Families: Cost of Living

Baroness Prosser Excerpts

Thursday 31st October 2013 Lords Chamber

Moved by

[Baroness Prosser]

That this House takes note of the current cost of living and its impact on family budgets.

[Baroness Prosser (Lab)]

My Lords, I am privileged and pleased to be able to introduce this debate on the cost of living and its impact on family budgets. It would be disingenuous to pretend that the issues encompassed in the title are easy to deal with or to put right, but I will try to set out the ideas and proposals from these Benches which, we believe, would in the short term ease the pain currently suffered by so many ordinary, “get up and out in the morning” individuals and families and, in the longer term, strengthen our economy to the benefit of all players.

Let me start by setting out the major changes and events that have taken place in the UK in recent history which have contributed to today’s imbalance in our society. First, the world of work for many in this country has been turned on its head. An industrial revolution has taken place whereby thousands and thousands of decently paid but largely unskilled, mostly manual, full-time jobs mostly done by men have gone for good. They have been replaced with jobs in the service sector which are lower paid, requiring very different skills, and often part time. In part, that has come about because of the extraordinary and rapid growth in technology, often replacing many hands with one worker and a computer screen; but let us not forget that that change also came about because thousands of jobs went overseas in the 1980s chasing the cheapest dollar and encouraged by the Government of the day. Some may say that that is no longer relevant because it was a long time ago, but that decimation of our manufacturing base and the skilled workforce that went with it has had long-term deleterious effects on our economy and on the livelihoods of many working people, still felt to this day.

Secondly on the big picture, we must take account of the 2008 banking crisis, a global collapse of confidence in financial institutions and a requirement for the Labour Government of the day to use millions of pounds of government money to save us from complete and utter catastrophe. We are of course aware that those events have led to a very difficult financial situation, with the need to curtail capital expenditure. Whether or not that justifies the current austerity regime is a matter of political opinion and fierce debate, which will no doubt run and run. However, it has been well documented that those on the bottom rungs and those in the middle of society have been the hardest hit by the Government’s actions, leading to a widening of the gap between the haves and the have-nots.

The final big picture point which needs to be mentioned is the opening up of European borders to some of the new members of the EU, enabling their citizens to come here to live and work. Many employees rely on EU labour, and most speak highly of the work ethic which those workers bring with them. Some, however, have, frankly, abused European Union labour, taking advantage of workers’ lack of knowledge of the legal protection available to them and often paying them below the rate offered to the indigenous workforce. That is not only wrong in itself but has introduced a “them and us” culture into workplaces and local areas which is divisive and unhelpful.

What comes out of all this? What is needed to bring greater equality back to our society, so that people can feel that they have a stake in the future and that not all the rewards are reserved for those at the top? The coalition Government appear to have only one string to their collective bow when determining priorities for both expenditure and the cuts: more and more austerity and more and more in the name of “We can’t afford it”, to roll back the role of the state. I am not alone in thinking that the first point is there in large part to disguise the desire for the second. Is the Tea Party alive and well in No. 11?

I would argue, and I believe most of the general public would agree, that in a civilised society the role of the state in ensuring well-being and fairness, in providing essential services and physical infrastructure and in controlling the excesses of private companies and individuals is not only important but key to social cohesion and the long-term well-being of the nation as a whole. What we have at the moment is, of course, a disinclination on the part of the Government to do any of these things.

I start with incomes. According to the Government’s own Social Mobility and Child Poverty Commission, the UK has one of the highest rates of low pay in the developed world. The national minimum wage is now worth £1,000 less in real terms than in 2008. Average wages have fallen in 38 of the 39 months since David Cameron came to power and, only last week, official figures showed that working people are now £1,500 a year worse off since the 2010 general election. The Joseph Rowntree Foundation maintains that minimum income standards have been hit by 4% inflation; the Government declare that it is 2.4%, as measured by the CPI. Wages have risen by 1% overall; as Mr Micawber would say, “Misery”.

A future Labour Government will tackle low pay by strengthening the minimum wage. Moves are already afoot to investigate the role and powers of the Low Pay Commission to see that they are strengthened and extended, including consideration of where certain employers could pay more than the minimum. The Low Pay Commission will continue to make balanced decisions on these matters, taking into account the need for wage growth versus the possible impact on employment. Increasing pay would reduce the numbers of people reliant on benefit subsidies and therefore help the taxpayer and the nation’s coffers. It surely cannot be right that taxpayers generally are supporting low-paid workers while, in many cases, their employers make very large profits and often record their own accounts in such a way that reduces their corporate tax liability. The great British public are a bit fed up with that wheeze.

