately, however, over the long term we on the Conservative side know that the best way to raise living standards is to grow the economy. That is why our economic plan and this Queen’s Speech will create more jobs, more investment and, crucially, higher wages.
During the pandemic, we provided billions in support not only to the economy, but specifically to businesses. Because of schemes such as furlough we were able to keep millions and millions of people in work, and the success of our plan for jobs is clear. As we heard from my right hon. Friend the Member for Forest of Dean (Mr Harper), unemployment right now is the lowest it has been in almost half a century, job vacancies are the highest they have ever been, and total pay is rising in real terms and is more than 4% higher than before the pandemic, even adjusted for the inflation we are seeing.
That does not happen by accident. It is the result of a responsible Conservative Government delivering a stronger economy—an economy that grew faster last year than any of our competitors. That strong recovery is making a difference to people’s finances. Taken together, the combination of policy measures the Government have announced and the growth in the economy offset around half the shock to incomes caused by higher global energy and goods prices. Half of that shock has been offset by the result of our actions to grow the economy and support people directly.
Of course we need to do more to create further economic growth. That is why this Queen’s Speech includes measures to do exactly that.
Dame Angela Eagle (Wallasey) (Lab)
Given that the right hon. Gentleman was just talking about growth in the economy, he will be aware that the Governor of the Bank of England and the Monetary Policy Committee told the Treasury Committee yesterday that growth would be negative in the fourth quarter of this year. Growth is slowing, unemployment is rising and inflation is soaring—is that not correct?
Rishi Sunak
I think the hon. Lady said unemployment is rising. No—it just fell this morning to the lowest level in almost half a century. I will come on to our growth figures in just a second, but we have had a strong recovery and are forecast to continue growing strongly relative to peers.
We do need to do more, and that is why the Queen’s Speech includes measures to boost our national infrastructure, to level up, to back financial services—one of our biggest and most successful sectors, employing millions of people across the country—to cut red tape, to use our new Brexit freedoms, to back British businesses, to reform higher education and to strengthen our energy security. We on the Conservative side know that over the longer term, the best way to create growth is to have an economy where businesses can invest more, train more and innovate more.
Dan Carden (Liverpool, Walton) (Lab)
While the Chancellor is still considering a windfall tax, I want to tell him about one constituent of mine who got in touch: a 62-year-old woman in Walton, who decided to disconnect from British Gas for fear of a bill coming through her door in a few months’ time.
Rishi Sunak
I am very sorry to hear about the circumstances of the individual concerned. I would be happy to talk to her directly, if that would help, but I hope the hon. Gentleman, in his role, can explain to her the support that is in place to support families such as hers, whether that is direct support with her energy bills, the £150, the fact that her national living wage may well be increased depending on her situation or, as my right hon. Friend the Secretary of State for Work and Pensions reminds me, the fact that she can talk to her local council to access the household support fund that is being doubled to £1 billion to provide direct support to those who are most vulnerable.
Several hon. Members rose—
Rishi Sunak
I am now going to make some progress. Our plan is to build the economy of the future. That is why, this autumn, we will cut taxes on capital, on people and on ideas to drive up growth and support businesses to do so.
While we are talking about growth, we have heard a lot during these debates—I think the right hon. Member for Doncaster North also mentioned it—about the Labour growth that we experienced between 1997 and 2010. It was obviously a very long time ago that we last had a Labour Government, so let me remind the House of the facts.
Under the Labour Government, the UK’s cumulative economic growth was third in the G7. Under this Government, despite having lived through the worst recession in more than 300 years, our cumulative growth is also third in the G7. Let us also remember that when the Opposition last arrived in office, unemployment was 7%. When they left, 13 years later, it was of course higher at 8%. New figures out this morning, as we have heard, show that today, the UK’s unemployment rate is less than half that, at 3.7%, the lowest in almost half a century.
The story is the same on public finances. The deficit in 1997 was 2% of GDP. By 2010, it was nearly 10%, and £1 in every £4 the Government spent was borrowed. There was, as we heard, no money left.
Richard Fuller (North East Bedfordshire) (Con)
May I add to what the Chancellor says that under this Conservative Government we introduced the living wage, which has increased wages for the poorest in our country at a higher rate than the last Labour Government ever had the courage to do, and we now have the lowest unemployment rate for 50 years?
