Cost of Living: Energy and Housing

Dominic Raab Excerpts

Thursday 5th June 2014 Commons Chamber

[Mr Davey]

Many commentators thought we should cut the deficit faster, but we have taken a very responsible approach, to ensure not only that interest rates were kept low—that has been so vital for many families and the hon. Lady’s constituents—but that employment has risen so well. I would have thought she would be welcoming that.

The problem is that the Opposition used to criticise the coalition on unemployment—they used to say that unemployment was going to go up—but when the facts showed they were wrong and that unemployment has gone down they have had to change their economic argument. The Opposition keep changing the economic argument because they keep losing the economic argument. Let us examine their recent economic argument on the cost of living. I presume that everyone in this House accepts that the key measure of the cost of living remains the inflation figures. So if the cost of living is the measure by which to judge this coalition, let us see what has been happening to inflation. Inflation is lower than when the previous Government left office and it is falling.

I have to confess to the House that the Bank of England’s inflation target is not being hit—inflation is lower than the target. In March, inflation had slowed to just 1.6%. Of course for our constituents it is real incomes and real wages that actually matter: what people have to spend after tax and after inflation. Looking at things in that way, it is true that after the 2008 recession many people saw living standards fall. But let us remind ourselves what happened: a huge £113 billion was wiped off our economy in the great financial crash of 2008, and there was a £3,000 cost to every household in the United Kingdom. To put that right, and to keep employment rising, it was arithmetically inevitable that living standards could not rise in the turnaround period for our economy, but now we really are in recovery. Now it is not just employment that is rising—it is living standards too. How has that happened? Of course, it has been because of the coalition’s long-term economic plan.

Key aspects of that plan are really beginning to help, above all the implementation of the Liberal Democrat manifesto policy to increase the tax-free allowance to £10,000 a year. Our record not just of implementing this fairest of tax cuts, but doing more than we promised is helping more than 26 million people. It has taken 3.2 million low paid out of income tax and it has cut the income tax bill of a double-earning couple on average earnings by £1,600 a year. This Liberal-Democrat-turned-coalition policy has cut the number of low-income people paying income tax more in five years than any other Government have achieved in the same period since records began.

[Mr Dominic Raab (Esher and Walton) (Con)]

Before the Secretary of State diverts on to a partisan frolic, may I ask whether he welcomes the British Retail Consortium’s data out this week showing that competition between supermarkets has led to a decline in non-food prices of 2.8%? Does he also welcome the fact that food inflation is at 0.7%, its lowest level since 2006?

[Mr Davey]

My hon. Friend is absolutely right to make that point: competition, not Government intervention, is the best way of getting prices down and helping people with their living standards.

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[Mr Dominic Raab (Esher and Walton) (Con)]

It is a pleasure to speak in this debate and to follow the hon. Member for Stretford and Urmston (Kate Green). She touched on some of the issues I intend to speak to, although she may have come to slightly different conclusions from those I shall reach.

The No. 1 thing for this Government from their inception through to this Queen’s Speech has been the economy. There is no divide between economic growth and fairness and all the things that follow through from that, including the cost of living, which is the subject of this debate. It has been mentioned that we have cut the deficit, and we hope it will have been cut by half by the end of this Parliament, as has been forecast. That is not just some bean-counting exercise; it relates directly to mortgage payments, and it is therefore a cost of living issue as well as an economic issue.

A lot is said about Government debt, but far less is said about banking and household debt. Both of those are down from their high point under the last Government, and that is important. None of us wants to have to talk to our constituents about taxpayers bailing out banks again, and with interest rates likely to rise—and rightly so—in the relatively near future, it is very important that household debt comes down as well, so that those on tight, fine margins in respect of their mortgages do not feel the pinch too much.

We have recently become the fastest growing economy in the advanced world, and as a result unemployment has come down to 6.8%, as opposed to the 8% rate left by the last Government. The private sector has fuelled a huge amount of job creation. The media and also many in this Chamber talk about job creation and unemployment as if it were an economic priority, but the most economically and socially disfranchised in this country are the unemployed, and jobs creation is about dealing with them. This Government’s record in that regard is stellar: in just four years we have seen businesses create double the number of jobs that were created in the last decade under Labour. That is absolutely critical.

