Working People’s Finances: Government Policy

Alison Thewliss Excerpts

Tuesday 21st September 2021 Commons Chamber

[Alison Thewliss (Glasgow Central) (SNP)]

This could not be a more timely debate. My constituents and people across the country are looking with great apprehension at the winter to come, fearful about how they will make ends meet. I welcome the Minister to his post, and I appreciate what he said about the economic support offered, but that is not unique to this Government or any other. Governments around the world have sought to support their citizens through this pandemic, and many have done so more compassionately and more competently than those sitting across from us on the Tory Benches.

Many have done that from a better starting point, too, without public services stripped bare from a decade of austerity and a welfare state that punishes people for their circumstances, and without the worst inequality in north-west Europe. And none of them has embarked upon a project so thoroughly deficient and self-defeating as Brexit, which has left businesses carrying higher costs, shelves empty, and skilled people—our neighbours and friends—leaving this island in their droves because this UK Tory Government have made them feel so unwelcome. Scotland voted for none of this.

To the here and now, Madam Deputy Speaker. We have food shortages and price rises, inflation increasing, cuts to universal credit and tax credits, the end of the pensions triple lock, a regressive national insurance hike, the end of furlough and the self-employment income support scheme—for people who were lucky enough to be eligible for that scheme rather than excluded from it—and now the prospect of spiralling energy bills as we head into the depths of winter.

[Alex Cunningham]

The hon. Member has just mentioned energy prices. I do not know whether she saw that Torsten Bell of the Resolution Foundation said:

“The autumn is looking like a cost of living crunch.”

He added that four in 10 households

“will see their energy bills rise by 13% (£153 a year) at exactly the same time as their income falls by 5% (£1000 a year).”

He also mentioned inflation, which is expected to get to 4%. What does she think that will mean for the poorest people in our society?

[Alison Thewliss]

The hon. Member is perfectly right to point that out and to refer to the words of Torsten Bell. He came to the Treasury Committee to give evidence about some of the things that we are facing in the months ahead. Many constituents will just not be able to cope with this. They will become more indebted, they will struggle to get by, and they will find it difficult to get back out of that debt, get on with their lives and be productive members of society. This is a significant crisis, which this Government are ignoring and making worse by their inaction.

This Tory Government have already created the perfect storm: a cost-of-living crisis atop an already weak and stagnant economy. Citizens Advice Scotland found that more than 1.4 million people in Scotland ran out of money before payday at least once in the last year. Sarah Arnold, senior economist at the New Economics Foundation, found that 2.5 million working families on low incomes will lose £1,290 a year because of the double whammy of the cut to universal credit and the increase in national insurance contributions. That is utterly unjustifiable.

It may not mean much to those on the Government Benches, but that is an enormous amount of money to many people across this country, which cannot be made up through a few hours’ work, as the Work and Pensions Secretary appears to believe. It is the difference between just getting by and not coping at all, between being able to put food on the table or relying on the food bank, between keeping the lights and the heating on or disconnecting from the power supply.

I am an honorary vice-president of Energy Action Scotland—I refer Members to my entry in the Register of Members’ Financial Interests—which has found that one in five households with a prepayment meter regularly self-disconnects because they simply cannot afford to top it up. Of those households, 88% contain a child or someone with health issues. Those on prepayment meters will struggle the very most in the months ahead—they always do—and this UK Government do absolutely nothing to support them. The stress of watching the meter eat what little money has been put in it is an experience that I am sure few on the Government Benches will understand, but I have had constituents shivering, living in one room under blankets and duvets, because no matter how much money they put in that meter, they cannot keep their home warm.

There is a significant impact on older people, carers and people with disabilities, whom this UK Tory Government have often completely ignored. That is a group whose energy bills are higher. My constituent Rob McDowall is among many already worrying about how to keep warm this winter. Like Citizens Advice Scotland, he is advising people to seek assistance and advice right now. While I fully support attempts to seek advice, this UK Tory Government should take their responsibilities seriously too.

Energy costs will increase more in Scotland due to our geography. This is a life and death issue. Living in a cold home causes illness, and Energy Action Scotland has found that there are around 2,000 excess deaths in Scotland each winter as a result. That is a scandal in energy-rich Scotland, but it is a reflection of how broken the energy system is—a system entirely reserved to Westminster. Around 25% of energy bills is the cost of UK Government levies and policy choices, as well as VAT. That disproportionately hits those on low and middle incomes. The Treasury must do something now to alleviate that burden. That is in its hands.

