Working People’s Finances: Government Policy

Bridget Phillipson Excerpts

Tuesday 21st September 2021 Commons Chamber

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

I beg to move,

That this House is concerned about the negative impact of Government policy on the finances of working people, with a growing squeeze on living standards caused by the £1,040 per year reduction to universal credit, the rise in National Insurance Contributions for low and middle income workers, increases in council tax, the freezing of the personal income tax allowance from April 2022, the increasing cost of household energy bills, the highest petrol prices since 2013 and the potential for the largest rail fare increase in a decade, the fastest rise in private rental prices since 2008, successive above inflation increases in childcare costs, and rising prices resulting from the supply chain disruption caused by worker and supply shortages; and calls on the Government to change the direction of its policies on these issues because they have created an avoidable and unacceptable burden on working people.

Before I begin in earnest, I welcome the Chief Secretary to the Treasury, the right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke), to his new role and congratulate him on his appointment.

In our country today, working families face a sudden squeeze on living standards on a scale not seen for a generation: incomes are coming down; prices are going up, especially energy prices; taxes are going up; rents are going up; childcare costs are going up; fuel costs are going up; rail fares are going up. And with empty shelves in too many shops, restaurants closing because of meat shortages and now refrigerant shortages putting Christmas at risk, it is not just that people can afford less; there is also less to afford.

The people of Britain face an extraordinary squeeze on their living standards this winter—not simply by chance, but because of the choices made by Conservative Governments this year, last year and in the 10 years before. It is not some tragic, unforeseeable series of unhappy accidents that brought us here today. It is a string of choices that this Government have made, sometimes in the face of evidence, sometimes against advice, sometimes through a dogmatic refusal to try, and sometimes simply through a lazy and complacent failure to take the hard decisions that government involves. Time and again, through the pandemic and the long years before it, the Government have left issues to fester rather than taking action to address them, and then rushed at the last moment, only to find that it is too late and the damage is done.

I said at the beginning that incomes are going down, prices are going up, taxes are up, rents are up, childcare costs are up, fuel costs are up and rail fares are up. Let me take each one in turn.

Ten months ago, the Chancellor set out his policy of a public sector pay freeze. Like so much of his policy making, it was a triumph of short-term accountancy over rational economics. Public sector workers—council staff cleaning our parks in lockdown, police officers on the frontline, teaching assistants doing everything they can to give our children the best possible start in life—are not somehow separate from the rest of the economy. They buy food from the same shops as their neighbours working for private firms. Their children go to the same schools as private sector workers. They shop on the same high streets. They visit the same pubs and cafés. Taking money from their pockets while the recovery is so fragile—and it is so fragile—is taking money from our shops, our high streets, our economy. It is pulling demand out of our economy at the worst possible moment.

But the Government have not been content with clobbering those who did so much to keep our country running during the pandemic. In just a few weeks’ time, they are putting their hands in pockets once again: the pockets of the millions of families in our country—40% of them in working households, doing everything the Government have asked of them—for whom universal credit is what keeps them out of poverty. Again, let us be clear: many of the people being clobbered by this hit are the heroes whose bravery in the face of a then little understood disease kept this country running through lockdown after lockdown.

The Government are taking £20 each week from every family who receive universal credit. Government Members may choose to forget what that means. In the years ahead, their voters will remember the choices that they made. They will have heard from their own constituents, as I have heard, the growing worry and anger of the people they represent—the genuine sense of surprise that any Government could do this, mixed with a lasting fury that the Government really are doing this. Twenty pounds each week is not simply a number. It is school shoes, a gas bill, dinner on the table, and decent meals for the children.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

Thirty-seven per cent. of children in Lewisham are growing up in poverty. That is the stark reality of the cost of living crisis. Rather than addressing the issue, the Government are cutting those people’s universal credit and putting up their taxes. Does my hon. Friend agree that this is not the way to treat hard-working families and their children? Should not the Government keep the £20 uplift, cancel the cut and think again about the tax rises?

[Bridget Phillipson]

My hon. Friend is absolutely right. It is frankly indefensible. We knew that poverty was already beginning to rise before the pandemic even hit, and we know the impact that the cut to universal credit will have on family and household budgets, and on child poverty.