Rishi Sunak
My hon. Friend is absolutely right. This year’s increase in the national living wage is worth £1,000 to someone working full-time who is on the national living wage. That will benefit millions of people, particularly those on a low income. That is our priority and those are our values.
The approach to borrowing that I have described is not the approach of this responsible Conservative Government. Today, despite having spent hundreds of billions throughout the pandemic, we are providing the highest sustained level of public sector investment in decades and investing record amounts in public services such as the NHS. This Government are on track to have borrowing low and debt falling again. That is our record: robust growth, more jobs and being responsible with the country’s finances.
History reminds us that, at times when we face severe supply problems, an unconstrained fiscal stimulus risks making the problem worse, pushing up prices still further and ingraining expectations of higher inflation—a vicious cycle leading inexorably to even higher interest rates and more pain for tens of millions of mortgage holders and small businesses. Let us be in no doubt, simply trying to borrow and spend our way out of this situation is the wrong approach; those paying the highest price would be the poorest in our society. Instead, the Government are taking a careful, deliberate approach. We will act to cut costs for those people without making the situation worse. We will continue to back people who work hard, as we always have, and we will do more to support the most vulnerable—and, unlike others, we will not simply borrow our way out.
So yes, we are helping families by cutting their costs, and it is irresponsible to suggest otherwise. That support will always be part of a broader plan to grow the economy, encourage investment and create more high-skilled, high-wage jobs, all built on the foundation of strong public finances. That is our economic plan. We are providing £22 billion-worth of support to help families with the cost of living. We are creating more jobs, more investment and higher wages. That is what this Queen’s Speech is all about, and I commend it to the House.
Several hon. Members rose—
Jonathan Ashworth
We are pushed for time, so I beg the hon. Gentleman’s pardon—but he can have a word with me when he is voting with us in the Lobby later.
Look at the realities facing our constituents: the cost of pasta is up 10%; milk, cheese and eggs, up 8.6%; butter, up 9.6%; cooking oils and fats, up 18%. And the message from Ministers? “Just purchase supermarket own brand.” “Buy value beans”—the new three-word slogan from the Tory party.
Another quotation of which the Chancellor may be aware is from Milton Friedman; I know the Chancellor is a big fan. Milton Friedman said:
“Inflation is taxation without legislation”.
But the Chancellor has legislated. Instead of helping people on universal credit, he legislated to cut universal credit in real terms—a loss of around £500. Instead of helping pensioners with the triple lock, the Government legislated to impose the biggest real-terms cut to the pension for 50 years, meaning a cut of more than £420 for the typical retiree.
The Secretary of State for Work and Pensions is about to embark on a programme of cutting the incomes of some of the most vulnerable people on legacy benefits as they migrate to universal credit. But it does not have to be like this, because—as the Chairs of the Treasury Committee and the Work and Pensions Committee, many charities and the Institute for Fiscal Studies have said—one could bring forward a proportion of the benefit increase pencilled in for 2023 today. Indeed, the Chief Secretary to the Treasury said a few weeks ago at the Dispatch Box that the 2023 increase in benefits and the pension will take account of inflation. The Government are promising to increase benefits and the pension in line with inflation in 2023, but in the meantime are sending the very poorest on a rollercoaster. Some 500,000 children will be pushed into absolute poverty.
To be fair to the Chancellor, he said, “We looked at this, but the IT system said no”. As many Members have said, it is a shame that his computer didn’t say no when he was cutting universal credit by £20. But I have been given a briefing note by Oracle, which I understand provides the IT systems for the Department for Work and Pensions, entitled: “How DWP transformed the backbone of the UK benefits system”. The note says that the changes that made to the computer system
“has built automation into…management—this allows DWP to make changes every week, rather than having to plan six months in advance”.
Mr Mark Bell, who is the deputy director at the Department for Work and Pensions, said:
“This has been widely recognised as one of the best technical achievements delivered by DWP Digital for many years…It also enabled us to make further digital enhancements to benefit millions of UK citizens.”
Technical lead Mr Nick Cutting says that this has brought “flexibility” and that it led to the Department being able to do things it
“never could have done, or that would have taken significant time at a significant cost”
if it was still running on legacy infrastructure. You see, Madam Deputy Speaker, the truth is that it is not the mainframe that is preventing the Government from acting; it is their frame of mind.