[Alan Brown]

Is it not the case that even the schemes that are meant to help the poorest, such as the warm home discount, the eco scheme that helps with some energy-efficiency measures, are paid for by other energy users, so they are actually regressive? Those who can least afford their energy bills are paying to try to support other people, so it is a circular argument that goes nowhere. Is it not also outrageous that in the highlands of Scotland, people pay up to £400 more a year as a levy on their electricity while exporting energy to the rest of the UK?

[Alison Thewliss]

My hon. Friend is absolutely right to point that out. That is an unfairness in the system that the Government have shown no compulsion to tackle at all. We must look at that unfairness, particularly for those in the most rural parts of Scotland who find it hardest to afford their energy bills.

I seek an assurance from the Government that those who have money sitting in their energy accounts just now will see that swiftly transferred over to any new company, as people tend to pay in more over the summer to meet their bills in the winter. In his statement yesterday, the Secretary of State for Business, Energy and Industrial Strategy could not guarantee that the warm home discount would be paid to customers transferring. I also want to know what assistance will be possible for those transferred customers who are living with existing arrears. It is an uncertain and very worrying time for them all.

As an aside, my hon. Friends the Members for Kilmarnock and Loudoun (Alan Brown) and for Aberdeen South (Stephen Flynn) have been pursuing the ridiculous transmission charging regime, which makes it more expensive for us to connect the clean, green energy produced on our doorstep in Scotland to the national grid. It feels as if Ministers could not be less interested in fixing that disproportionate scandal.

We all know households that already struggle to pay their energy bills. Households relying on electricity for their energy needs pay £600 more on average than households with both gas and electricity. In the areas that are off the gas grid completely, particularly those relying on liquefied petroleum gas, those costs can be even higher.

In addition to food banks, fuel banks are springing up around the country to meet this need, but given the soaring fuel prices we face, it will just not be enough. The price of food in the shops is also going up. Inflation stood at 3.2% in August, which I understand is the highest month-on-month increase since records began in 1997. Some have predicted that it might reach 4.5% by November. The Bank of England target is 2%. That means that goods in the shops will get ever more expensive. There is the prospect, too, of the national insurance hike being passed on to consumers. The Institute of Chartered Accountants in England and Wales has suggested that companies may try to cover the increase on employers’ costs by passing it on to consumers, so as well as being a tax on jobs, this is a tax at the till.

In addition to having an impact on people’s food bills and their ability to feed themselves, this cost increase is having an impact on charities that are already trying their best to support those in need. Audrey Flannagan at the Glasgow South East food bank in my constituency tells me that food donations to it are down 30%, at a time when she is planning for an influx of people due to the cuts to universal credit. I say “cuts” because, for many who claimed benefits for the first time during the pandemic, they have known nothing else. Audrey tells me that people she has spoken to have been horrified to receive a letter from the Department for Work and Pensions informing them that their money is getting cut, because for them it is not an uplift; it is quite simply what they have been managing on for months now.

The Minister talked about living wages, but his living wage is not a real living wage, as set by the Living Wage Foundation; it is a pretendy living wage. It is not enough for people to live on, and it is not available to everyone. As he knows well, age discrimination is baked into the living wage. Younger people, who face the same bills at the checkout and on their energy and rent, are getting short changed by this Government through their pretendy living wage.

The impact on families of this cut has been well repeated, but I would like to mention the impact on single people. Twenty pounds is around a third of a single person’s income on universal credit. Glasgow South East food bank has seen a significant drop in single people coming for emergency food assistance in this past year, from 601 people in January to March 2020, to just 151 people in the same period this year. Audrey Flannagan believes that the additional £86 per month—UC is paid monthly—was enough to make a difference to those people. It pays for the gas and electric, it puts food on the table, and without that £86 a month, many will return to her service in just a few weeks’ time.

Many people have been in touch with me, as they have with my colleagues, to protest the cut to universal credit, but I want to read this email from John, because he puts it so well. He says:

“I wanted to write you a short note to tell you that cutting back on the U.C. uplift is going to have a very hard consequence on me. I was laid off at the start of the pandemic when the company I was working for closed down. With the uplift I’m receiving about £300 to last me nearly 5 weeks! The government talks like this was a favour done us! Firstly, I and all those on Universal Credit are not responsible for a pandemic! Secondly, the pandemic is not over yet! There could be further strains and further lockdowns! What then for people like me! Also benefits did not go up before the uplift for years and years, while prices and the cost of living have. This therefore is actually a benefit cut! It will be the difference for me between just getting by and crushing poverty!”

That choice will be faced by people up and down this country. Every single person in this House has a responsibility to think of each and every one of them when we vote on this issue, because it is the difference between just getting by and crushing poverty, as my constituent John pointed out.

