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Baroness Drake
That this House takes note of the impact of the cost of living on the public wellbeing.
Baroness Drake (Lab)
My Lords, the real and present danger of rising inflation is clearly and obviously undermining public well-being. It is common cause to want to increase growth, but the questions of how to, who benefits and who suffers on the journey plan are at the heart of the markets’ and the public’s failing confidence in the Government. The Government have frightened the ordinary people whose interests they were elected to protect.
The Government are now so deeply divided that chaos will of itself undermine market confidence in the UK. Borrowers faced paying the price for the market’s lack of confidence in the mini-Budget, and millions will now feel the cost of regaining it. The Prime Minister’s Budget undercut key institutions, came with no OBR forecast, lacked detail about costing, worked at cross-purposes with the Bank of England and led to dramatic shifts in the financial markets. Her approach invited no restraint and certainly did not consider public well-being.
Of course there are global pressures, but there is a unique UK government contribution. The chief executive of the Resolution Foundation called it
“the biggest unforced economic policy error of my lifetime … Lower taxes combined with a loss of market confidence mean rising interest rates, leading to higher mortgages and lower living standards.”
Rishi Sunak observed:
“We cannot make it worse. Inflation is the enemy that makes everybody poorer.”
Unfortunately, it was made worse—much worse.
On 23 September the fiscal Statement was delivered against the background of a rising cost of living, weak growth and rising interest rates. Kwasi Kwarteng said that it was
“a new approach for a new era … For too long in this country we have indulged in a fight over redistribution”,—[Official Report, Commons, 23/9/22; cols. 934-38.]
and that the new Government would “focus on growth”. That was a defining Statement. It conveyed the view that arguments over redistribution are an indulgence, that planning for the public well-being is separate from achieving economic growth and that the public benefits of growth would trickle down from the spending and investments of rich people and big corporations who are taxed less.
On trickle-down, oh so many authoritative sources reinforce the IMF view:
“We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down.”
Gross domestic product is an important measure of national performance. It indicates changes in the size and overall strength of the economy. There is growing recognition, however, of the limitations to the use of GDP because it fails to capture many things that society may value. There is a growing view that traditional economic measures should be complemented by well-being measures to inform policy and spending priorities. To lift from a Bank of England explanation:
“GDP doesn’t tell us anything about how evenly income is split across the population. Growth could mean everyone becoming better off or just the richest segment getting even richer.”
In 2018 the Treasury Green Book guidance on public sector appraisal and evaluation was revised to include references to well-being at all stages of policy development. I doubt that guidance got an airing in the preparation of the mini-Budget. The ONS has a well-being measurement framework consisting of 10 domains. I cannot cover them all but they include the economy, personal finances, where we live, health, personal well-being and the environment. As the FT reported, the ONS September figures confirm the stress that inflation, falling real wages and rising mortgage rates are placing on households, and the proportion in financial difficulty is increasing. One-fifth of Britons are being forced to borrow more to meet payments and half are unable to save at all. One-third have struggled to meet mortgage payments and we have not seen the full extent of the hikes in mortgage rates. Three-quarters—77%—of adults are worried about the rising cost of living. The experience of Step Change, the debt charity, aligns with these findings.
High inflation does not impact everyone equally. New Economics Foundation modelling shows that, on average, price increases have pushed up the cost by £2,300 a year of an essential basket of goods and services—the minimum income standard measured by Centre for Social Policy research. This rise for the poorest half of families is nine times larger than for the richest 5% as a proportion of income, and six times larger for middle-income families. Middle-income families are increasingly impacted. An additional 2.2 million people across 900,000 households will see their incomes fall below that standard in 2022, despite having average earnings from work of £33,000.
These findings and those of the IFS, the Resolution Foundation, the Legatum Institute, the Joseph Rowntree Foundation and many others confirm the importance of uprating universal credit and legacy benefits by inflation for the many stressed individuals and households. You do not get a clean slate by asserting that it is a new era; you have to carry the consequences of the impact on public well-being of the sustained cuts in social security benefits over the past 10 years and the compounding effect of future cuts. Asserting a clean slate is not enough.
Few things are more important for public well-being than a roof over your head, but mortgage rates are up, rents are rising, the stock of housing is stagnating and homelessness is rising. Adults in their 30s and 40s are now three times more likely to rent than 20 years ago. Household debt is rising. Household financial resilience is already in decline in the UK. Some households can weather the storm, but many others lack the resilience to do so. Employment benefits, social security benefits, private insurance, savings, affordable credit and fewer pre-existing debts strengthen financial resilience, but all those factors have been weakening. The majority of employers now pay only statutory sick pay of £90.33 a week, 11.5 million adults have less than about £100 in savings and 65% have no form of life or protection insurance.
Recent ONS findings on household financial resilience confirm that the proportion of households in financial difficulty is rising. Its opinions and lifestyle survey uses the affordability of an unexpected expense of £850 as a measure of financial vulnerability to identify those most at risk. More than one-third of adults reported that they could not afford such an expense. The groups more at risk and more likely to report that they could not afford an unexpected expense included adults on lower incomes, 40% of parents, 53% of adult renter households, disabled adults’ households, adults who were divorced or separated and adults in regions outside the south-west, south-east and London.
The Bank of England reported that credit card borrowing rose at its fastest pace in 17 years. When children live in stressed households, their physical and mental health suffers, as do their education and life chances. Increases in child poverty levels in England between 2015 and 2020 were associated with more than 10,000 additional children entering state care. Does the Minister agree with me that the volume of evidence on the stress of households now confirms the importance of uprating universal credit and legacy benefits by the rate of inflation?
Levelling up is a flagship policy that risks stalling. The phrase is disappearing from the Government’s lexicon. Rising inflation will reduce public investment and undermine the very prospects of private investors turbocharging regional growth. It will drive up regional inequalities in economic performance, life chances, health, income, education, children’s wellbeing and public services. If regional inequality is not at the heart of a growth plan, neither is wellbeing.
The Institute for Fiscal Studies observed:
“We’ll know we are on the way to levelling up when differences in health and life expectancy across the country start to drop. Sadly, that’s one measure of inequality that has clearly been moving in the wrong direction over the past decade.”
Female healthy life expectancy at birth in the most deprived areas was 19.3 years less than in the least deprived areas. For males it was 18.6 years less. ONS figures show that since early 2020, almost 400,000 people exited the jobs market with long-term health problems. The Government committed to addressing the wide inequalities in health outcomes between deprived and well-off areas, between white and BAME populations, and between north and south. So where is the promised White Paper on health disparities that was so integral to Boris Johnson’s declared mission to take “bold action” to address them? May I ask the Minister where is the White Paper? Has it been dropped?
The rising cost of living will drive more people into poverty, with serious consequences for health. New polling from the Royal College of Physicians shows that over two-thirds of people are more worried about their ability to stay warm and healthy at home this winter compared to last winter. A recent issue of highlights from the Lancet Public Health emphasises the relationship between changes in individual or household income and mental health and well-being.
The Money and Pensions Service reveals that three in 10 people—30%—report problems with mental health, up from 21%, particularly among the working-age population, linked to worse financial well-being. The Government’s health and social care Statement confirmed that the NHS backlog was rising and acknowledged that there is too much variation in social care across the country. They want to free up beds, with a focus on discharge to home or care home, to address the waiting list of 7 million. Following the scrapping of the health and social care levy, the funding increase for health and social care, based on forecasted receipts that would have been received from the repealed taxes—an estimated £13 billion per year—will now follow from general taxation. How will the Government replace the money that will no longer accrue from the health and social care levy: through raised taxes, more borrowing or public expenditure cuts elsewhere?
The levy was the answer to Boris Johnson’s promise to fix the social care crisis “once and for all”. Is it still the Government’s belief that the funding that will be taken from general taxation, instead of the hypothecated tax, will still fix the social care crisis once and for all, or has their view changed?
Given the stress on households, both economic and well-being measures must be brought into the evaluation of the decisions the Chancellor is currently considering. Market confidence needs to be restored but the public will want to understand the trade-offs the Government will now be making, and the implications for their national interest and their well-being, because currently they cannot—and they will want to know. I beg to move.
Baroness Sherlock (Lab)
My Lords, my noble friend Lady Drake has done a characteristically brilliant job of describing the impact of the rising cost of living across the whole landscape. I will focus specifically on the impact of inflation on low-income households, especially those who depend on benefits for their survival. I warn noble Lords up front that this will get techy and dull in parts but, frankly, given what is happening down the other end, a bit of dullness would not do us any harm.
I get really cross when I hear jibes, to this day, about the idle poor and Benefits Street. If we are to be a country where your well-being is not determined solely by having chosen your parents with care, we need a thriving welfare state. We have the basics of it there but we do not need one that is simply a safety net. We also want something that can fulfil its original ambition to be a companion service to the NHS—something that pools risk across the population and across lifetimes, so that we pay in, work and contribute when we can and we take out when we cannot or when our needs are greater. We need a system that helps us: when we cannot work or can work only part-time; when we retire; if we get sick or injured; or if we are caring or bereaved.
We have a system but for it to work, benefits need to keep their value. Prior to 2011, rates were linked to the retail prices index—RPI—or a variation called Rossi. From 2011, they were linked to the consumer prices index—CPI. Incidentally, that RPI to CPI shift saved the Government a lot of money at the expense of the poor. The current measure used for uprating is the CPI 12-month rate for the September before the April when the increases take effect. That gap between September and April is allegedly there to allow the computers to be updated but, at a time of rising, high or unstable inflation, it can cause problems.
For example, the CPI rate in September 2021 was 3.1%, so benefits rose in April by that much; unfortunately, in April inflation was 9%. The CPI rate in the month just gone was 10.1%. Logically, that suggests benefits would rise by 10.1% in April—but if they do, the IFS says that would leave their real value around 6% below pre-pandemic levels, equivalent to about £500 per year for the average out-of-work claimant. That is because the rise last April was so much lower than inflation.
As noble Lords will have heard, many Ministers are now suggesting that CPI inflation uprating is too generous, and that perhaps some lower figure should be chosen. Does this mean that indexing is becoming a one-way bet, so that if inflation is low in September it must be stuck to, but if it is high in September it has to be rethought? What is the argument? Maybe it is that inflation is different for those on lower incomes. In fact, it is different. The ONS figures on inflation show that rising food prices were the biggest driver of rising inflation, at around 14%, but of course the poor spend far more of their income on essentials such as food. The IFS estimated that even with the energy price guarantee, from this month the poorest 1/10th will face an average inflation rate of 14%, compared with 10% for the richest. So maybe Ministers are arguing that these are very special circumstances, and that for one time only we have to move away from uprating by inflation, but let us look at what has happened since 2010.