It is bad enough to be taking money out of people’s pockets as the recovery falters, but as price after price goes up for working people, this is unforgivable—because prices are up, and they are up sharply. Madam Deputy Speaker,

“August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago.”

Those are not my words, but the words of the Office for National Statistics. Alongside the most recent GDP figures, that is a powerful signal of how fragile our recovery remains.

Rising food prices have been driving upward pressure on the inflation rate, but this week, of course, it is energy prices that are the focus of our attention. That rise is taking money out of household budgets directly, but it will also be taking money out indirectly. Higher prices for energy mean higher prices for industry, and that means higher prices for goods. Already factories are being shuttered by higher prices and already that is driving further problems, such as knocking out the carbon dioxide supplies that keep meat fresh along our supply chains.

Ministers are always keen to blame other people, the weather or bad luck, and to claim that all of Europe has the same problems. That is not good enough and the public know it. To assert that other Governments have faults is not to excuse our own. What we are seeing and what we have seen over the last decade is a chronic failure to take responsibility, and it is hard-working families and struggling businesses who will pay the price.

[Jack Dromey (Birmingham, Erdington) (Lab)]

On Saturday, I met a care worker on Erdington high street who was close to tears. “I’ve got two kids, Jack”, she said, “I’m on universal credit. I can’t work any longer hours. Now I’m facing a £1,000 a year cut and a tax increase. Why? I worked so hard throughout the dreadful covid crisis to care for the desperate, sometimes the dying. Why are they doing this? I’ve worked so hard over so many years. I feel that they just do not begin to understand people like me and the pain that I will endure at the next stages.” Is it not the simple reality that the Government seem to be utterly oblivious to the consequences of their actions for the poorest in our country?

[Bridget Phillipson]

Like my hon. Friend, I have heard from care workers and many others in my constituency about the anger that they feel. The average care worker is set to lose more than £1,000 in tax rises and universal credit cuts. Of course, the Government’s much trumpeted so-called plan for social care will do absolutely nothing to help the very care workers my hon. Friend describes.

Let us remember the exact timing of the soaring energy prices: exactly as the cut in universal credit bites. It is about choices. The Government choose not to protect working people. We would choose differently.

[Stephen Flynn (Aberdeen South) (SNP)]

The hon. Member is making a number of incredibly important points in an articulate fashion. However, would she not agree that much of what she has covered up to this point is also a consequence of Brexit? Will she therefore condemn the fact that the Government took us out of the European Union during the middle of a pandemic?

--- Later in debate ---

[Bridget Phillipson]

I will shortly come to a section of my speech that deals with the extensive problems that we face as a result of the Government’s Brexit deal; I will say a little bit more at that point.

Resolution Foundation analysis published yesterday shows that four in 10 households on universal credit face a 13% rise in their energy bills in the same month that their universal credit is cut by £20 a week. Earlier this month, we heard a lot of Government Members selectively quoting the analysis of the Resolution Foundation. I hope that they have been paying a little more attention this week, and will be reading that report with the same degree of careful attention.

This crisis may be sudden, but the causes are long standing: dependence on imports; a lack of energy security; inadequate emphasis on storage; a decade of decisions deferred and dodged. This is a crisis made in Downing Street that was caused by a decade of complacency. Gas stockpiles are at their lowest level for 10 years. In 2019, the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves)—who then chaired the Business, Energy and Industrial Strategy Committee—wrote to the Government about the impact of closing the Rough storage facility, which provided about 75% of Britain’s natural gas storage capacity. She wrote about gas security and the need for supply resilience. “All is well” was the tenor of the response she received, even though the key report on which Ministers relied did not include any explicit analysis of consumer price impacts. And yet here we are today.

This month, connectivity to the continent for electricity imports is down. It is often high praise to be able to say that something is really on fire, but rather less so when it is the main electricity cable to France, which went up in flames earlier this month and will not be back online until March. As the pandemic showed so powerfully, when crises arise we discover that our country is not prepared, and that only one thing has to go wrong and everything is at risk. The resilience that should be there has long since been stripped out for illusory short-term savings.

