Low-Income Families: Energy Cost Support

Lord Wood of Anfield Excerpts

Tuesday 6th September 2022 Lords Chamber

Asked by

[Lord Wood of Anfield]

To ask Her Majesty’s Government what further support they plan to provide for low-income families who do not pay income tax, to help meet their rising energy costs.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we are making necessary preparations to ensure that a new Government will have options to deliver additional support as quickly as possible. Further to the support measures announced in May, the Government will of course continue to support low-income and fuel-poor households with their energy bills through the warm home discount, winter fuel payments and the cold weather payments scheme to ensure that the most vulnerable are better able to heat their homes over the cold winter months.

[Lord Wood of Anfield (Lab)]

My Lords, the incoming Prime Minister spent the summer repeatedly pledging income tax cuts, yet 43% of adults, including those in the greatest need, pay no income tax and would not benefit from this. Meanwhile, her pledge to reverse the national insurance rise will give the poorest 10% of households £7.60 per year and the richest 10% £1,800 per year. When asked about this, the new Prime Minister said,

“to look at everything through the lens of redistribution … is wrong”.

Does the Minister think it fair at a time of such widespread fear among low-income households to prioritise income tax cuts that would give the most frightened families no help whatsoever?

[Lord Callanan (Con)]

The noble Lord is commenting on proposals that he has not yet seen. The House will not have long to wait, and a lot of options have been worked on over the summer. As well as putting preparations in place for the Energy Bills Support Scheme, which I remind the House will be rolled out from 1 October in a series of monthly payments, other options have been prepared. The energy price rise is unprecedented, and we all know the reasons for that. The noble Lord will have to be patient and wait and see what we announce.

Queen’s Speech

Lord Wood of Anfield Excerpts

Monday 16th May 2022 Lords Chamber

[Lord Wood of Anfield (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Hunt. I will make some remarks on the macroeconomic aspects of the economic challenge that we face.

Of course, we all know that this is a dual economic crisis: it is a crisis at household level as inflation soars—it is predicted to exceed 10% in a few months—and it is a macroeconomic crisis of stagflation, or inflation and constrained growth combined. No one should pretend that addressing stagflation is easy if you are in power, as a lot of the people on these Benches know from the past. To some extent, this is of course a global challenge and not a UK one, although I take the comments of the noble Lord, Lord Forsyth, on this issue, which were as stimulating as ever. But it is important to understand that there is a UK variant of this economic shock if we are going to get the policy-making response right. That is what I want to talk about briefly today.

Of course, everyone has suffered from two huge impacts—Covid and the Ukraine war—and the supply problems and commodity shocks that have come from those two crises. But, to understand how the UK should respond, we have to understand three things. First, we have to understand how serious the risks of recession are, as economic activity slows down, as well as the dangers that come with escalating prices. Secondly, we have to understand how much domestic inflation is caused by these external shocks and how much is caused by wages chasing inflation. Thirdly, we have to understand what country-specific factors lie behind inflation in the UK.

On the first issue, the risk of recession, most commentators, including the Bank of England—to the extent that it is a commentator—say that we are on the brink of a recession, or at least a very significant slow-down. The second largest hit to household incomes since records began is coming our way. Consumer confidence is at the lowest it has been for nearly 50 years. The OBR says that living standards will fall by the largest annual amount since records began 65 years ago. In my view, the risks of recession should worry policymakers as much as inflation. I suspect that, in six months, they will worry us much more.

On the second point, of how much inflation is driven by supply shocks versus a wage-price spiral—various people have talked about this issue—the evidence is quite complicated. The UK is an odd case in this regard because, like the US, where economists suggest there is clear evidence of excess demand as wages chase prices across the economy, the UK has tight labour markets and inflation is well above target. But unlike the United States, there is little evidence so far that our inflation is at the moment being fuelled by a wage-price spiral. The latest ONS data in February shows that regular pay fell year on year in real terms. The one area in which that is not true, by the way, is financial services, where large bonuses have kept overall pay growth higher. However, we do not at the moment have a systemic economy-wide wage-price spiral problem—though that is not to say we should be complacent. But we have a serious problem of lagging real wages in much of our economy, which is a key issue because it means that the Government have much more fiscal room to counter an upcoming recession than they might think.

On the third issue, the UK-specific factors behind inflation, again the UK is an odd case in one important respect—Brexit. Brexit has caused UK-specific inflationary pressures, and for a few reasons: the depreciation of sterling in the aftermath of the referendum; additional barriers at the border; raised costs; and trade barriers protecting domestic producers from efficient competition. What we have not seen, interestingly, is inflation driven by the labour shortages that Brexit accentuated. IFS studies suggest that, with a couple of exceptions, those have not led to accelerating wage growth.

That is the bad news. The good news is that we do not have a broad-based spiking of wages due to a Brexit that is causing raging inflation. This suggests that, while inflation is causing huge pains to millions of households, the far bigger risk for the UK is the unhappy combination of energy price hikes, higher food prices, fiscal tightening and monetary tightening, all leading by the end of the year to a serious slowdown and even recession. A concern about the horrific impact of the cost of living crisis on struggling families and a macroeconomic concern about the dangers of reinforcing the drift towards recession point the same way, in my view: towards the Government taking urgent, sizeable steps to stimulate the economy. By far the most efficient and targeted way of doing this is through not tax cuts but the benefits system, helping those who need it most and whose incomes are not keeping up with rising prices, who have no savings to rely on and no access to other wealth. This could be financed in various ways, such as through borrowing or the windfall tax, which noble Lords would expect me to talk about.