The coalition Government limited most working-age benefits to a 1% annual increase for three years from 2013-14. The Conservative Government then froze those benefits in cash terms at their 2015-16 levels for another four years, so for seven years the value of benefits was slashed year on year, saving around £4.7 billion. Those cuts are baked in because every year future increases are a percentage of that lower value. That is before I even mention all the other cuts in benefit support—the two-child limit, the benefit cap, the bedroom tax, cuts in housing and council tax benefits, Sure Start and so much more.
Why would they do it? Ministers may say that they had no choice given the financial circumstances but let us look at a detailed study by Ruth Lupton et al, The Coalition’s Social Policy Record 2010-2015, which found that
“the poor bore the brunt of its changes to direct taxes, tax credits and benefits”.
Meanwhile, with the exception of the richest 5%, those in the top half of the distribution were net gainers. The report concluded:
“Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction.”
Those austerity cuts were not needed to cut the deficit but to pay for tax cuts. Recently, when Ministers announced that they were going to cut taxes and might need benefit cuts to pay for them, this was a shift in scale rather than principle—albeit, I grant, a pretty dramatic shift in scale. I still cannot quite believe that we have seen a Government who have imperilled the stability of our entire economy, driven up inflation, interest and mortgage rates, and put pension funds at risk, then have the nerve to suggest that low-income families should pick up the bill for it.
Instability really matters on a macro scale because it shakes markets and makes us all poorer. It also matters on a micro scale because, when you can only just make ends meet, above all you need certainty. I am sure other noble Lords have had similar experiences, but I have never met so many people so scared about how they are going to manage in the weeks and months ahead. They are terrified that they cannot pay their bills, feed their kids or keep a roof over their head. Not only do we now have some 2,500 food banks, but already roughly 1,000 churches and 200 libraries have registered to become warm, welcome spaces because people cannot afford even to sit in their houses and heat them.
The problem with the rollercoaster politics we have been having is that no one trusts anything. Last night BBC News interviewed a pensioner, Betty from Sunderland, about the cost of living. She said:
“It fills you with dread. Are we going to have to start living on what little bit we’ve got saved? When that’s gone, where do we go from there?”
Faisal Islam told her the Government had decided they would after all uprate the state pension. She replied:
“That’s today. What happens tomorrow? They could change their minds by tomorrow because every day they change their minds.”
Quite so. This is not a game It is a life-or-death matter for millions of our citizens and they deserve better. I urge the Government to get a grip or get out.
Baroness Tyler of Enfield (LD)
I congratulate the noble Baroness, Lady Drake, on her excellent opening speech and refer to my relevant interests in the register.
As we speak, we are witnessing political turmoil of a kind I have not seen in my lifetime. Frankly, we are a laughing stock on the world stage. All of this makes me very angry because it is ordinary people who will pay the price, and that is what we are debating. On 23 September we were already in a cost of living crisis, with the highest inflation in 40 years and the nightmare of out-of-control energy prices. Events since then have caused massive further anxiety, fear and distress for millions of our fellow citizens. The cost of living crisis we are experiencing and the impact on public well-being is simply dire. All the research on well-being shows that not being able to meet basic needs has a negative impact on well-being individually, as families, communities and as a nation.
How did we reach this parlous state? It just does not wash to blame it all on Ukraine and other international factors. The market’s response to the so-called fiscal event of 23 September—the completely unfunded and by far the largest giveaway Budget in 50 years—was instant, brutal and devastating, both for the UK economy and us all as individuals. Sterling plunged; gilt yields rocketed; mortgage rates rose by well over two percentage points; and major players in the pensions market came close to insolvency. The outgoing Prime Minister’s much-lauded but quickly junked growth plan led to the UK losing overnight our much-cherished global reputation for fiscal probity and sound financial management.
Instead of it being a case of going too far too fast, the truth is that the growth plan did not survive its first contact with economic reality. The immediate result was to crash the economy. It is ordinary citizens—particularly the most vulnerable and the lowest paid—who are going to pay the highest price. Fast forward a few weeks: the IFS and others estimate that there is a remaining black hole of around £40 billion still to be bridged in the Chancellor’s Budget on 31 October. The Chancellor has said that he will be identifying a mixture of further extraordinarily painful cuts in public expenditure, together with increases in taxation. No matter what the Chancellor does, however, the UK will be paying a significant political risk premium to lenders not just for months but for years to come. One very visible effect of this is that millions will be paying higher mortgages and rents of several hundred pounds a month for years to come. It is no wonder that people are anxious, and public well-being has nosedived.
Jeremy Hunt has stated that he will be keeping the most vulnerable at the centre of his attention, which is clearly right. However, he is still refusing to confirm that universal credit will be raised next April in line with an inflation figure of well over 10%. The energy price guarantee—which, of course, was very welcome—has now been reduced from two years to six months. History will judge both the politics and the economics, and will allocate blame for the mistakes made on 23 September and subsequent events. Today, however, we are focusing on what we can do to support the millions whose already fragile sense of personal well-being has been further battered by all this turmoil and to protect them from the worst effects of that £40 billion of further cuts and tax increases still to come.
The context is not promising. Inflation is at 10%; food inflation is at 14% and real wages for many are at a 40-year low. According to a recent British Psychological Society survey, 55% of people feel more anxious about being able to pay their bills than they did this time last year; more than a quarter said that worrying about money was making them feel depressed; only 27% felt confident that they will get by financially this winter, and 52% said they were concerned about not being able to afford food. Other recent surveys have shown an estimated 11 million people feeling unable to cope. Anxiety about the rising cost of living is estimated to be affecting half the population; 50% of the population report that they have had to reduce expenditure on essentials—food, toiletries and petrol—over the past few months. Use of food banks, as we have heard, including by people in full-time employment, is skyrocketing. Millions are extremely anxious about how they will be able to feed their families and children. An estimated 1 million children are in food poverty and not receiving free school meals. Fuel poverty is estimated to have tripled, with many saying that they feel too scared to open their energy bills.
This cost of living and well-being crisis requires an urgent and meaningful response. This toxic cycle of mental health problems and money worries demands immediate action from the Government, regulators, employers and firms to stop the cost of living crisis becoming a mental health crisis. Many charities, think tanks and external commentators are generating policy responses and ideas. Foremost among these are: raising all benefits, including universal credit and disability benefits, in line with inflation on 1 December; reviewing and then revising in line with inflation all benefits, not only every 12 months but every six months, starting from next April; moving all children from families living in food poverty into free-school-meal programmes; providing further targeted cost of living payments to vulnerable groups still falling through these new safety nets; strongly encouraging mortgage providers and landlords to restructure payments for those struggling with payments, with a view to minimising home possessions and evictions; requiring the appropriate regulators to work with the energy companies to ensure that they make all possible efforts to secure payment restructuring for bill payers and provide a compassionate response to customers; ensuring energy companies make further financial contributions to the financing of the energy price cap; and ensuring—this is very important—provision of adequate and accessible debt advice services and debt relief schemes to prevent people from spiralling ever further into debt.
Finally, it is vital that the Government commit to funding mental health services, as set out in the NHS Long Term Plan, and publish the promised 10-year cross-government mental health and well-being plan and the health disparities White Paper. I hope that, when the Minister winds up, he can assure me that the measures I have highlighted, and others that we will no doubt hear about today, are being urgently considered.
Finally, there is a time when you have to say, “Enough is enough”. So could the Minister also say when this Government will finally do the decent thing and call a general election?
Lord Layard (Lab)
My Lords, we all know the problem facing our country: as a nation, we have become poorer. Our import prices have risen more than our export prices and, on that account, we are 5% poorer than we were a year or so ago. That is a lot of money—over £100 billion a year—and it is something we cannot escape.
This is the issue that the Chancellor is facing: who should bear the cost of the loss in our national income? It could be working people, the owners of capital or the public services—those are the only three parties that could be cut to bear this cost. Or it could be some combination. This is an agonising dilemma; I think the Chancellor called it “eye-watering”. So how should the Chancellor decide between these three parties and the sub-groups within them? What criterion should he use to make the decisions? The answer of course lies in the brilliant way in which my noble friend formulated the issue for this debate: it should depend on the way in which each of the alternative options would affect the well-being of the population. This is the new approach—it is totally feasible, and we should adopt it.
For example, we know a lot about what affects well-being. The first thing we know is that a loss of real income matters more to the poor than to the rich. To be specific, the loss of £1 hurts a person on low income 10 times more than someone who is 10 times richer. So, as others have said, the top priority for the Chancellor must be, as other speakers have said, to fully protect the real incomes of those on lower incomes.
When it comes to richer citizens, there are real issues about what is most important to them at the margin: is it their own spending power, in real terms, or is it also the services on which they depend? Here, too, well-being science provides important insights. In explaining the spread of well-being, real income is not the most important thing: health always comes top, especially mental health, as the noble Baroness said. Then comes stable family life, happy work and workplaces and safe communities—and only then comes income. When people are asked—in a survey commissioned by Sainsbury’s, for example—about their main worries in daily life, it may surprise Members of this House and the political class that the order is the same: income and debt come about sixth in the list. So public services are crucial to all of the other things that affect well-being, as well as income.
We desperately need a fully functioning NHS, proper social care and a functioning court system—and we do not have any of them. We also need safety on our streets. These services are already under massive pressure, which will get worse due to unanticipated inflation. The last thing they need is further cuts of the kind that are being discussed these days. So, if well-being is the goal, services also have a case for some inflation protection—why are we going to protect only households and not services? At the very least, they should not be subjected to further cuts. To balance the books, we have to look elsewhere: proper taxation of excess profits in the energy sector, for example, and a sensible approach, from next April, to how far we protect the real incomes of families with above-average incomes.
Let me give some illustrative figures that I think are relative to the issue of what is in the interest of people with above-average income. If a person suffers from clinical depression or an anxiety disorder such as PTSD, their well-being—measured in terms of life satisfaction—falls by 0.7 points out of 10. Similar is true of addiction, personality disorder and eating disorders, which wreak havoc on so many families and communities—0.7 points out of 10. By contrast, if a person’s real income is halved, their well-being falls by 0.5 points or less.
Let us apply these apply these numbers to the Chancellor’s dilemma. He could be spending money on psychological treatments. Good ones exist for most mental health conditions but are simply not available to millions of the people who need them. An extra £1 billion a year here would make an incredible difference. By contrast, the Government presently spend £120 billion annually on protecting people’s real incomes. There is a huge difference there.