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
I appreciate that the right hon. Gentleman used to be a political adviser to the previous Government, but they did not have universal credit. What he is describing is universal credit, a system that the Labour party has consistently opposed. That is why we are able to make the changes; it is true and accurate, as he has just read out to the House, that it is the legacy systems that are the problem. That is why we cannot simply change the rates of all benefits as he wants us to do. The point is that we cannot do that, and he has read out the reasons to the House.
Jonathan Ashworth
The right hon. Lady has just confirmed that she is refusing to increase universal credit, with the consequence that 500,000 extra children will be pushed into poverty—[Interruption.] I am not misleading the House. I remember meeting her for negotiations over the pandemic legislation. We met in the offices of the Secretary of State for Health and Social Care. We said that we needed more support on universal credit and we came to an arrangement. She also gave a lump sum to those on working tax credit, which is a legacy payment. So if there is a will, the Government can do it, but the truth is that they do not want to do it.
The reality is that if the Government wanted to lift children out of poverty, they could do it. If they wanted to lift pensioners out of poverty, they could do it. If they wanted to prevent 250,000 families from being pushed into destitution, they could do that too. The fact that they will vote against the amendment in the Lobby tonight tells us everything we need to know about this Tory party. For them, rising child poverty is a price well worth paying.
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
It is an honour to conclude this debate on the Gracious Speech. Understandably, a lot of people have contributed today. I want to take this opportunity to join right hon. and hon. Members in paying tribute to Her Majesty in her platinum jubilee year. This is a Queen’s Speech that will deliver for the British people: safer streets, stronger schools, a secure supply of energy, speedier access to social security for those people near the end of their lives, streamlined financial services unlocking investment, stripping out unwanted EU regulation, and legislation to help level up across the United Kingdom. All these measures will help to grow the economy, which will help to address the cost of living challenge that families are facing.
We should remember that this is a global challenge. Countries around the world are having to deal with inflation, and the covid aftershocks are still ripping through the world’s supply chains. On top of that, Putin’s brutal invasion of Ukraine has exacerbated spiking energy prices. On this side of the House, we are the champions of freedom and democracy around the world and it is right that we do all we can to end Putin’s onslaught, but sanctions are not cost-free for us here at home. They come on top of the impact from covid. These are global inflationary forces, and it would be wrong to pretend that we can protect everyone from their impact.
Thanks to our strong recovery from the pandemic and having got the big calls right over the last two years—such as our plan for jobs—we have helped families across the country. We can see that in the labour market statistics published today. Our unemployment rate today is below the low level we saw before the pandemic. Not only that, it is the lowest since 1974. The number of people on payrolls is at a record high, and over half a million more people are now benefiting from a regular pay packet than in February 2020.
I am also delighted to say that we have met our 2017 commitment to get 1 million more disabled people into employment in 10 years. In fact, we announced today that we have hit 1.3 million more people. That is good news for people with disabilities and it is good news for the economy too. The level of youth unemployment is now at a record low. This means greater security, more financial resilience and better prospects for people.
David Linden
The Secretary of State talks about employment, but when I go to my local food banks, one of the things that people tell me on a regular basis is that the number of people using the food banks as a result of in-work poverty is up. What does her local food bank tell her?
Dr Coffey
The hon. Gentleman is right to say that food banks are present and providing support in many communities, especially where people are trying to work out the best way to spend their resources. He mentions in-work poverty, and it is why we have a plan for in-work progression, why we have been investing in skills, why we are investing in our jobcentres and why, through the plan for jobs, we are doing more to help people not only to get back into work but to get on in work too. That is what we are doing.
On top of the activity we have been undertaking, there are things we can do and are doing to cushion families from the worst effects of inflation and to ease the squeeze on household budgets. As my right hon. Friend the Chancellor set out, £22 billion has already been committed to support the hardest hit this year. The £150 of support for households in bands A to D is landing in people’s bank accounts, with a further £144 million discretionary fund available to councils. From October, the £200 reduction in energy bills will help families spread this year’s increased costs over the next few years.
We initiated the household support fund, through which we invested £500 million across the UK to help with the cost of household essentials. We are increasing that to £1 billion every year. For the second phase of the grant we have put a particular focus on people on fixed incomes, which is why a third is ringfenced for pensioners. That is on top of existing targeted support such as the warm home discount, cold weather payments and winter fuel payments. We are stepping in at this challenging time, and we are ready to do more to help.