Incomes are heading down and prices are up, but, more than that, taxes are already up and planned to go up further. Last November, the Chancellor all but forced councils to put up council tax further to pay for the rapidly rising cost of social care—a challenge the Conservatives did nothing to tackle in 11 years in power. In March, he set out his plans to freeze income tax thresholds, taking a higher chunk of working people’s incomes each year. This month he set out his new tax on working people and their employers, providing £19 in every extra £20 by taxing the earnings of working people and the success of small businesses. As we head towards another Budget, the Prime Minister and the Chancellor have repeatedly refused to rule out yet another unfair tax rise on working people. Time and again this Chancellor reaches to take money from the pockets of working people and their employers rather than looking across the system and ensuring that those with the broadest shoulders, who can afford to contribute more, do contribute more.

Incomes are heading down, prices are up, taxes are rising, and what is more, rents are up too. According to the property website Zoopla, private rental prices across the UK increased by 5% in the 12 months to the end of July, adding almost £500 a year to the average tenant’s bill—the biggest jump since its index began in 2008. That might be welcome news for those who have a portfolio of properties and make their living from renting to others, but for working people these numbers are an index not of success but of a decade of Government failure to get a grip on the housing issues of this country.

Incomes are going down, prices are going up, taxes are rising, rents are rising, and, what is more, the cost of childcare is going up too. Labour Members have long warned that a decade of Conservative neglect and the impact of the pandemic could force thousands of early years providers to shut their doors for ever, and it is now clear that those fears are being realised.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

A recent report by Pregnant Then Screwed showed that nine in 10 working families believe that the cost of childcare is severely impacting on their living standards. This is not surprising considering that childcare costs have been rising three times as quickly as wages in the past decade. Does my hon. Friend agree that the Government urgently need to put in targeted support for these working families, right now, rather than cruelly withdrawing the universal credit uplift?

[Bridget Phillipson]

I am grateful to my hon. Friend. I pay credit to her for all the work that she has been doing to highlight these issues and the impact on families and children, and the much bigger economic impact when we do not get our childcare system right in this country.

Three thousand childcare providers have closed since the beginning of 2021 alone, denying families access to the childcare that parents need and denying children access to the early education that sets them up for life. Why is that? One major reason, as the Early Years Alliance has highlighted, is that information released through freedom of information requests makes it clear that Ministers have been knowingly underfunding early years providers, driving up costs while driving down quality. Childcare should be a vital part of our national infrastructure that should help our whole economy to grow and to recover. Yet, as my hon. Friend points out, Britain has some of the highest childcare costs in the developed world. Childcare must be affordable and accessible to families. If more people can work, our collective output will be greater. It is right for children, it is right for families, and it is right for our economy.

Incomes are going down, prices are going up, taxes are rising, rents are up, the cost of childcare is up, and petrol and diesel are more expensive again too. I represent a seat where there are no passenger rail services. If people live far from their jobs, they drive to work or get the bus. Fuel prices feed fast enough into the squeeze on living standards, and last week petrol was over 135p a litre. It is more than £10 more expensive to fill up the average tank than it was when the spending review was agreed in November. That makes an enormous difference to families when every single penny counts.

Incomes are down, prices are up, taxes are rising, rents are up, the cost of childcare is up, fuel is up, and rail fares are set to rise too. My hon. Friend the Member for Oldham West and Royton (Jim McMahon) has set out the next steps we expect in the Government’s hammering of working people. With rail prices tied to July RPI inflation, and with inflation as high as it is, the cost of season tickets will rocket by almost 5% for long-suffering rail users next year—the biggest single increase in a decade. Again, it is not just the leap now but the decade of complacency before that tells the full story. The average commuter faces paying almost £3,300 a year for their season ticket—50% more than when the Conservatives came to power in 2010. Average fares have risen nearly three times faster than wages, and they are on course to rise again.

It is not just that families can afford less on food, energy, rent, childcare, travelling and commuting but that there is less to afford. Restaurants have closed. Shelves are empty. Shortages are real, and biting not just on families and their weekly shop but on our supply chains for industries too. What lies behind that? Not enough HGV drivers; long queues at our ports; more paperwork at the border; no agreement on food, animal and plant health standards when we left the EU; shortages of refrigerant, putting meat supply chains at risk: on issue after issue the Government were warned and warned again.