We could just ask: suppose we took £1 billion away from the protection offered to people with above-average incomes and gave it to mental health? What would happen to well-being? I can tell noble Lords from the evidence that the impact on well-being of giving £1 billion to mental health would be 50 times higher than giving the money to people with above-average incomes. I think that calculations for other public services would confirm the case for at least protecting them, and probably expanding them.
We constantly hear, as if it were shocking, that public expenditure is now at its highest level relative to national income than at any time since the 1940s. Of course, that is just as it should be. It is exactly right. As people get richer, the impact of extra income on their well-being declines. That is what economists for several centuries have called the diminishing marginal utility of income. But if you think about the impact of health on well-being, that remains exactly the same, however rich you are. So do the impacts of ignorance, loneliness, addiction and crime. We should be giving proper attention to the public services which can help us with the things of enduring importance to human beings; in particular, the social infrastructure of their lives.
If we want to maintain national well-being in these difficult times, the top priorities must be to protect the real incomes of the poor—I hope the Minister can say something about that—and to protect the public services on which we all depend.
Lord Howarth of Newport (Lab) [V]
My Lords, the cost of living crisis, so catastrophically intensified by Liz Truss and Kwasi Kwarteng, has been developing for a long time. It was an illusion that inflation had been abolished. Eventually, printing money on an industrial scale by quantitative easing unleashed inflation and central bankers were wrong to suppose it would be transitory. Inflation generates inequality. More than a decade of QE led to a gross inflation of asset prices and vast inequalities of wealth. We know from the research of Kate Pickett and Richard Wilkinson that more unequal societies suffer more severe pathologies in physical and mental ill health, the well-being of children, teenage pregnancies, drug abuse, violence, prison populations, destruction of trust and of community life.
Combining monetary laxity with fiscal austerity, the policy choice of David Cameron and George Osborne, led to a harsh and damaging erosion of public services and physical environments. We know from the research of Michael Marmot that poor conditions in which people are born, grow, live, work and age are social determinants of poor health and well-being. Poverty brings anxiety and depression, and people in poverty have suffered more from Covid. The Health Secretary has suppressed the health disparities White Paper, but the Government should acknowledge this. A deregulated private sector and an obstinately misplaced faith in trickle-down economics—the creed of Prime Minister Truss—have produced a long-term stagnation of wages and, in combination with a pitiless scaling down of the social security system, the emergence of a gig economy and a precariat who live in chronic insecurity and economic stress. In-work poverty has become normalised.
The Conservative emasculation of the welfare state—most recently Rishi Sunak’s cut to universal credit, but worse is now threatened—has meant that more and more people have had to rely on food banks. The food banks now report that they are in crisis, dealing with unprecedented demand. People on lower incomes spend a larger proportion of their resources on the items whose cost have shot up the most: food and energy. Food inflation—inflation for the poor—is now around 14%. People are driven to cross off their shopping lists healthier items that have become even more unaffordable. The Food Foundation charity reports that, in September, nearly 20% of low-income families experienced food insecurity. A very worrying number of people say that they have not eaten for a whole day. Professor Marmot warns that the alarming increase in hunger points towards more stress, mental illness, obesity, diabetes and heart disease for those who are worst off.
QE also wrecked the housing market by hugely boosting the prices of homes and rendering it impossible for people on modest incomes with modest savings to buy, or even to rent, a home in large parts of the country. Not to have a secure roof over one’s head, and to despair of entering that state, is profoundly inimical to well-being.
Since 2010, there has been no effective strategy to tackle our central economic problem of poor productivity. Without a strategy for productivity—how are the Government to pay for it now?—we have no prospect of non-inflationary growth and increasing prosperity for all. On top of all these failures, the post-Brexit transition to a new trading relationship with the EU has been handled ineptly. Then came Covid, hammering business, employment and the national finances, as well as creating widespread fear, grief and impoverishment. After that came Putin’s invasion of Ukraine, with a further colossal disruption of trade and the disastrous increase in energy costs. So Liz Truss and Kwasi Kwarteng are not the only authors of our present national predicament, but what these callow politicians have done is criminal: at a juncture when sensitivity, caution and competence were crucial, they arrogantly, heartlessly and idiotically made our predicament vastly worse. Their fiscal recklessness has caused the pound to weaken, importing more inflation, and the cost of borrowing has soared for the Government, businesses and home buyers, in what the markets are calling the Truss premium.
At least another £35 billion of spending cuts or tax rises are required. In 2010, cuts in spending were accompanied by monetary easing; the consumer prices index in 2010 was 3%, whereas now it is over 10%. In 2022, we have to look forward to both fiscal and monetary austerity and deep recession, with all the pain and fear that this will bring. People whose pay falls far behind inflation are going to be hungry, cold and frightened.
Throwing away the reputation not just of the Conservative Party but of Britain for financial prudence, resolute control of inflation and competent economic management will cause our country to be poorer and those who are most vulnerable to live in greater poverty and insecurity for a long time to come. The cruelty of the Prime Minister’s hints and throwaway lines—for example, about de-indexing benefits and ending tenants’ security—has been chilling.
To people on the margin, an assault on their living standards will make them sick with anxiety. It will also make them bitter about inequality and the contempt they discern on the part of those who are comfortable and those who govern them. Inflation dissolves the ties that should hold our society together. It robs people of the real value of their income, their savings and such security as they have. It generates mistrust, resentment and fear.
If we are denied a general election, which is clearly what is required given the collapse of the Government and the rotten state of the Conservative Party, we must hope against hope that the new Chancellor and the new Prime Minister will reshape policy to ensure that financial stability and the trust of the markets are restored; and that in the grim process of retrenchment, the broadest backs carry the heaviest burdens and the neediest are protected, while an intelligent strategy for economic reconstruction, with due focus on well-being, is implemented. We need a Labour Government to do this.
Lord O'Donnell (CB)
My Lords, I am delighted to contribute to this very timely debate. Noble Lords will be surprised to hear that it marks a big step forward in the policy approach taken by the Government. I had been very dubious about the idea of maximising growth, wondering, “Growth of what?” But, thanks to the Leader of the Commons, we now know that the focus of the current Prime Minister
“is on the wellbeing of every one of our citizens.”—[Official Report, Commons, 17/10/22; col. 378.]
Wow. That is an incredible surprise. I very much hope that the next Prime Minister will continue that emphasis.
Let us be clear: maximising GDP growth is really stupid. It is not something that any grown-up would want to do. As the noble Baroness, Lady Drake, said, GDP basically measures a pound, irrespective of who gets it; one pound to the millionaire counts the same for GDP as one pound to someone on universal credit; and one pound to someone in the richest part of the country counts the same as one pound to someone in the poorest, most deprived part. So how do you reconcile levelling up with maximising GDP growth? They are wildly inconsistent. On top of this, Simon Kuznets, the economist who put together GDP in the 1930s, begged us not to use it as a measure of success; it is a measure of activity.
Having been a Permanent Secretary to the Treasury, I can tell you that maximising GDP growth is completely straightforward. I could do it like that. I could concrete over the south-east of England and build lots of houses or, if you want something a bit more radical, I could explain that we should just get rid of charities and volunteers: we should stop anyone volunteering and tell them they have to get out on the streets and take up prostitution or selling illegal drugs, because both of those count in GDP, but volunteers do not. You would have to be stupid to think about maximising GDP.
There is a far superior goal, which Richard—the noble Lord, Lord Layard—has worked on tirelessly for many years: maximising well-being and, in particular, reducing inequalities in well-being. The simplest way to raise well-being for all is to work on those at the lowest levels of well-being, as the noble Lord laid out. That would mean, first, spending a lot more money on mental health services. We know how to do this.
As the noble Lord said on the cost of living crisis, this is a terms of trade effect. There will be costs and they will hit people on lower incomes in particular. If we respond by cutting public spending, those who rely on those services will be damaged even more. You will have a really bad well-being impact if you go down the route that we are beginning to think might happen.
As the noble Baroness, Lady Drake, said, the Chancellor has a handy little book that can tell him what to do: the Treasury Green Book on investment appraisal. It has supplementary guidance on well-being, which has just been updated. I commend that to the Chancellor—let us hope he is still there. I understand he is not standing to be the next leader, so let us hope he is still around.
Let us imagine that we are going to take this seriously; that we are going to have a well-being approach to handling the current cost of living crisis. What would you do? First, you would look again at the energy support package. You are giving a lot of money to a lot of very rich people. You could target that support much better and get a massively bigger well-being impact using the numbers that Richard—the noble Lord, Lord Layard—mentioned.
Secondly—we have just had this debate—the Behavioural Insights Team, which I am proud to have had a role in setting up, should be working 24/7 to give us the tools and information that can allow us to improve our energy efficiency. We are being far too timid and far too slow. All we need to do is go to Germany. German energy usage is down by 20%. They are turning off the lights at 9 o’clock in Berlin. Public buildings have been ratcheted down. There are lots of things we could do. We need to get on with this now, encouraging people and allowing them to make those really sensible decisions. So, get those going.
Thirdly, seeing the former Permanent Secretary to the Treasury in his place, I know that he will be completely with me on this. We have serious issues in the economy with labour shortages. One of the things we should be thinking very carefully about is, how do we entice the over-50s back into the workforce? What kind of incentive structures should we be providing? Are they really improving their well-being by deciding they have given up on the world of work? There are lots of things about the world of work which enhance one’s status and well-being. There really is something there.
Fourthly, please can we have a bit of stability and predictability in government policy? A very good former colleague in the Treasury was saying to me that if we did have pictures of Chancellors on the wall in the Treasury—which we do not—it would look like the “Employee of the Month”. We have had four in four months. I said this to David Cameron when we talked to the Opposition before the 2010 Election. He said, “Okay, I’ve told you what I’m thinking of doing; what would you like from me?” My No. 1 request was stability among Ministers, so that they get to be in their post for a long time and get to work well with the civil servants. I think that is massively good.
We have lots of uncertainty that is bound to spook financial markets. Uncertainty about which benefits are going to be cut, as the noble Baroness, Lady Sherlock, said, is difficult. We emphasise the poor, which is absolutely right, but I read the piece by James Coney in the Sunday Times on the fact that there are middle-income people who, equally, are very disturbed by what is going on.