A future Labour Government will also be ready to help families back into work by assisting with the high cost of childcare. In particular, many women are deterred from participating in paid employment because the cost of childcare is far from affordable on the kinds of salaries that they can command. An extra 10 hours of free childcare will be available, on top of the 15 hours early years entitlement, and given to households with three and four year-olds where single parents or couple households are all in work. The cost of this extra provision will be met by increasing the bank levy rate to raise an extra £800 million a year.

I turn to housing, the costs of which are a reflection of supply and demand. Lack of supply has sent the cost rocketing. It is estimated that, today, it would take 22 years for the average family to save for a deposit. Effectively, that means no house. Rental prices have risen to an average of 41% of gross income for the 9 million people who rent privately. Our Prime Minister has presided over the lowest level of homebuilding of any PM in peacetime since the 1920s. The gimmick of providing guaranteed home loans will do nothing to increase the numbers of homes available and is therefore not capable of denting the current crisis. A Labour Government would provide a number of policy initiatives which will be key in helping to resolve this problem, including powers to tackle landholding; the development of new towns and garden cities; local authority access to fast-track planning processes to ease differences between neighbouring authorities; and ensuring that communities receive a greater share of the benefits of developments.

I turn to the major cost-of-living topic of our times: the rising cost of energy. What was supposed to be a move to install competition and efficiency—that is, the privatisation of the utilities back in the 1980s—has turned into what some of us always knew it would, a monopoly in all but name, with seriously hefty profits for those at the top and for dividend-holders. Just this week, Ofgem issued figures regarding the ups and downs of average wholesale electricity costs, showing categorically that the recently announced increases in consumer bills far outstrip anything that has had to be paid on the wholesale market.

A Guardian article on 29 October, a few days ago, cited Npower as having increased consumer prices by 7.2% and 9.1% in the years 2011 and 2012, despite the wholesale price reducing by 4% in 2011 and rising by less than 2% in 2012. As the article pointed out, running an electricity supply business is about more than wholesale and retail prices. However, complaints by the various companies that the network and environmental costs are a key factor appear to be rather dented by Ofgem’s assertions that network costs have risen by £10 in each of the past four years, with green costs rising by a similar amount.

The story of gas supply is a similar one, with recently announced gas prices ranging between 8.4% to about 10%. Meanwhile, the CEO of Centrica, owner of British Gas, enjoyed a pay packet last year of £4.97 million. He will not be turning down the thermostat or putting on an extra jumper.

This shameful state of affairs has even spurred Sir John Major to speak out, calling for the Government to recognise the unacceptably high profit margins by introducing a windfall tax on the industry. Neither the Prime Minister nor the Chancellor has responded positively to that proposal, preferring instead to continue their hopeless advice to be choosy and to change suppliers. Given that there is nothing to choose between suppliers, it is hard to know what benefit such an exercise would bring.

It is of course well known that the leader of the Labour Party, Ed Miliband, has committed to introducing a fuel price freeze, a proposal very much welcomed by the fuel-poor; when the choice is between heating and eating, any help is welcome. It is, I would say, a national disgrace that we have such a situation in this country. We may have something of a cash-flow problem at the moment but we cannot by any stretch of the imagination profess to be a poor country, and to have our citizens reduced to turning off the heating and/or lining up at food banks should be a matter of national embarrassment.

I started my contribution today by recognising that the financial difficulties that we face are very real and not easily overcome. I hope, however, that I have been able to persuade noble Lords that positive actions have to be taken if we are to get through this period with all our citizens on board. I hope also that I have been able to point out that it is unfair and unacceptable to expect those who have the least to carry the burden for those who have the most. I beg to move.

--- Later in debate ---

[Baroness Prosser]

My Lords, I thank all noble Lords for their contributions to the debate and particularly thank the Minister for his detailed response. I should like to single out the noble Lord, Lord Horam, for putting forward a different point of view and keeping us all on our toes. However, I find it difficult to understand the point that he and the Minister made about the narrowing of inequality. It rather reminds me of the “lies, damned lies and statistics” statement with which we are all familiar. How is inequality being narrowed when we have seen such a huge increase in the number of people using food banks and those in rent arrears? That phrase does not mean the same thing out there on the street. I urge the Minister, as the representative of the Government, to take the arguments back to other members of the Government and to remind them that the word “govern” is a verb—it is a doing word. I, on behalf of these Benches, expect there to be rather more doing than talking because the consequences of not dealing with the major widening of inequality in our society will be hugely dangerous for our country in the future. I once again thank noble Lords for their contributions.

Motion agreed.