Living Standards: Inequality

Debate between Baroness Lister of Burtersett and Baroness Neville-Rolfe

Tuesday 7th March 2017 Lords Chamber

[Baroness Lister of Burtersett]

To ask Her Majesty’s Government what policy lessons can be learned from the forecast of growing inequality in the Resolution Foundation report Living Standards 2017.

[The Commercial Secretary to the Treasury (Baroness Neville-Rolfe) (Con)]

My Lords, according to the latest data from the Office for National Statistics, income inequality in the UK is at its lowest level since 1986. The key to economic success and to reducing inequality is to improve productivity, which determines living standards in the long run. That is why the Government have established a national productivity investment fund and published a Green Paper on an industrial strategy, highlighting the role of improved skills, infrastructure investment and R&D.

[Baroness Lister of Burtersett (Lab)]

My Lords, the Resolution Foundation argues that preventing the biggest increase in inequality since the 1980s requires a shift in social policy choices, notably the freeze in most working-age benefits in the face of rising inflation. Will the Government now follow the advice of Iain Duncan Smith and reconsider the freeze? He warned that it was never intended that it should have such a “dramatic effect on incomes”—his words. Would that not be the right thing to do, to protect low-income families in and out of work, for a Government who claim to be working for everyone?

[Baroness Neville-Rolfe]

My Lords, I think we have to have a little context. Savings are necessary to reduce borrowing and to put the public finances back on a sustainable footing after the financial crisis. Between 1980 and 2014, spending on welfare trebled in real terms to £96 billion, while GDP increased by much less. Our approach is a different one. We are committed to supporting working families with a whole host of measures to get people back into work, to innovate, to grow and to put the country on a good footing. It is only a forecast from the Resolution Foundation. Forecasts are not always right, and we are determined to make the changes we need for this country.