There are global issues, of course, driving the cost-of-living crisis, but the political choices being made by this UK Tory Government are making it worse. Yet again, they have chosen to balance the books on the backs of the poor—to repeat the mistakes of the previous crash by choosing austerity over stimulus. My constituents did not choose this. The people of Scotland did not choose this. Even many Tory voters did not choose this, as those on the Government Benches break promise after promise to their own supporters. The first duty of Government is to protect its people, and this UK Tory Government have failed repeatedly on all counts. There is no Union dividend, only a Union dead end. Scotland needs the full powers of a normal independent country, to look after all of our people and seek a fairer, just and more prosperous recovery for everyone.

[Mr Speaker]

We now come to the maiden speech of Jill Mortimer. I remind people that they cannot intervene.

--- Later in debate ---

[Miriam Cates]

The hon. Lady makes an excellent point. While, overall, on a macro level, having more jobs available for British workers will push wages up, it is of course the case that certain sectors will need specific interventions to save them, and I would support any such measures.

While there are concerns like the one the hon. Lady has raised, and concerns in the wider economy, our plan for jobs is working and the future is optimistic. None the less, there are some long-term structural issues with the cost of living and threats to living standards that must be addressed, and this is the moment to do so. We must find a solution for the sake of future generations.

First, housing affordability is a key driver of problems with the cost of living. Solving the housing crisis will unlock many issues, such as generational inequality, and it will reduce the cost of living. I am delighted that the Secretary of State for Levelling Up, Housing and Communities, my right hon. Friend the Member for Surrey Heath (Michael Gove), has been appointed to look at this specific problem, because it is very important. Many of the serious issues that Members have raised in this House today would be much aided by a reduction in the cost of housing.

Secondly, we also need to look at fairer finance for families. Again, much has been said about the changes to universal credit, but I want to consider what we could do in our taxation system to make life fairer and cheaper for families. Unlike many countries, the UK has an individualistic tax system. We tax individuals rather than households, which means that we do not take into account the number of dependants in a particular house, and that can make life very expensive for families. Some families on low and middle incomes can end up paying around 30% more tax than individuals living on their own. When we couple that with the way that benefits are clawed back as people earn more, some families can effectively face a marginal tax rate of 75%, making it very difficult for them to get out of poverty. We must recognise the importance of raising children not just for the nuclear family, but for our whole society. We need to look at how we can make it less expensive for families to exist and to raise their children.

[Alison Thewliss]

The hon. Member is making an interesting point about support for families. Does she agree that the UK Government’s two-child benefit cap punishes those who have a larger family and puts them in a position where they cannot work their way out of poverty?

[Miriam Cates]

What is far more significant is the way in which we tax individuals—potentially spreading people’s income tax allowance and things like that—rather than looking at household income; that would give families far more choice about how they spend their income and organise their lives, and make family life much more affordable.

Thirdly, we have to address the long-term affordability of our public spending commitments. The welfare state that we have today was designed 80 years ago, when life was very different. Demographics were different then. There was no paid-for childcare or paid-for social care. Most women did not work. There was a huge amount of free care and community living going on that we just do not have, or that there is not nearly as much of, today. Of course, people then also spent a far higher percentage of their life working, whereas now people spend much longer in education and much, much longer in retirement, which means that proportionally, over the course of someone’s life, they are spending far less time paying tax and paying for insurance—paying for the benefits that we all want to enjoy.

The Office for Budget Responsibility forecasts that public sector net debt could rise to 300% of GDP by 2070. We just cannot continue in the way that we are now. We need a reset. We need to redesign our public spending and welfare state for modern life and modern demographics. I think we have already established that we cannot tax our way out of this. Of course, we should be trying to grow our way out of it, but we also need a fundamental redesign of the welfare state and public spending.

We also need much more emphasis on community solutions and prevention. It has been an honour to be part of the early years review of my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom), whose start for life recommendations look at the importance of the first 1,001 days of a child’s life. If we get that period right, we can prevent so many problems that destroy people’s lives in the long term and which are incredibly expensive for public spending. We must spend more and invest in the early years and health prevention. About 40% of the NHS budget is spent on preventable and lifestyle diseases. We have to tackle those things if the state is going to be affordable in the long term. Of course we should innovate, use technology and look at what other countries are doing to address these issues.

We should be concerned about the cost of living. Families up and down the country are struggling, and there are families that are not able to take advantage of opportunities in jobs and higher wages. But this Government have taken action on jobs over the last 18 months, and that is bearing fruit. As our economy is reset, we now have an important opportunity to solve some of the structural issues that we face.