Cost of Living

Baroness Crawley Excerpts

Thursday 3rd February 2022 Grand Committee

[Baroness Crawley (Lab)]

My Lords, I applaud the timing and the work of my noble friend Lord Whitty in his chairing of the Commission for Customers in Vulnerable Circumstances and much more. We have also worked together as vice-presidents of the Chartered Trading Standards Institute.

April can be a cruel month, as TS Eliot might have put it, and it is certainly looking that way for millions of British households. Emerging from the biggest health crisis in a century, many UK families will be facing a painful cost of living crisis this spring, with energy price increases, rising inflation, more taxation promised and the burden of Brexit becoming more evident every day. Many British household budgets will be stretched to the limit and, in the poorest households, where fuel poverty is already a fact of life, there will be the realisation that there is nothing left to stretch.

According to the ONS’s latest stats, growth in income of the poorest fifth of people has not kept up with inflation, which has led to the median income of the poorest fifth falling by an average of 3.8% between 2017 and 2020. Meanwhile, income for the richest fifth continued to steadily grow between 2017 and 2020. This means that income inequality increased substantially over this period—before Covid, the soaring cost of energy or the increase in inflation. We know that households on low incomes spend proportionately more than richer households on essentials such as housing costs, food and transport, as noble Lords have said. According again to the ONS, households in the lowest decile spent 54% of their total weekly expenditure on these things, compared with 42% in the highest-income decile.

It is against this architecture of inequality that we have to view the alarming energy situation post April. Households in Britain could soon be spending more of their money on energy than any previous generation, including those who lived through the oil shocks of the 1970s and 1980s—some of us are old enough to remember those. Of course, these aggregate numbers do not represent the experience of specific households, particularly those in very low income and low expenditure households. They may see their energy burden rise to 13% of total spend or above.

As we know, this crisis in living costs comes on the back of the loss of the £20 a week Covid welfare boost, as my noble friend Lord Monks said, which finished in September. Some people are already not putting on their heating through this winter, and the 14% of people on absolute low income in this country are finding it very difficult to keep themselves and their children warm right now. As the noble Baroness, Lady McIntosh, said, eat or heat is the dilemma. At the start of the pandemic, the Government rightly launched a project called Everyone In, which took all the homeless off the streets and into accommodation. This cost-of-living crisis needs the same urgent focus for those on low incomes: “Get Everyone Warm”.

The mitigating measures announced by the Chancellor today may take the edge off some bills, and we should recognise that, but they are ill thought out, too little and too late. The Labour Party has called for VAT on energy to be cut, and that should have happened. A one-off windfall tax, as the noble Lord, Lord Shipley, has called for, also should have happened. Paul Johnson of the IFS has suggested a one-off uprating in benefit payments this year—quite right too. While I understand that the warm home discount will finally be increased, and that is welcome, I ask the Minister: what is happening to the household support fund available to local government beyond 2022?

My noble friend Lord Whitty knows better than most that the underlying problems of a badly regulated energy market need fixing urgently, and he has set out a way forward today. There is no real resilience of suppliers, and customer protection by Ofgem’s own standards is often completely ignored by companies. The market is a shambles; meanwhile, many British children and pensioners shiver in their cold homes. It is shameful, and the Government’s response falls short of what is needed in the medium and long term.