The fifth point is something very close to the heart, and which I am working on in my role as chair of Pro Bono Economics. We should be working closely with charities and philanthropists. We have a proud history of generosity demonstrated powerfully by the public’s response to the pandemic and Ukraine crisis. Can we help charities that work to improve employment, boost education and skills, reduce inequalities in life expectancy, and create conditions for entrepreneurship in places that most need local economic revival? I have just come back from meeting some civil servants in Darlington and talking about philanthropy in Newcastle. Lots of things could happen there.
Andy Haldane, the former chief economist at the Bank of England, estimates that the charity sector generates £180 billion of social value every year. Philanthropic investment can bring very distinctive benefits alongside private and public sector investment. Doing things to maximise the impact of philanthropy across the country would be tremendous.
Finally, Ministers should think about the well-being of public servants. The prospect of cuts in real pay and redundancies is bound to damage morale. Treating them with respect and thanking them for their work costs nothing and would be a very good start.
The Lord Bishop of Oxford
My Lords, I welcome this moving and timely debate and the opportunity to highlight the consequences of the rising cost of living and its impact on well-being. I particularly want to focus on the well-being of children.
Psalm 41 begins with the words, “Blessed are those who consider the poor”—a reminder, if we need one, that the well-being of the whole nation is enhanced or diminished by the way we respond to those most in need. This insight is shared by all the great faith traditions.
So let us consider the poor, especially children caught in poverty and the impact of that on their well-being. The Children’s Society published its Good Childhood Report a few weeks ago. The stats have been quoted already. Some 85% of parents and carers are concerned about how the cost of living crisis will affect their families; that is nearly everybody. A third of families reported that they are already struggling with the costs of school trips and uniforms over the next year. A recent Action for Children survey report found that nearly half of children worry about their family finances—but, of course, many children’s needs are much more basic.
The diocese of Oxford has more than 280 primary and secondary schools across three counties in one of the better-off parts of the country. But heads and governors report that more and more effort is having to be invested in feeding children and other forms of social care. Our director of education tells me that many of our schools are even now having to meet basic needs through providing food parcels, giving away school uniforms, brokering support from local charities, washing school uniforms—even buying beds.
This means that time and energy are being drawn away from the primary focus of schools: to educate. Every teacher knows that it is impossible for children who are hungry to learn well. Schools report that their budgets are being squeezed through rising energy costs and rising salary costs for which they have not received extra funding. One head writes:
“The only way to break even this year will be to cut teaching and support staff, reduce educational opportunities and school visits, and keep the heating off.”
The impact on well-being for this generation of children, already affected by Covid, will be obvious.
All churches are reporting rapid escalation in food bank support and food bank use. Over the past year, I have personally visited many food banks and meals services in urban and rural areas. In 2011, one-third of churches were involved in supporting food banks. By 2016, that had risen to two-thirds. Last year, it was 80% of churches in rural and urban areas. The Trussell Trust estimates an increase in the use of food banks of 128% since 2015. I wonder: can the Government begin to imagine or plan for a time when food bank use decreases and some of our food banks go out of business, as they all want to do?
As other noble Lords have argued, the problems are deep seated. Poverty has been rising for a decade. The impact of Covid and now the cost of living crisis multiply the effect on health and well-being. We as a society should never grow used to children being hungry or families being eroded by lack of hope and an inability to meet basic needs. Many of the local support services and small charities that have sustained their communities during Covid are now overstretched. The infrastructure that has formed a safety net and contributes so much to well-being is now itself vulnerable.
I recognise the Government’s constant pledge to help the poorest, but I underline from the evidence and experience locally that the situation is getting worse, not better, and that has been the trend for many years. I repeat the call that many others have made for benefits to be increased in line with inflation; for the proper, generous funding of schools; and for co-ordinated support for charities to help the poorest. Above all, in the light of the Budget and the events of this week, I call on the Government to consider still more deeply this new and different metric, and to aim not simply for economic growth but for greater, deeper equality and fairness as a measure of society’s well-being.
As the noble Lord, Lord Howarth, and others have mentioned, the research of Kate Pickett and Richard Wilkinson in The Spirit Level, and the stream which has flowed from that, demonstrate the connection between measures of inequality in a society and its whole well-being. The most equal societies are also the more content. Those most in need want and need to know that the Government have abandoned trickle-down economics and are applying a spirit level of fairness to the economic plans of the nation.
We need to keep alive a vision for the United Kingdom where no child is hungry; where the safety nets are robust; where child poverty is reducing; and where food banks are in decline. The well-being of the nation is now very fragile. To the incoming Prime Minister, I say, “Please don’t make it worse. Do all you can to make it better. Don’t allow the costs of the economic downturn to be borne by children and the poorest”. Blessed are those who consider the poor.
Lord Monks (Lab)
My Lords, I thank my noble friend Lady Drake for her characteristic enterprise in securing this debate at this particular time. Not many people will envy the Chancellor of the Exchequer at the moment, as he wrestles with shifting the trajectory of the economy from the feckless spending of his predecessor to what looks like a big bout of painful austerity, with cuts, cuts and more cuts coming our way. As a result of the calamity of the last few weeks, we are poorer, shakier and more feeble. That is bad news for all of us who care deeply for the future of the country. We know from experience who suffers most in periods of austerity, and references have been made to this by previous speakers. We know it is the poor, the old, the young and people who were on the breadline before the crisis and who now face the avalanche of soaring food, housing and energy prices—a devastating prospect. This time it must be the comfortable who step forward and carry the heaviest burdens, not the vulnerable and hard pressed.
For sure, some of the reasons for this are global, as the Government claim. But not all are; some we know are home made. Step forward the team of ignominy—the European Research Group, the Institute of Economic Affairs and the Adam Smith Institute—all of whom have earned a place in the dock for the Truss-Kwarteng calamity. The great irony is that the team of ignominy believed that they were taking back control, as they promised in the EU referendum of 2016. Under their blueprint, we would shake off the EU’s shackles, jettison Brussels’ constraints and become sole masters of our destiny. Yet, “Take back control” was always a delusion and the Government have now been blasted by a reminder that there is no such thing as pure sovereignty. Of course, it was not the EU that dictated a whole new policy direction for our economy; it was the money markets. They have taken back control—not for the first time in British economic history.
The UK has just learned the hard way that it cannot announce £43 billion of unfunded tax cuts as a time of high debt and rising inflation. The markets would not have it and acted brutally to remind the UK of some painful lessons. Many of us across the political spectrum hoped that we had seen the end of post-imperial delusions about the UK as a world power, able to be fully sovereign and free of external constraints. We hoped those days were over. We were wrong; the delusion is alive. It was the underlying principle of the leave campaign in 2016. It was central to the Truss leadership campaign, and it shaped her first few weeks in office. It is a vain dream. Just as Suez made us face our military and diplomatic limitations, so should the Conservative Party stop using nostalgia as its guiding star for the future.
I have three suggestions for the Chancellor on public well-being. First, make sure that the vulnerable and poor do not bear the price of austerity. This is a national crisis, and we need to approach it with the same “all in it together” spirit that we have displayed in previous crises in our history.
The Chancellor could start, for example, by opening discussions with the TUC and following the example of ex-Chancellor Sunak when the furlough scheme was introduced. I think all sides in those talks were surprised by the positive outcome. This would be more practical and useful than introducing yet another anti-trade union law, in the form of the Bill that is to be published. The current Chancellor has taken a fresh perspective on things; he should now attempt to stop this Government smacking the unions. Specifically, the Chancellor should prioritise benefit claimants, particularly those on universal credit, and increase the real value of UC, as was done in the lockdown. That was important then and would be important now. That was a recommendation, by the way, of the Economic Affairs Committee of the House of Lords.
Secondly, the Chancellor should protect our already creaking public services. Whether it is health, social care, education, benefits, the police and justice, prisons or many others, they are all struggling and are ill equipped to cope with a new period of austerity. It is tax that must take the strain to avoid a further deterioration in our public services. The financial burdens must fall on those best placed to pay.
My final suggestion is that, having carried through Brexit—a decision I still bitterly resent, by the way—we must get Brexit done properly by aligning the UK very closely with the EU single market. Our export performance has been woeful since Brexit. Firms, especially small and medium-sized enterprises, have given up trying to export to the EU because of the hassle and red tape involved. The existing treaty is not working, not just in Northern Ireland but between Britain and the EU generally. We need to reset the relationship with the EU and do it quickly. There is much to do, particularly by the rich and comfortable, to help poorer citizens on low pay and benefits, who are more dependent on public services, to get through this crisis. Let there be no more wallowing in past glory. In his Statement in a couple of weeks, the Chancellor must relegate nostalgia to the Last Night of the Proms.
Lord Pendry (Lab)
My Lords, I recognise that this debate is about a number of issues in our society. I certainly welcome the initiative of my noble friend Lady Drake—no one better than her, perhaps, with her trade union background. Indeed, she once worked for my old union, the National Union of Public Employees. We shall have the pleasure of hearing from another speaker who worked for the National Union of Public Employees, in my noble friend Lady Merron, later in the debate.
It is clear from what my noble friend Lady Drake said that she is aware of the issues I intend to raise. Indeed, it is becoming something of an old chestnut of mine: I have raised in this place, on numerous occasions, the plight of carers in our society. In this short speech, therefore, I wish to return to that issue, to raise the lack of recognition of the important part played by social services, which has been neglected by successive Governments. Ministers, including the last two Prime Ministers, have expressed that importance but done very little to rectify the plight that these workers endure. The Government rightly emphasise, from time to time, the massive problems of the National Health Service and often raise the plight of doctors and nurses, yet do little about their problems. They place even less emphasis on the problems of ancillary workers in the service. Attention should be drawn to the problems faced by doctors and nurses, but never are those equal problems in the social services sector generally raised by the same Ministers. They too play a vital role in the National Health Service family, and they too deserve recognition for the important duties they perform.
I particularly wish to dwell on the plight of low-paid carers. The cost of living is affecting the well-being of low-paid workers generally in our society, but nowhere is it more obvious or more damaging than in how it affects the social services sector. The Conservative manifesto laid out how they would fix social care and its problems, but the Government clearly have not met that pledge, along with many others. Just last week, Skills for Care published its annual report on the state of the social care workforce. Four out of every five jobs in the wider economy pay more than the median wage for care workers. Care workers are facing unprecedented levels of stress and financial worry, some turning to work other than the work they love. As Carers UK said, it is a choice between heating and eating.