We are discussing an Opposition amendment, and I make it clear that we will reject all Opposition amendments to the Queen’s Speech as a matter of precedent. The Queen’s Speech sets out the Government’s legislative programme for the year, and it is for my right hon. Friend the Chancellor to introduce fiscal measures, and he will make all future decisions on tax in the usual way. I reiterate that he told the House today that no option is off the table.
We know that the best way to raise living standards over the long term is to grow the economy, to invest in skills and to get people moving into and progressing in decent jobs. The latest statistics cut through the Opposition’s charge that poverty has increased since the Conservatives came into power. There are 1.2 million fewer people, including 200,000 fewer children and half a million fewer working-age adults, in absolute poverty, before housing costs, than in 2010. In March we published statistics that, for the first time, combine absolute low income and material deprivation among working-age people. Those statistics show a fall of three percentage points, from 3.1 million when we came into power to 2.2 million in 2019-20.
Alan Brown
Will the Secretary of State remind the House of how much money the Treasury puts towards the warm home discount?
Dr Coffey
The hon. Gentleman is trying to be clever, as he knows the answer is that it is a redistribution within the energy policy. [Interruption.] Would he rather not have it? Would he rather be with his fellow SNP people who voted against any rise in benefits at all? That is what several of his colleagues did. They did not vote for a lift in benefits.
After a decade of rising employment, we are building on our track record. We are ensuring that people have stronger incentives to work and can keep more of what they earn. Some 1.7 million working people on universal credit are, on average, £1,000 a year better off following our cut to the taper rate. Last month’s 6.6% rise in the national living wage has provided the lowest paid with an increase of £1,000 a year in their income, and in July the increase in the national insurance threshold will benefit 30 million working people, with a typical employee saving over £330 a year.
Stephen Timms
The Secretary of State mentioned today’s labour market statistics. Will she confirm that they show there are now half a million fewer people in employment than before the pandemic?
Dr Coffey
In my discussions with the chief statistician, he has said that more people are on the payroll than ever before. That is good news. I am conscious that there are people who are economically inactive, and the Government will set out how to challenge that. As the right hon. Gentleman knows, my main priority is those people to whom we pay benefits to look for work and making sure they get into work, but of course we will be extending our activity to try to get people back into the marketplace who have dropped out since the covid pandemic.
As I pointed out, 30 million working people will benefit from the rise in the national insurance threshold in July. With a record number of vacancies in the economy, we want more people to have the benefits that work brings. That is why we are focused on getting more people into and progressing in jobs, where they can boost their pay, prospects and prosperity. Building on our plan for jobs, our Way to Work scheme is getting people into jobs even more quickly, with the aim of getting half a million claimants into work by June. We can see a kind of magic in our jobcentres, as people really want to break free from that unemployment poverty trap. By the end of April we were more than halfway to our goal, and we know there is more to do. But our Way to Work scheme is helping people move into any job now, to get a better job tomorrow and to build a longer-term career. To help people lift off at work when they land a job, we are rolling out extra support for claimants to build the skills they need to progress in work.
All of this is underpinned by our programme to deliver on what Parliament voted for in 2012: to replace all the legacy benefits with universal credit, because people will always be better off working than not working, unless they cannot work. That is the magic of UC, unlike the cliff edges of tax credits, which stop people progressing the amount of time and skills they get in work. So we are getting on with it, having resumed the process to complete the move to UC by 2024. Given that we estimate that two thirds of people on tax credits would receive a higher entitlement on UC, this will be important in helping to increase incomes.
All of this stands in contrast to what is put forward by those on the Opposition Benches. I believe the Leader of the Opposition would scrap UC—it was certainly in his pledges when seeking to be elected as Leader of the Opposition. They would undo a decade a progress, leave people further from the labour market and penalise the taxpayer by failing to realise the benefits of a modern system.
My right hon. Friend the Prime Minister summed up our focus in his speech last Tuesday at the start of our debates on the Gracious Speech: “Jobs, jobs, jobs!”. We are talking about high-skill and high-wage jobs. These are clearly challenging times, but we will continue to provide the leadership needed to rise to those times, continuing to drive up the skills our economy needs and employment prospects across the country, and putting more pounds in people’s pockets. This Queen’s Speech will grow the economy, level up our country, spread opportunity, and strengthen security and prosperity for all the British people, through the covid aftershocks and for decades to come. We therefore continue to commend the Loyal Address, unamended, to the House.
Question put, That the amendment be made.