I will say one last word on the windfall tax. If it is designed properly and targets genuine, supernormal profits, the idea that it will undermine investment is incorrect because investment plans do not rely on supernormal profits. If they do, they are not very good investment plans. Spain, Italy, Bulgaria and Romania have introduced them and France has enforced big price reductions on EDF. Germany’s coalition is debating one and Biden’s congressional Democrats have proposed one. From what Ministers have said in public, in coded and less coded ways, I am actually hopeful that the UK looks like it may follow suit. If so, it will be not just for the families but for the macroeconomic health of our economy that it happens.

Trade Bill

Lord Wood of Anfield Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 8th September 2020 Lords Chamber

[Lord Wood of Anfield (Lab) [V]]

My Lords, I too offer my congratulations and very best wishes to the new Minister. It is slightly depressing that we have to make the case for basic parliamentary scrutiny to a Government who, once again, seem intent on minimising it but, yet again, this is what we have to do. The degree of parliamentary scrutiny provided for in the Bill is laughably thin; as some noble Lords have observed, we are faced today with a proposal to approve fewer scrutiny powers and control over trade agreements than when the UK was a member of the European Union—so much for taking back control.

The European Parliament, a body so often disparaged as lacking legitimacy and plagued by democratic deficit, has access to timely information about trade negotiations, access to negotiating texts, and is able to vote on the final outcome. We have an archaic provision that trade falls under the royal prerogative, with Parliament involved only at the end of the treaty-making process, at a time when it cannot influence the substance and text of the treaty.

I use the word “archaic” because the world of trade deals has transformed since the last time the UK had competency in trade policy, in the early 1970s, in a way that demands updating the commensurate powers of Parliament. Trade deals then were fundamentally about tariff reductions and associated border measures. They attracted little public attention and raised few wider concerns, and thus enjoyed little debate and scrutiny in national Parliaments. Now, in 2020, trade agreements have huge implications for public policy across a range of areas, from farming and food, to the digital economy, healthcare, financial services, manufacturing and even education. Proper prior parliamentary scrutiny, including the opportunity to question and challenge Ministers at a formative stage of the proposal, is appropriate in an age when the scope, implications and public concern on the substance of trade agreements is light years greater than it was 50 years ago.

Secondly, unfashionable as it is to say it, proper parliamentary scrutiny would improve the quality of decision-making. Ministers who know that their decisions will be examined by Parliament are, I suggest, more likely to make proposals robust enough to survive scrutiny.

Thirdly, proper parliamentary scrutiny would help rebuild public trust over whether policymakers are responding to public concerns on issues such food standards, where polling suggests that there is significant public lack of trust.

Fourthly, as the noble Lord, Lord Lilley, explained from his experience, requiring legislatures to approve a negotiating mandate can provide strength, not weakness in international negotiations by providing constraints on those negotiators. Therefore, I strongly support the proposals set out eloquently by my noble friend Lord Stevenson at the start of this debate.

Like trade, the decision to deploy the Armed Forces is also an area traditionally reserved for the royal prerogative. Yet Parliament has been asked to debate on both Armed Forces deployment and prerogative power on several occasions since 2003. In 2011, the Government suggested that a convention had emerged whereby the House of Commons should debate before such deployment. As Emily Jones, a trade expert and my colleague at the Blavatnik school at Oxford University, has argued, a similar practice could be adopted for trade agreements, with the Government committing to a full debate on a substantive Motion prior to ratification of any trade agreement that the relevant scrutiny committee deems of interest. Back in 1867, Walter Bagehot —often quoted, I know—remarked:

“Treaties are quite as important as most laws, and to require the elaborate assent of representative assemblies to every word of the law, and not to consult them even as to the essence of the treaty, is prima facie ludicrous.”


Personally, I am with Bagehot; perhaps the Minister can tell us why he is not?

Covid-19: Business

Lord Wood of Anfield Excerpts

Wednesday 13th May 2020 Lords Chamber

[Lord Callanan]

My noble friend is tempting me to go back to my previous role on Brexit. Of course, we will approach the negotiations constructively. I am sure he will be delighted to know that our position has not changed. We will not agree to any of the EU’s demands to give up our rights as an independent state. We are committed to getting a deal by the end of the year and will not extend the transition period.

[Lord Wood of Anfield (Lab)]

My Lords, as the Government try to navigate a gradual return to work for millions, I am sure the Minister will agree with the central importance of the need to dovetail the financial ambition of winding down the furlough scheme with the public health ambition to protect workers going back to their workplaces. In particular, I know there are worries that the Government will with one hand reduce support for furloughed workers sometime after the end of June and, with the other, demand workplace health and safety conditions that make a return to normal work impossible. I am thinking of establishments such as smaller cafés and restaurants and small entertainment venues. Can the Minister assure those businesses that the end of furloughing will be conducted in a co-ordinated, sector-specific and company-specific way, to ensure that some firms do not have a situation in which the Treasury expects a return to work while BEIS and the Health and Safety Executive make such a return impossible?

[Lord Callanan]

We have extended the scheme significantly to support firms through the transition out of lockdown. We are doing right by them and expect those firms to do right by their staff. As the economy gradually reopens, it is fair that firms begin to pick up some of the cost of their workers’ salaries, but we will of course want to do this in a specific and phased way to make sure that these businesses can manage to survive and trade their way back to success.