Therefore, it comes as no surprise that there are currently 165,000 vacant posts in the care sector, the highest number on record. Staff turnover rates remain alarmingly high, with nearly a third of care workers leaving their jobs each year, as they are underpaid and undervalued. The Government are failing to meet this challenge to convince enough workers to stay or to join the care sector, which they will not do until there is fairer pay and improved working conditions. It is no wonder that so many carers are leaving the job they love to join Tesco and other supermarkets. They would rather stay in the job they love, doing the rewarding work they do, than stack shelves in the Tescos of this world.
I hope that my words and, much more, those of other speakers in this debate make an impact on the Government, and that the Government realise the importance of this debate to those who have taken part and act accordingly.
Baroness Smith of Newnham (LD)
My Lords, this is a very serious debate. I am delighted that the noble Baroness, Lady Drake, brought this vital question to the Floor of this Chamber.
It is perhaps disappointing to see the vast swathes of Conservative red Benches without any Members on them. At the moment, for the record, we have the Minister, we have the Whip, and we have the noble Baroness, Lady Bottomley, who I am delighted to see in her place. Other than that, there have been perhaps six Conservative Peers in the Chamber at certain points. I realise that we are speaking on a day of considerable turbulence for the Government and the country, but we have been in a state of considerable turbulence for some weeks. Indeed, we have been in some turbulence since Liz Truss became Prime Minister at the start of September.
This is the first opportunity I have had to welcome the Minister and the Whip to their places. The noble Lord, Lord Markham, I believe, was gazetted on 7 October and took his seat in your Lordships’ House a mere 10 days ago. They have been a very interesting 10 days. I suspect that the two people on the Government Front Bench are here not necessarily because they put their names down voluntarily, in the way that most of us who had signed up to speak today did, but rather because it was felt that they needed to come out to speak on behalf of the Government to respond to one of the most urgent questions in this country: the impact of the cost of living on public welfare.
This is surely what the Government should be about. There are two things that really matter: one is the security of the nation—defence—but the other is ensuring that every man, woman and child living in this country has enough to eat, has a roof over their head, and can heat that home. We cannot guarantee that in 2022. What sort of country do the Government think we are living in? This is a country where the Prime Minister and others were so keen in pledging to get Brexit done that they said we had this fabulous economy—we were the fifth-largest economy in the world. If that is true, why are 69% of people worried about heating and eating? Why is the Royal College of Physicians saying that vast numbers of people are more concerned this year than last year about whether they can heat their homes and eat?
There are major problems in this country, and it is not acceptable for the Government to claim that it is all to do with Putin’s illegal war in Ukraine. Yes, that is part of it. Yes, there is inflation, and there are grain problems elsewhere in the world. Yes, there is an energy crisis. But other countries are not facing the difficulties that the United Kingdom is facing, because we have added a degree of chaos and instability, as the noble Lord, Lord O’Donnell, pointed out. Instability is a major problem. The Government’s mini-Budget spooked the markets, and however many U-turns there are, that spooking of the markets and the increase in interest and mortgage rates will not be overturned overnight. Changing the Chancellor, changing the Prime Minister, even—dare I say it—changing the Government will not change those difficulties, which are now baked into the system. However good the next Prime Minister is—of whichever political persuasion—some of the difficulties brought about in the last three weeks by this Government are going to be the legacy that we all have to pay for, including those who are still at school, because the national debt is going to be paid back, not in weeks and months, but over generations. I would like the Government to apologise for that, and I am sorry that there are not more Conservatives here to apologise as well.
It is not normal, I realise, in your Lordships’ House to be perhaps quite so partisan, but some of the difficulties we are facing can be put only at the door of the outgoing Prime Minister and the recently departed Chancellor of the Exchequer. There is very little that can be done to overcome some of those difficulties. Those difficulties are substantial: we have already heard about the difficulties for those on benefits, as the noble Baroness, Lady Sherlock, spoke about so movingly. However, there is something that the Government can do: make a commitment—and stick to it—about uprating benefits in line with inflation, while at the same time sticking with the pensions triple lock. It will be difficult but they should at least try to persuade people that when they finally make a commitment on one of these vital issues, they will stick to it.
At the moment, we are seeing children going hungry—the danger of malnutrition even in this leading first-world country in the 21st century. That is not acceptable. Will the Government commit to ensuring that every child that needs them gets free school meals? They should not be excluded from free school meals because somehow they do not quite meet the metric that the Government have assumed. Those children who are hungry, who have arrived at school without breakfast and who cannot afford school meals are not going to be able to study effectively. That means they are not just being damaged now, at this time of a cost of living crisis; it will damage their prospects for the whole of their lives unless we do something to protect them right now.
In 2020 it took a footballer, Marcus Rashford, to change the Government’s mind. In those days the Prime Minister was Boris Johnson, and he made U-turns twice on providing free meals to children during school holidays. On 12 November 2020 the then Secretary of State for Work and Pensions—currently the Deputy Prime Minister—Thérèse Coffey issued a statement following the U-turn regarding Christmas 2020. She stated:
“We want to make sure vulnerable people feel cared for throughout this difficult time and, above all, no one should go hungry or be unable to pay their bills this winter.”
Can the Minister confirm that it is still the Government’s view, two years later, that no one should go hungry and everyone should have a warm home?
Baroness Primarolo (Lab)
My Lords, I congratulate my noble friend Lady Drake on initiating this very timely debate, given the challenges that our communities face. Many of the speeches today have been very detailed and, with great eloquence, have explained the cause at the heart of why so many people’s well-being is not what we would want it to be. That is down to the economic choices that this Government have made—the economic choices that they claimed they had to make, for which there was no alternative. Many of the contributions have detailed what the alternatives are, and they are still there for the Minister to take.
Understanding people’s experience is crucial for the credibility and accountability of public policy and, perhaps even more important for me, for the functioning of a democracy. When people believe that the Government do not know or care what their experience is, if people believe that their interests will never be represented, in my view their faith in the institutions of democracy is fundamentally undermined. This Government are playing fast and loose not only with the economy and our futures but with the very principles of democracy in our society. Why should you vote if it never makes a difference? Why should you vote or participate if no one cares about or values your experience and tries to ameliorate it? Why would you vote if you believed there was no justice in our society because the Government believe that if you give money to the people who have the most, somehow that will benefit all of us in the future?
The relentless rise in the cost of living has already taken a terrible toll on the well-being of many people in this country, particularly those on lower incomes. Measurements of well-being are about how well a person’s life is going, how they perceive themselves and how they experience their lives. What they are seeing is that the cost of living crisis, as it continues to deepen through 2023 and 2024, will fundamentally change their lives. How can it be right that a Government sacrifice their citizens’ well-being for an economic policy that does not even work, and change their minds about what it should be just about every day?
We live in a society where pensioners live in fear of not being able to pay their bills, and families are terrified that they are going to lose their homes. Across the country, millions of households are fretting about how they are going to pay for rising food and energy costs. First-time buyers cruelly had their opportunities to buy a house snatched away by the Government’s mini-Budget, after years when they had scrimped and saved for a home. People cannot afford to pay private rents because they are too high, and local authorities are unable to provide social housing for the many, which they desperately want to do. Child poverty is rising. Children are living in homes which cannot afford to be heated, without enough nutrition and food for their development. Children, who are the responsibility of all of us, are having their life chances snatched away from them before they have even had the opportunity to develop their potential.
The noble Baroness, Lady Tyler, referred to the British Psychological Society’s survey about people’s attitudes to their well-being. I looked at the OECD figures, which make shocking reading. Shame on us that these figures show us below the average of OECD members. The share of the population at risk of depression—31%—is a very big number out of 68 million, and the share of the population at risk of anxiety is also 31%. The share of the population with very low life satisfaction is 9%. The figures show inequality between top earners and the bottom growing and growing. Inequalities between men and women in the UK, on every measurement, are below the OECD.
As the noble Lord, Lord O’Donnell, said, this is not difficult to put right. There are alternatives. What are the Government going to do to reverse the downward trend on well-being? What policies will they put in place to build financial resilience, including benefit up-rating and investment in our public services? What policies will the Government bring forward—assuming they are still in power next week—to restore the quality of life of households, reduce stress and reduce anxiety, give people confidence for tomorrow, next week and next year, and give them hope that actually their lives will get better? If the Minister cannot answer those questions and cannot lay that out to this House today, this Government do not deserve to be in power and a general election should be called.
Lord Sikka (Lab)
My Lords, I would like to congratulate my noble friend Lady Drake on securing this vital debate. Opinion formers and mainstream media have latched on to the phrase “cost of living crisis”. In reality, it is a crisis of poverty, inequality, failed economic policies, an irresponsive state and democracy that is preventing millions of people from living a fulfilling life. The crisis has been incubating for years, and the main reason for that are the failed ideologies that the party opposite seems to venerate.
There is a twofold attack on people’s well-being—first, by shrinking their disposable incomes and, secondly, through an escalating cost of living, with inflation as measured by RPI already at over 12%, taxes at a 70-year high and, just last month, food prices increasing by nearly 15%. The weak pound means that we also importing inflation. Yet the Government have no strategy for dealing with corporate profiteering at all. If anything, the Government’s mantra is to further shrink people’s disposable income by cuts in real wages, pensions and public services that enable people to get healthcare and related services.
Due to government policies, the richest 250 people in this country are now worth nearly £711 billion compared to only £658 billion the year before. Clearly there is no cost of living crisis for the rich—or the rich people who donate to the Conservative Party. However, there is a cost of living crisis for the rest of the people. While many have been getting rich, the living standards of the masses are now lower than the average for developed countries. The Financial Times reported that the poorest 20% in Ireland have a standard of living almost 63% higher than the equivalent poorest in the UK. In 1976, workers’ share of GDP in this country, in the form of wages and salary, was 65.1%. Following attacks on trade unions, zero-hour contracts, fire and re-hire and other policies, that share is now down to 50%. It is not really surprising that people cannot get access to good food, housing, education, pensions, healthcare and much more.
Even before the pandemic and the energy price crisis, some 14.5 million people were living in poverty. This included 8.1 million working-age adults and 4.3 million children. That number is expected to hit 16 million to 18 million before long. Thanks to the Government’s policies, 21 million adults in this country have an annual income of less than £12,570. Has any Minister tried to live on that and see how they manage? Even with the freezing of energy tariffs announced by the Truss Government—we do not know what the next one will be called—some 6.7 million households are in fuel poverty. If the Government do not continue their support beyond next April, that number is expected to rise to over 11 million.
