Section 5 of the European Communities (Amendment) Act 1993

Debate between Shabana Mahmood and Philip Hollobone

Wednesday 30th April 2014 Commons Chamber

[Shabana Mahmood]

And yet people in our country are on average £1,600 a year worse off. Let us look at the combined impact of tax and benefit changes. The Institute for Fiscal Studies figures, analysed for us by the House of Commons Library, show that on average people will by next year be about £1,000 a year worse off. This comes back to the central point: the Government say in the Red Book that pressures on household budgets are easing, but people are worse off, and not by trifling amounts, such as a tenner or £20 quid—they are worse off by nearly £1,000. That is a huge sum and it has a huge impact on a family’s ability to make ends meet.

The Government talk a lot about the personal allowance, and when the charge is made that ordinary people are suffering a deep-seated cost of living crisis, they often say, “But of course we have taken a large number of people out of tax altogether because of the increase in the personal allowance.” Although the personal allowance increases have been welcomed and supported by everybody across the House, they do not in and of themselves give a family the ability to make ends meet. We still have people who are desperately struggling, and who have their head in their hands every time a bill comes through the door. The truth remains that people on lower and middle incomes are worse off, and they will be worse off at the end of this Parliament than they were at the beginning of it. The balm offered, by the increases in the personal allowance in particular, is not enough to heal the deep wound that has been inflicted by all the other changes this Government have implemented since they have been in power. As I say, the combined impact of tax and benefit changes means that by next year people on lower and middle incomes will be about £1,000 a year worse off.

The Red Book also talks a lot about the Government’s economic policy in relation to savers. The Chancellor famously said:

“If you are a maker, a doer or a saver, this Budget is for you.”—[Official Report, 19 March 2014; Vol. 577, c. 781.]

There was not much in the Budget and the Red Book to help those who are making do—the people struggling with the cost of living crisis. But for the savers, there is much in the Red Book: about retirement choices, individual savings accounts and other savings devices. The Red Book has twice as much about savers as about supporting households. Again, however, it is not a true and accurate reflection of what is going on in the economy, because the Red Book fails to recognise that for many people saving, particularly at the moment, is a luxury that is desperately out of reach. I can imagine the welfare Minister I described earlier as being baffled about why people go to food banks being equally baffled about why people cannot save. People go to food banks because they have no money and they are going hungry. People do not save because they do not have any money left once they have met their other costs of living.

Hidden away in the documents that accompanied the Budget we found that the OBR says that the savings ratio has fallen in recent months and is projected to fall every year until 2018. I put that point to the Chancellor yesterday when I asked him to confirm that, despite his Budget for savers, the savings ratio is forecast to go down. He ducked the question and refused to accept that that is what the OBR is saying is happening to the savings ratio.

In recent weeks, we have had a number of surveys, particularly an important one carried out by the Money Advice Service, which have shown that 16 million British people are living life on the edge with no savings at all. Just 27% of people say that they can save on a monthly basis, and 37% say they have fewer savings now than they had last year. The truth, which we do not see in the Red Book, is that savers withdrew money from their accounts last year at the fastest rate for nearly four decades, according to Bank of England figures. Britons ended up taking out £23 billion from long-term savings in 2015. The ability of ordinary people on lower and middle incomes to save and to have enough money left over after the working week to put aside even £1 a day is fairly limited. Again, that is something that has not been spelt out in the Red Book.

[Mr Philip Hollobone (Kettering) (Con)]

It has certainly been spelt out in the convergence document produced by Her Majesty’s Treasury. Page 12 makes it quite clear that falls in the rate of saving are to be expected in periods when confidence is increasing. It goes on to say that total household debt as a percentage of disposable income has fallen more than 30 percentage points since its pre-crisis peak under the previous Government.

[Shabana Mahmood]

I am afraid that that does not get the Government off the hook when it comes to the impact of their own record. The decisions that the Government have made, both in this and previous Budgets, have left ordinary people worse off. The rhetoric around savers and how much there is in the Red Book for savers in our country misses the point and does not spell it out in ordinary language for the ordinary person to understand that saving is a luxury today for millions of people struggling with a deep-seated cost of living crisis.

The Red Book gives a rosy picture of what is happening in the UK economy, but is just a good line in rhetoric that is rather removed from the reality of daily life for millions of people in our country. For that reason, I urge Members to reject the Government motion and to support our amendment, which, at the very least, introduces an element of reality into what is a surreal characterisation of today’s British economy.