It is only three months since Ministers told the industry that concerns over HGV shortages were “crying wolf”. Last Christmas the roads around many ports were clogged for days. I meet businesses that have had to scale back ambitions for global expansion because it is not even worth their while sending goods to Northern Ireland any more. Again, these issues were not just foreseeable; they were avoidable. They were foreseen; they could have been avoided.

People are having less money to spend; having to spend more of what little they have paying more on tax, transport, fuel, rent and childcare; and having less in the shops than they can buy. There is a word for that: impoverishment. More and more people are being pushed into poverty. It is the policy of this Government to stand by and watch, and it will be the policy of the next Labour Government to turn it around.

[Dame Margaret Hodge (Barking) (Lab)]

I have listened very carefully to my hon. Friend’s really excellent exposition of a whole raft of issues that have challenged living standards, and what is interesting is that not one Government Member has got up to challenge any of the assertions that she has made. Does she agree that that demonstrates that they have nothing to say and that the slogans they use to try to describe their actions belie the truth of the increased division and poverty that they are creating?

[Bridget Phillipson]

I am grateful to my right hon. Friend, who did so much in government to tackle issues of poverty and of child poverty in early years, in particular.

Conservative Members will have heard the same from their constituents as I have heard from mine, which is that life is getting tougher and they just cannot understand why, in the face of rising cost pressures, the Government are putting up their taxes, cutting the support that is available and making life harder. My constituents simply cannot understand why the Government are prepared to stand by and allow that to happen.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

I thank the hon. Lady for giving way. You are making the case for why you do not agree with the Government’s position, but I have been listening very carefully to hear what your position is. You have criticised the removal of the uplift in universal, but no Labour politician on the news or interviewed by the press has committed to keep it if you were to be elected.

[Dr Johnson]

I did not mean to, of course, Madam Deputy Speaker. The point I am trying to make is that there is no plan from the Opposition. They are not giving any plan on what they would do instead; they simply criticise. They simply say we must spend more and tax less, but how does the hon. Lady propose to do such a thing?

[Bridget Phillipson]

I am grateful to the hon. Lady for her intervention. The single biggest difference that all of us could make right now would be to cancel the cut to universal credit. That would make the biggest difference to her constituents and to mine, who are facing the single biggest cut to social security since the inception of the welfare state. That is not a choice that a Labour Government would be taking in the aftermath of a pandemic.

[Dr Johnson]

The hon. Lady says that she would not wish to remove the temporary uplift, which we had always planned to be temporary throughout the pandemic. Does that mean that she is making the commitment that a Labour Government would reinstate that £20?

[Bridget Phillipson]

We would not be cutting it in the first place. We would replace universal credit with a better and fairer system that supports people into work. If the hon. Member wants to have a discussion about semantics, I suggest she has a chat with her constituents and sees how she gets on, arguing about the distinction between a temporary uplift and a cut. It is more than £1,000 a year from families’ budgets—that is what really matters.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

The hon. Lady has made it clear that Labour wants to keep the temporary uplift. However, given that Labour does not support increasing national insurance, which is a very broad-based tax, how does it propose to pay for a permanent £6 billion a year increase in public spending? How would she pay for a blanket extension of £20 a week for every single universal credit claimant—it is not targeted to families or those with children in particular—in a way that is fair and does not involve raising taxes?

[Bridget Phillipson]

First, it is worth considering why the increase to universal credit was put in place. It was because, during the pandemic, the Government had to recognise that universal credit had been set at an inadequate level on which families might survive. On the hon. Lady’s wider point, I have a long list of places where we could find some money, if she is interested: the 1.9 million pieces of personal protective equipment, worth £2.8 billion, procured by the Government that were useless; the stamp duty holiday that was a £1 billion-giveaway to landlords and second homeowners—I could be mistaken, but I do not recall her objecting to that—and the hundreds of millions of pounds about to be wasted on the Prime Minister’s vanity yacht. That is before we get to the Test and Trace system that the National Audit Office said had not worked properly and had had a “minimal impact” on transmissions, literally wasting billions. This is about choices. There is always money for the Government’s projects, their friends and their people, yet when it comes to dealing with some of the poorest families in our community—those who have got us through the pandemic—I am afraid they are told that there is nothing for them.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

rose—

[Bridget Phillipson]

I will make a little more progress but will happily take another intervention in due course. Having gone from no interventions to a flurry of them, I should probably press on.