Some 800,000 children do not even get free school meals because their parents have income of more than £7,400. The tax system favoured by the Government clobbers the poorest. The poorest 10% of households pay 47.6% of their gross income in direct and indirect taxes. The richest 10% pay only 33.5%
In the face of the Government abandoning their duties to their citizens, people have to rely on charity for survival. Teachers, nurses and the police are relying on food banks. There are 1,400 Trussell Trust food banks and, in addition, nearly 1,200 independent food banks. They dished out 2.1 million emergency food packages in the last year, and 832,000 of them went to children.
Our senior citizens are taking endless bus trips and huddling in libraries, shopping malls and warm hubs just to stay warm. In case the Minister wheels out the slogan, “We are providing energy help”, I remind him that even with that help, energy prices have more than doubled. The Government have somehow managed to find a magic money tree and conjured up £65 billion to bail out the gilts market, but the same magic tree is never really plucked to eradicate poverty, reduce inequalities or make investment in public services.
This Government have set unprecedented records: let me give the House some examples. A study published in the peer-reviewed Journal of Epidemiology and Community Health has reported that there were 334,000 excess deaths in the period from 2012 to 2019. The cause was austerity. In 2016, Exercise Cygnus concluded that the NHS would struggle to cope with a serious outbreak of flu—an epidemic. The Government’s response was not to fund the NHS properly; they reduced the number of beds per capita in the UK. Despite the heroic efforts of NHS staff, 208,000 people died from Covid. Within the NHS, 117,000 people died last year while waiting for hospital appointments. The charity Marie Curie has reported that 93,000 people died from poverty in 2019. No previous Government have killed so many of their own people. Why have this Government not reflected on this organised democide in the name of their defunct economic ideology? We need a public inquiry into the real human cost of what the Government have done, and we need it as soon as possible.
The Government are not reflecting on what they have done to the people. We have Chancellors who are promising even more austerity, saying, “Yes, every public department has to be cut; there will have to be more cuts to people’s wages and benefits”. At the same time we have patriotic millionaires urging the Government, “Please tax us more”, but the Government will not do it. The Government could easily raise billions, for example by taxing unearned income at the same rate as earned income. If they applied that to capital gains it would raise £25 billion, which could be used to reduce inequalities, but the Government are not going to do that. Finally, I say: for God’s sake, please go and let the Labour Government do the proper thing for the country.
Baroness Gohir (CB)
I thank the noble Baroness, Lady Drake, for securing this really important debate, because some of the hidden and long-term impacts of the cost of living, such as how well-being is affected, have not been given sufficient attention, especially by this Government. I welcome the many calls to action and recommendations that have been made, including the one for a general election. That may be the favourite one today. Before I share my concerns, I draw attention to my interests set out in the register.
As already highlighted, because of the incredible financial hardship that people face in Britain today they are having to use food banks to make ends meet. It is not just people who receive benefits but those who are working, as the noble Lord, Lord Sikka, just highlighted—those workers who kept our country moving on the front line, including nurses and health workers who risked their lives for us. But now, because they cannot afford to feed their families, they are leaving the jobs they love and moving out of the NHS, resulting in a shortage of staff. That crisis is already happening. It means that we have not enough nurses on wards to look after patients; patients are therefore put at risk. The cost of living crisis is therefore impacting on the well-being of patients in our hospitals.
We are not going to see fewer patients going into hospitals; we are likely to see more people ending up in hospital because of the cost of living. When people starve themselves, they are not taking in the right levels of nutrients, which will weaken their immune systems. This means they are more likely to get sick and end up in hospital—and the pandemic is not yet over.
The cost of living crisis will also impact physical health in many other ways. To make money go further, families will opt to buy cheap food. This means more families will buy processed food, which is linked to diabetes. The number of people with diabetes will increase. Research shows that by 2030 one in 10 people will be living with diabetes, but that does not take into consideration the cost of living at the moment; the numbers are likely to be a lot greater. Diabetes is associated with kidney disease, heart disease and some cancers.
It is not just physical health that is affected and that we need to worry about; mental health will also worsen. Compared with men, women earn less and are more likely to work part-time. This means that they will increase their working hours or take on a second or third job. We know that is what the Government want—they have made that clear—but that is not right. Women will have less time for self-care and less time to spend with their children. Surely that will impact their mental health and that of their children.
Another impact of the cost of living is domestic abuse. We know that cases rose during the pandemic, and the cost of living will increase the risk of domestic and economic abuse. It will also mean that victims struggle to leave perpetrators because they will not be able to afford to, putting themselves and their children at risk of harm. Their mental health will also worsen.
It is clear from what we have heard today that people in Britain are surviving, not thriving. Is this the Britain we want? We are supposed to be a wealthy nation. We should not see people struggling; no one should be struggling. People on benefits are made to feel like a burden. We keep hearing about compassionate conservatism, but I feel that these are empty words. Compassion, kindness and empathy are the very principles that make this country great, but this Government have lost their way.
The Government are storing up physical and mental health problems for the future—problems likely to result in long-term unemployment and disabilities. I ask the Government: what is the plan to protect the health and well-being of the nation, threatened by the cost of living? What action will be taken to prevent health inequalities being further exacerbated? What will be done to reduce them?
Lord Hendy (Lab)
My Lords, it is a pleasure to follow the noble Baroness, who has obviously made a flying start to her career in this House. I congratulate my noble friend Lady Drake on securing this important debate and on her eloquent exposition of so many aspects of the issues we are discussing. The noble Baroness, Lady Tyler, mentioned the survey conducted by the British Psychological Society and gave us some statistics. I would like to quote the chief executive, who said in relation to that survey:
“The cost of living crisis is critical, immediate and severe and disproportionately impacting those that need support the most. As well as the practicalities of being able to heat homes and put food on the table, people are also carrying the mental health load of living under this strain. We are incredibly concerned that many simply will be unable to cope, with nowhere to turn to get help as services are already stretched and struggling to cope with soaring demand.”
The Government have capped the price of energy, but the cap is estimated to cause average bills to rise by more than 150% over last year’s figures. Now the Chancellor has announced that that guarantee will last only until April, by which time the average energy bill is expected to be 400% greater than last year. Could anything be more calculated to undermine public well-being and increase
“the mental health load of living under this strain”?
The other side of the equation is income. Others have spoken of benefits and pensions; I would like to say a word about wages. Average regular pay is currently £574 a week. Its value in real terms has been declining for a decade. Wages are so low that, for several years, more people claimed universal credit who were in work than were out of work. The value of wages this year, under this Government, is falling faster than ever. The loss is, according to the ONS, on average at least 3.2% per annum. The latest figures show that the nominal wage increase is running at 5.4%, whereas the consumer price index with housing—CPIH—is rising at 8.5%. As noble Lords have pointed out, for food it is rising at 14%.
In the public sector, where average wage increases are running at 2.2%, the cut in the real value of wages is even more stark. Indeed, even if the 3.2% cut, on the basis of the ONS calculation, is the median annual wage loss, half of our workforce of 30 million are suffering greater wage cuts than that.
My noble friend Lady Primarolo referred to the OECD. In its annual Employment Outlook 2022, published a fortnight ago, it stated:
“The impact of rising inflation on real incomes is larger for lower-income households which have already borne the brunt of the COVID-19 crisis.”
The decline in the real value of wages by reason of pay not keeping up with prices is, of course, a global phenomenon—although, globally, the UK scores particularly badly on that metric.
The OECD highlights that one of the causes of the fall in real wages is that
“the proportion of workers who are covered by collective agreements in the OECD has steadily declined over the last three decades … weakening the bargaining power of workers … In the absence of countervailing power by organised labour, employers typically retain significant power to unilaterally determine wages and working conditions. Bargaining power is typically lower for vulnerable groups: while this is a source of concern even in low-inflation conditions, it becomes more serious in the current relatively high-inflation situation as these workers are not in a position to negotiate wage increases to keep up with price increases.”
The OECD recommendation is simple:
“Protecting living standards also requires rebalancing bargaining power between employers and workers, so that workers can effectively bargain for their wage on a level playing field … Rebalancing bargaining power, however, also means giving a new impetus to collective bargaining and, therefore, accompanying the efforts of unions and employer organisations to expand their membership and enlarge the coverage of collective agreements.”
This, of course, has been advocated by the International Labour Organization since the Second World War. Even the IMF has recommended the extension of collective bargaining, and nowhere is this more necessary than in the United Kingdom, where collective bargaining coverage has fallen from 85% in the 1970s to less than 25% of workers today covered by a collective agreement—from one of the highest coverages in Europe to one of the lowest. Yet high collective-bargaining coverage is one of the hallmarks of the most successful economies in Europe.
In the Transport Strikes (Minimum Service Levels) Bill, published today, I was appalled to see yet further restrictions on the capacity of workers to protect their wages by taking strike action where persuasion fails. But I was surprised and encouraged to read that the Bill imposes a mandatory obligation on employers and unions to negotiate a collective agreement. Unfortunately, such an agreement is confined by the Bill to agreeing a minimum service level in the event of a strike.
With this remarkable precedent having been set, I hope the Minister can tell us that compulsory collective bargaining will be extended to all sectors of the economy, covering pay and terms and conditions of employment—the matters that really affect the well-being of the half of our population whose work supports the entire population. If they took this step, the Government would be following many global precedents, notably in New Zealand and the practices of western Europe, as well as the exhortations of the ILO and the OECD. In doing so, they would be exercising the only real option open to them to address falling wages.
Baroness Janke (LD)
My Lords, I too add my thanks to the noble Baroness, Lady Drake, for initiating this debate and for comprehensively and analytically setting out the context. My comments concern the education of children, particularly those with special educational needs, as well as the impact of years of underfunding on the morale of teachers, parents and schools.
Having read an article in a local paper by a parent of a child with special educational needs, about the fear they feel at the prospect of more cuts, I made my own inquiries and found a situation that makes me also fear for the future of these children, particularly those from disadvantaged homes, and their education across the country. I found that schools in general feel very undervalued and the lowest priority of Governments. I was told:
“Every year we need to do more with less and it is simply unsustainable”.
I am including direct comments from schools and parents, so I apologise if they sound slightly out of context.
The first thing to say is that not having enough funding encompasses just about every problem in any school, and the effects are: not enough teachers or assistants in the classroom, so schools cannot deliver an individualised education for disabled pupils and those with special educational needs; provisions for personal growth and mental health cannot be met with not enough staff, and neither can early intervention; and alternative provisions for those most in need are not fit for purpose: students have been refused places in schools that are specialised and should be meeting their needs. But, if a specialised school, with all the equipment and funding, deems a child “too difficult”, how is a mainstream school supposed to deliver an effective education and a safe place for that child, with no specialised provisions or training?
