Cost of Living: Public Well-being

Baroness Drake Excerpts

Thursday 20th October 2022 Lords Chamber

Moved by

[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.

--- Later in debate ---

[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.

Motion agreed.