Cost of Living

Lord Shipley Excerpts

Thursday 3rd February 2022 Grand Committee

[Lord Shipley (LD)]

My Lords, I remind noble Lords that I am a vice-president of the National Energy Action advisory board. I join others in extending thanks to the noble Lord, Lord Whitty, for this timely debate.

The rise in energy costs announced this morning and in the cost of living generally is now being described as a pending cost of living catastrophe. Unless the Government change course, even with this morning’s announcement, I fear that that is what it is likely to be. It most certainly is for those on low incomes, who face rising inflation, likely to be 7% in April, this massive hike in energy prices, rising taxation—not least national insurance, council tax and the freezing of thresholds—and rising interest rates, increased to 0.5% about two hours ago.

The StepChange Debt Charity has estimated that a third of households are now having difficulty meeting their bills and many of them are now borrowing to cover their basic needs. There is now a real risk of a national debt crisis. One partial solution is to restore the cut in universal credit—that seems essential—but there are others.

I hope that the Government will act on the need to reflect the true rise in the cost of living for those on low incomes. The CPI index does not reflect the rising cost of basic food products or the cutback in the value range of supermarket products. Perhaps the supermarkets might look at what they can do to keep prices down. There should be an index that does not include car costs or consumer goods, so I am glad that the ONS will be producing an inflation index based on tracking basic food prices. I hope that the Minister will confirm that the Government will want to use it.

We heard just now that the energy cap has been increased this morning by 54%. It is estimated that a quarter of UK households will be paying more than 10% of their budgets on energy in April, but many of the poorest households we will be paying much more than 10%. For that reason, it is welcome that the Government are introducing some further financial support. It is, however, inadequate. As the noble Lord, Lord Whitty, pointed out, it is only half the increase and other measures need to be taken to support people on low incomes. Loans are being used when it is estimated that gas prices are likely to stay twice as high as they have been until at least 2025.

The Government have a responsibility to help people on low incomes now, not to keep their costs high so that tax cuts can be delivered nearer the next election, which is rumoured to be the Government’s intention. I very much hope that the Minister will confirm that that is not the Government’s intention and that the people who need help now will be helped now.

The council tax discount at bands A to D is £150, but it will not be sufficient to meet the 54% increase in the energy price cap. I have concluded that we need a windfall tax on oil and gas companies. The announcement this morning of Shell’s enormous profits points to such a Robin Hood windfall tax being justified. As I understand it, Shell has announced $6.4 billion in profits over its fourth quarter. The priority must surely be to cut the heating bills of vulnerable and low-income households, perhaps by doubling the warm homes discount and expanding it to all those on universal credit. This should be funded through a one-off Robin Hood tax on the record profits of oil and gas producers and traders.

We know that the lowest-income households spend twice as much on food and housing as do better-off households, so the current crisis hits the poorer more than it does the better off. The national insurance rise should be abandoned. The public now see it as the equivalent of the cost of unused PPE and fraud in the business support system. Those two things are the same as the projected income from the national insurance rise and I think that the NI rise really cannot be justified now. The Government should use general taxation instead, as many commentators suggest.

Mention was made by the noble Lord, Lord Monks, of the Levelling Up White Paper, but you do not level up poorer parts of the country by increasing so substantially the amount of tax that people who live there have to pay. The noble Lord, Lord Howell of Guildford, reminded us of the need for back-up. We need that and more. We need to relaunch the green homes grant scheme, we need more local networks for renewable energy sources, we need greater investment again in insulation and we need much more research on how to store renewable energy. In the medium to longer term, those should be the Government’s priorities.