The scar of poverty is not just about not having material goods, a roof, warm clothes and warm food. It is about a lack of freedom, having nothing to spend on yourself, having choice exercised for you—either by others or by necessity—and finding your voice and your own choice squeezed out. That is what the Government’s changes do, but it does not need to be like that.

Labour has a clear plan for how we would secure a better future for our country and steer a path for our economy in the months ahead. We would not be pretending that a national insurance rise without a plan is the way to fix the NHS, we would not be cutting universal credit in just a few weeks’ time, hitting working families hard, and we would not have spent 18 long months handing out huge amounts of taxpayers’ money through outsourcing and crony contracts while hitting working people for tax again and again. We would not be telling hauliers that they were crying wolf. We would be taking action day and night with employers and trade unions to fix the supply chain disruption that is leading to higher prices and fewer goods. We would not have sat back for the last decade as rent, childcare and rail fares soared.

[Alex Cunningham (Stockton North) (Lab)]

When I wander down Stockton high street or through Billingham town centre, I can see the signs of poverty everywhere in faces that are tired, faces that are anxious and faces that look older than their years. Eventually, poverty kills. The decision to leave thousands of my constituents in this situation is a political one. Does my hon. Friend agree that, as we are one of the richest nations in the world, it is time that the Tories’ choices changed for the better?

[Bridget Phillipson]

Yes, absolutely. These are political choices—who we seek to prioritise, what we do from Government and what matters most to us all.

[Aaron Bell]

When the hon. Lady’s boss, the hon. Member for Leeds West (Rachel Reeves), was appointed as shadow Chancellor, she said that not only would all Labour’s policies be fully costed but she would explain how they would be paid for. They need to be paid for on an ongoing basis. It is no use going over incidents from the last 18 months and saying that that would fund the extension to UC forever, that tax credit uplifts would be made permanent and that legacy benefit claimants would also get them, as well as turning the advances we have had into grants, reducing the taper rate and scrapping the benefit cap and the two-child limit. Those are popular policies, but how much would all of that cost and how would Labour pay for it on an ongoing basis? The hon. Lady cannot deny the fiscal reality that we are in a difficult situation because of all the money that the Government have spent on protecting jobs.

[Bridget Phillipson]

The difficulty with the Government’s approach is that they like to pretend that theirs is the only way to do it, with the only option being to hike national insurance on workers and businesses when our recovery is far from clear. Labour would not be putting up national insurance at this point with the recovery far from secure. We have set out in lots of detail the different options available. Just yesterday, my hon. Friend the shadow Chancellor set out further changes that we would make to allow the tax system to become fairer and more progressive. We could say a lot more. It should be shared more evenly across the incomes and across the generations and not through the Government’s approach of hammering working people and their families.

Labour will make more in Britain by giving more public contracts to British companies big and small. We will build a prosperous and resilient economy where every corner of our country can offer decent jobs; where ours is the best country to grow up in and the best country to grow old in. We will use stretching social, environmental and labour clauses in Government contracts to raise standards and to spend and make more in Britain. We will focus on bringing the jobs of the future to Britain by investing in reshoring jobs just as we invest in foreign direct investment. By helping every business access the expertise and support that it needs, we will build a high-skill, high-wage economy, and we will take seriously the challenges that we face outside the EU, fixing the gaping holes in the deal that the Government negotiated.

Let us focus on what the Government can do right now. Earlier this month, the Government felt they just could not wait for next month’s Budget to announce their plan to clobber working people’s incomes through an increase in national insurance, after all that this country has been through. After a pandemic that again and again showed the British people pulling together at their generous, innovative, dedicated best, the Government’s reward was a tax rise on workers and struggling businesses rushed through in less than a week. There is nothing to stop Ministers taking the same decisive action, with the same urgency, to protect the living standards of millions of people. There is nothing to stop them tackling poverty as the scar that it is. I urge the Government to change direction not at their conference, not in October, not at the Budget and not next year but now, as the nights grow cold, the bills mount up and the money runs out. There is no time to spare. The time for action is now.