Financial Inclusion

Lord Forsyth of Drumlean Excerpts

Monday 11th July 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, pre-payment meter customers are covered by the price cap, so they receive protection from that, but they pay a higher rate, which Ofgem believes is necessary to reflect higher operational costs and risks. However, a robust set of rules is in place to protect pre-payment meter customers, ensuring that, if suppliers identify that they are in a vulnerable situation, including where they are self-connecting or self-rationing their supply, they must be offered additional support credit. In doing so, suppliers must also consider people’s ability to pay back that credit. So a robust set of support is available to people in that situation.

[Lord Forsyth of Drumlean (Con)]

My Lords, although the Government have done well in reducing the taper rate, is it not still the case that people in work on universal credit are paying an effective marginal tax rate of 55%, which is 10% more than the highest-paid people in the country? So, while we are talking about tax cuts, as we appear to be doing in the Conservative Party at the moment, would it not be a good idea to reduce the effective marginal tax rate of those who are poorest in order to encourage people back into work and to encourage those who are in work to value their contribution to society?

[Baroness Penn (Con)]

I agree with my noble friend’s sentiments. As he pointed out, a cut to the taper rate of universal credit is essentially a tax cut for those on the lowest wages, and it makes sure that the incentives are aligned for them to take on more work and bring home more money. So I totally agree with him, but I cannot speculate on any future policies in that direction.