Families: Cost of Living

Baroness Tyler of Enfield Excerpts

Thursday 31st October 2013 Lords Chamber

[Baroness Tyler of Enfield (LD)]

My Lords, I, too, congratulate the noble Baroness, Lady Prosser, on securing this critically important debate. Living standards are the most pressing issue facing this country, despite the recent and of course welcome signs of economic recovery and the preliminary estimate of gross domestic product, just published, indicating that output will grow by 0.8% during the three months to September. Nevertheless, real anxiety over the cost of living is the day-to-day reality of many British families, particularly those on low incomes. The stark fact is that living standards have been stagnating. The economic review published yesterday by the Office for National Statistics shows that households in Britain have seen their living standards stagnate for the past four years and are spending an increased share of their income on essentials such as food, fuel and housing.

As has been referred to, the Which? Quarterly Consumer Report for this October found that just 24% of people surveyed believed that they were able to live comfortably on their earnings, and 52% in the lowest income group are still cutting back on essential spending. Furthermore, the Institute of Fiscal Studies has pointed out that real average earnings continued to fall in 2012-13, and this trend is expected to continue into next year. The time for action on the cost of living is now.

As other noble Lords have already pointed out, the Social Mobility and Child Poverty Commission has done important work in drawing to our attention the problem of in-work poverty in Britain. As it has already been referred to, I will not repeat what was said, but this focus on children living in poverty in households where at least one adult works forces us to abandon for good the long-held prejudice that poverty is the preserve of the workshy. It is simply not the case.

Before addressing what needs to be done, I want to recognise that the coalition Government have a genuine commitment to easing the burden on lower and middle earners, and to acknowledge the welcome measures already taken. I particularly mention the raising of the tax-free allowance to £10,000—a flagship Liberal Democrat policy that has given a £700 tax cut to more than 20 million working people and lifted some 2.7 million of the poorest paid out of income tax altogether. We have also seen the freezing of council tax and fuel duty, expanded childcare and an increase in the state pension. Of course, these efforts to ease the pressure on household budgets are laudable, but more simply must be done, and quickly, if we are to tackle the looming cost-of-living crisis.

Because of my usual areas of interest, I wanted to talk about childcare and the living wage—but, this week of all weeks, I felt that I could not begin without saying something on energy prices. Like many other noble Lords in this House—and, I am sure, in common with many people up and down the country—the ever-rising price of energy, way above the rise in wholesale prices, makes my blood boil. It simply feels as if we are being held to ransom for a basic essential of life. I am no expert in this field, so my thoughts are those of a lay person. I certainly do not speak for my party on energy policy; others far more expert than I do that. However, the antics of the big six companies—which seem to operate as a price-fixing cartel—tell me that privatisation in this case has created an energy market that is simply not working in the public interest. Otherwise, why would prices be going up sharply when wholesale prices, which are by far the biggest element of energy costs, are relatively stable?

In recent weeks there have been many suggestions across the political divide about how to do something about a situation which is fast becoming intolerable; the noble Baroness, Lady Prosser, referred to some of them. They include a price freeze on energy, a windfall tax, far greater transparency over profits, the simplification of tariffs, a competition review, more focus on consumer power through things like collective switching, and switching green levies away from energy bills to general taxation. Personally, I think that anything which could feasibly and realistically bring down prices, and quickly, deserves further investigation to test its workability and impact. I hope that this does not simply turn into a political football match. The stakes are too high, with winter approaching.

I am fully committed to protecting the environment, investing in renewable energy resources and safeguarding our green energy and jobs. However, we must help those in fuel poverty. That is why I strongly support shifting some of the costs of green levies from individual energy bills to general taxation, which is more progressive in nature. In simple terms, it prevents the cost of vital energy efficiency measures such as insulation and new boilers for households in fuel poverty from falling disproportionately on poor households. For reasons of social justice, those with the broadest shoulders need to bear a bigger load.

That is why I strongly support the call made at the weekend by my honourable friend Simon Hughes, who called for the Autumn Statement to contain a rebate on energy bills that would help the poorest most, and bring immediate relief this year. Of course, we all understand that money is very tight and that George Osborne has many competing priorities to consider when he draws up the Autumn Statement. My message is simple. If the choice is between doing something to reduce energy bills and introducing tax breaks for married couples, the former gets my vote, and I suspect that the same could be said for many up and down the country.

On low pay, I contend that the living wage has a valuable role to play in the fight to raise living standards. As the Institute for Fiscal Studies’ recent report, Living Standards, Poverty and Inequality in the UK, concisely expressed it,

“it is low hourly wages rather than low hours of work that are most strongly linked to being in poverty”.

Encouraging employers to pay a wage that allows workers to have an acceptable standard of living without recourse to benefits is not just about fairness but makes sound economic sense. According to figures by the Resolution Foundation, savings of up to £3.6 billion could be made by the Treasury if employers paid the living wage, which would end the current situation whereby tax credits to low earners are used to top up wages—essentially, to be honest, subsiding some employers who could afford to pay more.

A much more empowering approach would be if people were able to maintain or improve their standard of life through earning their own money, rather than through complicated tax credits whose take-up rate is only 65%. I know that some will argue that this will lead to a loss of jobs, to which I would respond that the same thing was said when the national minimum wage was introduced, and it simply did not materialise.

That is why I am delighted that at our party conference in September, the Liberal Democrats decided to adopt in principle the living wage as party policy and to create a commission to establish an official living wage with a view to a gradual rollout across sectors and employers who can afford to do so. I hope that this will also help stimulate a debate about how a fixed pot of pay is distributed more fairly between those at the top and at those the bottom.

My final point is about childcare and the need to tackle its cost and availability, which again has already been referred to by other noble Lords. Much has already been done in this area thanks to Liberal Democrat Ministers who have pushed for this to be a priority. Lack of access to affordable and good-quality childcare prevents many women from returning to work following childbirth, denying their skills and the potential tax take to the economy, and is proving a major squeeze on the household budgets of those that do return.

The Institute of Fiscal Studies, yet again, has shown that female employment has been the key driver for increased income among low to middle-income families over the past 50 years. Of course, the current provision of 15 hours a week of free childcare for all three to four year-olds, and 20% of two year-olds from the most deprived backgrounds, rising to 40% next year, is hugely welcome. However, the cost of additional hours of care has been rising rapidly and squeezing the living standards of working parents.

Again, that is why I am so pleased that Liberal Democrat party policy is now to extend the number of free childcare hours on a stepped basis, starting with 10 hours of free care for babies between the ages of one and two, and culminating in 25 hours for four to five year-olds. That fills the gap between the end of parental leave and the existing free entitlement for two years. At a time when we all recognise that public finances are still very hard pressed, these are the sorts of measures designed to alleviate the pressure on living standards that I would like to see given clear priority in 2015 and beyond.