There is very limited language provision. When 25% of a school does not speak English, even as a second language, there is no access to or funding for translators. One translator on one morning a week for six weeks does not cover the revolving door of refugees from places such as Afghanistan and Ukraine. Staff work very hard with these children to give them the best possible chance and to provide some stability, only for them to be moved on, with other schools refusing to take them. One refugee child could not get a school to take him because of disabilities, which is of course devastating for the child.
The increase in teaching assistants’ wages of around 10% is very much welcomed, but this now has to be funded by the school’s budget, so the choice is between having fewer teaching assistants or cutting the school’s budget in another way. Having fewer teaching assistants impacts on the quality of teaching and learning. Already, not all classes have a general teaching assistant to support those who need extra help.
Energy cost measures apparently apply only to residential premises, so schools will have to find the funds to meet the increases in energy, or not heat classrooms. One school has estimated increases of 230%.
As the right reverend Prelate the Bishop of Oxford said, feeding children is also extremely important. Free school meals are grossly underfunded, and they struggle to offer a good nutritious meal for the price, including vegetarian, halal and kosher alternatives. Children are not engaged and ready to learn if they are hungry, and this might be their only hot meal of the day. A large proportion of pupils in the school I mentioned—43%—receive free school meals.
Parents too feel that they have been left high and dry and fear that worse is to come. Many of them suffered indignity and encountered rudeness in fighting for their children’s rights. The education, health and care plans which have replaced statements are also a cause of great concern. They are supposed to take 20 weeks to achieve but in some cases it is 50 to 70 weeks, fraught with numerous assessments and shed loads of bureaucracy. Mainstream schools focused on performance are reluctant to make proper provision for children with special educational needs.
Council services are starved of cash, so parent support groups, play groups and social arrangements for children with special needs and learning difficulties are closed due to lack of funding. There is heavy reliance on private provision. This is very expensive and many councils now have enormous debts in their special educational needs departments, which are in crisis. All this is happening now, before anything in the future budgets. It is clear that the system cannot bear any more cuts without threats to the very existence of many schools and services.
The current system clearly needs reform. It already offers woefully inadequate services to the most disadvantaged children, particularly those with special educational needs and those with disabilities. I hope that the Minister might propose some form of in-depth review of what is clearly a failing service.
We have heard ample evidence throughout the debate that current services cannot sustain future cuts. Indeed, they are in danger of collapse already. The noble Baroness, Lady Sherlock, spoke about indexing and the link to reality, and proper systems to protect us all. The noble Baroness, Lady Tyler, mentioned the effect of poverty on anxiety and mental health, and fear and insecurity and the need for reassurance with health and advice. The noble Lord, Lord Layard, underlined the importance of services to all sectors of the population and providing for their enduring needs. The noble Lord, Lord Howarth, mentioned inequality and how that leads to poor physical and mental health as well as social problems. The noble Lord, Lord O’Donnell, talked about well-being and the importance of targeting, as well as energy efficiency and labour shortages. All these concern different departments of state. It seems to me that one of the most important messages from this debate is that poverty concerns all the services; it certainly should not be left as being led by the concerns of the Treasury. I hope that message will hit home.
I urge the Government to protect our children, particularly those who are already disadvantaged, from any further attempt to cut essential services. As the right reverend Prelate the Bishop of Oxford said, children’s futures are on the line. Our country will pay the price if we do not face up to our responsibilities and make sure that children are fully protected in these difficult times.
Baroness Merron (Lab)
My Lords, as the cost of living continues to spiral, I congratulate my noble friend Lady Drake on securing this timely debate focusing on the most pertinent issues of the day and speaking up for the many people whose health and well-being are deeply affected by a crisis that can only be said to have been made in Downing Street. I thank my noble friend for the incisive, informed and comprehensive way she set out the situation.
Over the course of the debate, I have been very struck by the way that noble Lords have so powerfully highlighted the inextricable link between the cost of living and our well-being. I have also been struck that throughout the debate I have kept coming back to just one question: how did the Government consider this link, if at all? Perhaps the Minister can offer some reflection on this point.
With inflation hitting over 10%, food inflation running at over 14% and millions worrying about their household finances, there is no sense that the Government have done anything other than make decisions that have sent costs through the proverbial roof. As my noble friend Lady Drake said, by choice the Government have made everything worse. The Prime Minister may have resigned, but the Government remain in office. As my noble friend Lady Smith said in the Chamber earlier today, this Government now have no mandate. As a number of noble Lords have said, it is time for the people of this country to have their voices heard and their votes counted.
We know that good nutrition, shelter and the ability to lead a dignified life are essential foundations of good health. If unaddressed, rising living costs will leave people in health-harming—even life-threatening—situations in the short term, while embedding a public health time bomb for the future. It is not now just economists but public health leaders who are sounding the alarm about the health consequences of failing to protect communities and individuals from the cost of living crisis engulfing our nation. So I ask the Minister: what assessment have the Government made of the short-, medium- and long-term effects of the cost of living crisis? I am also interested to hear his response to the proposal from my noble friend Lord Sikka for an inquiry, especially given the anticipated extent of further cuts to public services in particular.
We know that the impact of the cost of living crisis is not felt equally or fairly: quite simply, those who have less suffer more. This have been borne out by the Office for National Statistics, which reminds us that the extent to which the rising cost of living has a financial impact on different households is very much based on
“factors including their expenditure patterns and their ability to absorb increased outgoings.”
This was referred to by my noble friend Lady Drake, who also emphasised the impact of the lack of financial resilience of lower-income households.
Analysis from the Institute for Fiscal Studies shows that the least well off are experiencing higher rates of inflation, while the New Economics Foundation confirms that the costs of the poorest are nine times higher than those of the richest 5% of society. Of course, key to addressing much of this will be the health disparities White Paper. The Minister will remember that last week I asked whether reports were true that this White Paper was not going to be published. Perhaps he might be good enough to provide a response today. If the reports are not true, when can we expect it to be published?
As my noble friends Lady Sherlock and Lord Monks and other noble Lords outlined, for those relying on welfare benefits, whether they are in work or not, inflation is not their friend. The Joseph Rowntree Foundation tells us that, if the Government uprate benefits by earnings rather than inflation, they will push a further 450,000 people into poverty. This will also increase poverty among working families by 350,000 more people, and families with a disabled person by a further 250,000, of whom a quarter are children. Could the Minister tell your Lordships’ House what discussions there have been with the Department for Work and Pensions about the health impact of failing to uprate benefits to reflect the reality of the cost of living? Following on from the comments of my noble friends Lord Hendy and Lord Pendry, where is the workforce plan to address low pay and record vacancy rates in the NHS and social care workforce—something that has been raised repeatedly in your Lordships’ House?
Many health conditions are caused or exacerbated by cold homes, and the cost of living deeply affects how people use their heating at home. Often, homes are heated less frequently and to a lower temperature to try to save money, and this can be a particularly acute problem for those who are older and disabled. Children and young people living in cold homes are more likely to suffer from respiratory and mental health problems. Cold homes can also have an adverse effect on the educational attainment of young people and increase the risk of social isolation.
Overall, cold housing costs the NHS in England an estimated £1.36 billion per annum and contributes to the excess winter deaths which take place every year in the UK. Can the Minister tell the House how he will deal with this rise in unheated homes? Can he share any analysis that the Government have completed regarding the consequences of fuel poverty for public health and death rates this winter and beyond?
When prices rise across the board, it is eminently understandable that households may choose the cheapest, and often the unhealthiest, food and drink, something that the noble Baroness, Lady Gohir, spoke of. The Food Foundation has found that 50% of people are buying fewer fresh vegetables and less fresh fruit. We know that people are paying £571 more on average for their groceries this year than last year and, as my noble friend Lord Howarth referred to, the latest data from the Food Foundation shows that nearly one in five households experienced food insecurity last month, which manifested in eating less or going a day without eating.
We know that food poverty is a driver of poor physical and mental health, including chronic diet-related conditions such as obesity and cardiovascular disease. As the right reverend Prelate said, experiencing food insecurity can limit children’s development and affect their ability to concentrate and engage in school, reducing educational attainment and long-term life chances.
Regrettably, the Government gave what I regard as an inadequate response to the opportunity presented by the national food strategy. Will the Minister revisit this? What will the Government do to make sure that those who are less well off can afford and access nutritious food at this time?
As we have heard in this debate, the mental health implications of the challenges the public are facing right now are heart-breaking. A Childhood Trust survey found that 23% of parents said that due to the impact of the cost of living, their children are expressing more anger, and more than one in five said that their children are smiling less. Stress, uncertainty, anxiety, inadequate income and having no cushion to fall back on all affect mental health and, as many noble Lords have said, people are scared. In June, the Lancet published an analysis of existing studies on the relationship between lower incomes and poorer mental health and well-being. Does the Minister accept this link and, if so, how will he address it?
In conclusion, I refer to the comments of my noble friend Lady Primarolo, who asked how the Government could sacrifice the well-being of people in this country in pursuit of ever-changing policies. This is a question for the Minister and his colleagues. I hope that what has been said today will impact the Minister’s response. A healthy population and a healthy economy are two sides of the same coin and, right now, we have neither.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)
My Lords, I thank the noble Baroness, Lady Drake, for securing this important debate, and all noble Lords across the Chamber who have contributed to the constructive and thoughtful discussion. To answer the noble Baroness, Lady Smith, I found the debate fascinating and respond with pleasure.
I thank the noble Baroness, Lady Drake, for framing the debate in terms of the ONS study on public welfare and for highlighting that to me ahead of time. I welcome the contributions from the noble Lord, Lord Layard—it is good to see my ex-lecturer at LSE— and the thoughtful contributions from the noble Lord, Lord O’Donnell, and the right reverend Prelate the Bishop of Oxford. I believe this is an excellent basket of measures which should act as a North Star for the Government. Many moons ago, I worked a lot in Nigeria setting up digital TV, and I learned that one of the poorest countries in the world can actually be one of the happiest.
I would like to look at the impact of the cost of living on those 10 measures. I have excluded two—the environment and governance—because I was not sure how much the cost of living impacted them. I am not so sure on the governance point now, but that may be above my pay grade anyway. As I reply, I will look at how the cost of living measures impact the other areas: personal well-being, our relationships, our health, what we do, where we live, our personal finance, the economy, education and skills. I will not pretend today to have all the answers, but what I will try to do, crucially, as requested by the noble Baroness, Lady Gohir, is set out what the Government are doing to ameliorate the impact of the cost of living in these areas.
I turn first to energy prices, which we probably all agree is having the biggest cost of living impact. Of course, it is driven by the Russian war in Ukraine, but brought home to us here on our doorsteps. Many speakers today have mentioned this, including the noble Baronesses, Lady Tyler, Lady Smith, Lady Primarolo and Lady Janke, and the noble Lord, Lord Sikka. It impacts our personal finance in terms of the well-being measures, the economy and, as many have said, our health. As the noble Baroness, Lady Merron, said, its impact is as much as £1.4 billion a year.
I think we all agree that the price freeze was bold and decisive and has united support from all sides of the political spectrum. It gave peace of mind to all households. To echo the point made by the noble Baroness, Lady Drake, 77% of households are anxious about the impact of fuel prices on the cost of living. A measure that seeks to address this for all households will go a long way towards removing that anxiety, bringing financial stability to many households and helping them with their health and well-being.
At the same time, I think we probably accept the comments about whether we should have more targeted support. We will review that after six months. It is probably a sensible thing to do to make sure that we are using such a large investment of public money in the best way possible. In the meantime, in addition to the price freeze, the Government have sought to act to make sure that the 8 million poorest households receive an extra £650 per year.
Thirdly, I turn to the price freeze for business and institutions. To answer the noble Baroness, Lady Janke, that also applies to schools for the next six months. The price freeze will help the whole economy because industry, schools and hospitals are all impacted by the increase in the cost of fuel. It will help the whole economy and jobs and, by helping to keep inflation down by as much as 5%, it will have knock-on benefits in terms of the level of interest rates needed to contain inflation.
Undoubtedly, as mentioned by many speakers, including the noble Baronesses, Lady Sherlock and Lady Tyler, and the noble Lord, Lord Monks, all this has had an impact on interest rates and inflation. While I am sure we all recognise the need to increase interest rates to reduce inflation and the impact that that has on mortgage costs, it would be blind not to recognise the turbulence in the markets caused by the mini-Budget, as mentioned by the noble Lords, Lord Howarth and Lord Monks, and the noble Baroness, Lady Smith.
The impact on the cost of government debt, mortgages and our ability to finance our spending plans is crucial and affects us all in terms of public well-being. So I think we would all agree that the inescapable truth from the past few weeks is that we must find a way to make sure that, as necessary as energy price caps are and as important as investment in health and other services is, we show financial discipline and show that we can live within our means. We have to give confidence to the markets to bring down the cost of government debt and mortgages, which we know have such an impact on every single household.
To that point, I welcome the comment on the stability of Ministers. Speaking as a Minister of only three weeks, I wish for some stability. However, again, I believe that that is above my pay grade.
I want to place what we are doing in the context of needing to work within this fiscal constraint. The markets have demonstrably proved that we must live within our means.
I turn next to food prices; again, this point was recognised by many speakers, including the right reverend Prelate the Bishop of Oxford and the noble Baroness, Lady Merron. Food insecurity clearly has an impact on health, but it also impacts productivity, the economy, education and skills—all key measures of quality of life and well-being. That is why it is so important that we make sure that our children have a nutritious upbringing, which is why the free school meals programme is so important. All infant school kids get a free school meal, as introduced by the Government. Today, that 37.5% level is the highest on record, I believe.
So we are trying to give children a good foundation by having a healthy start and healthy food at school. We are also expanding that with a £200 million holidays and activities food programme to make sure that children can enjoy that when school is out. We also have the Healthy Start scheme to help 300,000 lower-income households. At this time, I thank the right reverend Prelate the Bishop of Oxford, the Church and all those who have a role in helping with food banks, because I know that that area provides a lot of comfort to people.
I turn to the impact of all this on mental health. The point was ably made by the noble Lords, Lord Hendy and Lord Layard, and the noble Baroness, Lady Gohir, among others, that the cost of living crisis causes more stress and anxiety. That is why the £2.3 billion of additional funding per annum that has been put in place to fund mental health services for an extra 2 million people per annum is a key recognition on the part of this Government of the importance of mental health to our general well-being. I believe that all areas have now set up a 24/7 urgent helpline to assist people in this. On a wider scale, the Treasury has set up the Breathing Space programme to assist people and give them breathing space when they need to manage their debts. These are difficult times and I will take this opportunity to urge anyone struggling with their mental health to seek support. Help is out there.
I turn to the pressures on the NHS. Again, many noble Lords’ comments recognised this issue today and, in terms of the broader measures of public well-being, how crucial health is in that—and, therefore, how NHS delivery is crucial to the health and well-being of our country. As a new Minister, I am under no illusions about the cost of living pressures and how they might add to the NHS challenges.
I have spoken previously about our plan for patients. I am confident that our focus on ABCD is the right approach. I will not repeat those points now. At a time of unprecedented investment in the NHS and a larger workforce than ever, my focus is to make sure that, by working with the NHS management team, we really are driving performance as well.
We have all seen examples of NHS brilliance—I had the chance to see some recently at Chase Farm in Watford—but we have all seen examples of poor performance that we know is not good enough. With tight budgets and the cost of living, maximising our return on this investment is more important than ever. That is why a lot of my focus is on making sure that not only are we expanding bed capacity by 7,000, we are expanding capacity in the right places. We must make sure that the beds are being used to most effect to relieve the pressures. Again, this will benefit the whole flow through the system, right back to ambulance and A&E waiting times. At the same time, we must make sure that the 50 million extra GP appointments we are delivering are available to meet demand in the places that need it most.
The noble Lords, Lord Layard and Lord Pendry, also mentioned the key part that adult social care plays in this whole system. As we all know, how we look after our loved ones is key to our relationships, to how we feel about ourselves and to our decency as a nation. Freeing up 13,000 hospital beds—13%—is key to ensuring that our loved ones are cared for in the right place: in care homes and not hospitals. It is also key to creating capacity in our hospitals to improve the flow right the way through the system, so that we can make sure that ambulance and A&E wait times improve. The £500 million discharge fund is a welcome addition to help solve this problem. Again, my job is very much making sure that we spend it in the right places to ensure that it is making a real difference.
In response to the point made by the noble Lord, Lord Pendry, at the same time we are working to recruit staff. Key to that, in the age of full employment, is looking to overseas workers, in the fine tradition of the NHS. I am glad that they have been added to the essential worker list so that we can have access to these markets. As the noble Lord, Lord Pendry, said, we must help people to see acting in the care sector as a vocation, not just a job.
I echo the points made by the noble Lords, Lord Howarth, Lord O’Donnell and Lord Hendy, around the role of work and employment. Work is not only key to our personal finances, it is key to our skills, our health and our own sense of worth and personal well-being. It is also key to a public sense of well-being and of benefit to the economy. In short, work pays. While I am delighted that unemployment is at a record low, as has been mentioned, we need to attract millions of people back into the workplace. Many people in their 50s stopped working during Covid. As the noble Lord, Lord O’Donnell, said, we need to find ways of attracting them back. As a former lead NED at the Department for Work and Pensions, I know about the work that the new Secretary of State, Chloe Smith, is putting in to help people on disability benefit back into the workplace. That is not only good for them and their income; it is good for their self-worth and vital to the economy. That is why we have put £1.3 billion into supporting disabled people and people with health conditions to help them back into work. It is good for them, good for their income and good for the economy.
In closing, I am grateful for the thoughtful contributions from noble Lords and to the noble Baroness, Lady Drake, for securing this debate.
Lord Sikka (Lab)
My Lords, will the Minister respond to my request for a public inquiry into the deaths caused by the Government’s policies? I referred to austerity, Covid deaths, deaths while people have been waiting for NHS appointments and poverty. I am aware that there are people here in the Gallery whose families and friends died. They are suffering anguish and they want an inquiry.
Lord Markham (Con)
No, I am not going to respond to that point at the moment.
The Government recognise how important it is to protect and promote the well-being of the British people, particularly the most vulnerable. The measures I have outlined today will do just that. We are delivering unprecedented levels of support due to the rising costs of living, and this will already be helping millions of people across the country. The increased costs of living are impacting everyone in a variety of ways, particularly the most vulnerable in society. The situation is very fast moving and I hope noble Lords will share my enthusiasm for continuing an open dialogue as the Government closely monitor the impact felt to ensure that the right support is delivered.
Baroness Drake (Lab)
My Lords, I thank the Minister for his reply. I have to acknowledge the humour he introduced at the beginning. He is quite right; one of the 10 domains of well-being that the ONS measures is governance—how decisions that affect ordinary people’s lives are made—so he was probably wise to bat that one away. I give him credit for fleetness of foot on that.
Given the instability in the Government, it is very difficult for him to give answers to questions with any confidence, and that clearly shows. It is not a reflection on his ability, but it is clear that at the moment any Minister for this Government cannot answer what are incredible challenges for most of the population. The Minister cannot tell us about the White Paper on inequalities, the Government’s confidence on dealing with the social care crisis or whether they are losing the political will on regional inequalities. Without meaning to be disrespectful, his inability to answer those questions in itself contributes to the evidence that this is a Government who cannot lead.
I thank all noble Lords who participated in today’s debate for making so many excellent contributions. They took different dimensions but brought it all so alive. In our normal daily lives, let alone in the statistics we have read—and I have read a lot over the last two weeks—we see the humanity and the challenges. We see our friends ringing up saying, “Oh my God, my son can’t afford the mortgage interest rate. What am I going to do? Am I going to have to go back to work and help him with the money?”. These are real human stories that people are experiencing. We live in extraordinary times. Our economy is under pressure, the public is frightened and the Government are in chaos, holding the confidence of neither the public nor the markets. I think it is a moment in our history as a country.
Those in our influencing institutions—those in the Bank of England and the Treasury, and our Parliaments and Ministers—must bear heavily the responsibilities that they have to discharge at this time. There really is a huge national interest here, above petty personal issues. For everyone, whether it is civil servants, parliamentarians or Ministers, this is the moment to recognise that they must do what is in the national interest. They must carry it heavily on their shoulders, though it may be a burden—because it should be—and deal with this cost of living crisis.
As my noble friend Lord Layard and the noble Lord, Lord O’Donnell, argued so persuasively, they must benchmark their decisions against the public well-being and show how they did it. For heaven’s sake, that is what the people of this country want to see and know. The confidence will not come back to our democratic institutions until we do that visibly. They need to see and know how we are looking after their national interest. We know that there are going to be more challenges, but I thank everyone who participated in today’s debate.