Inflation has been one of the issues eating away at the cost of living for many of our constituents, but again this Government’s record is very clear. The statistics do not lie: consumer prices index inflation now stands at 1.8% as against the 3.4% we inherited from the previous Government. The British Retail Consortium figures out just this week show that because of supermarket competition there has been a decline in non-food prices of 2.8% over the year. That is critically important, and annual food inflation stands at 0.7%, the lowest rate since 2006.

[Huw Irranca-Davies]

I just want to dig under some of the things the hon. Gentleman has been saying about debt. How, for example, would he make sense of the fact that, according to a recent report, the Bridgend county borough area, which covers two constituencies and contains a big manufacturing belt and areas of prosperity, has seen a tenfold increase in the number of people taking out payday loans at the end of the week to ease themselves over into the following week? In spite of all the good news that the hon. Gentleman is giving us, something worrying is happening.

[Mr Raab]

I am trying to look at the big picture, and the fact is that household debt has fallen from its 2009 peak of about 109% of GDP to around 10 percentage points lower. I am not suggesting that there are no issues relating to other subsets of household debt, such as credit and payday loans, but if the hon. Gentleman looks at the big picture and examines the raw data, he will see that the present situation represents a significant improvement on the one that his Government left behind. He is right to look at other micro-issues, and we must continue to do that, but let us not lose sight of the big picture.

When it comes to the big picture, we have to talk about housing. We could talk about stamp duty, as I am tempted to do, and about planning regulations and the relevant taxation, but the key issue is the supply of new homes. We need to do more on that front. I am sure that the Secretary of State for Communities and Local Government does not feel that he is on the back foot in this regard; I am simply urging everyone to look at the raw data. Hon. Members will be delighted to hear that, according to DCLG figures, the average annual number of affordable homes built under this coalition was 48,000, compared with 31,000 during the 13 years of the previous Government. That represents a 50% increase, and we should recognise the progress that we have made as well as talking about what else needs to be done.

We are talking about fairness in this debate on the cost of living, and we should also talk about inequality. The Leader of the Opposition is a wonkish sort—I mean that in the best possible way—and I am sure that he will be delighted to learn that the Gini coefficient shows that inequality is lower under this Government than it was under Labour. People talk about tax cuts for millionaires, but he will also be delighted to know that people earning between £10,000 and £15,000 are paying 54% less tax under this Government than they were in the last tax year under the previous Government, and that millionaires are paying 14% more. The idea that this Government are the enemy of the low-paid and the friend of the millionaire is therefore news to us.

[Ms Gisela Stuart]

I shall try not to be too wonkish. The recent Institute of Economic Affairs pamphlet on poverty argued that the best way to help the poor and to reduce inequality was to reduce the cost of those things that most disproportionately affected the spending of the poor—energy, food and housing. Given the hon. Gentleman’s argument, should he not therefore welcome Labour’s proposals?

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[Mr Raab]

The hon. Lady’s interventions are always thoughtful, but I am not quite sure to which bits of Labour’s proposals she is referring. We can talk about the minimum wage and rent controls, but I fear that they would not have the impact that she desires, despite her best intentions. Some people on my side of the House think that raising the minimum wage would be a good thing, but I do not think that it would be the best thing to do for the most socially and economically disfranchised; nor do I think that rent controls are the right answer.

[Ms Stuart]

Rather unusually for a Labour MP, I am praying in aid the Institute of Economic Affairs, which has stated that it would be better to reduce energy and food costs than to increase benefits. I would have thought that that would be absolutely in line with the hon. Gentleman’s thinking.

[Mr Raab]

The hon. Lady is absolutely right; we share the same aspirations. Unfortunately, however, this is all about the means to achieving those ends. If we had wanted to do something about energy prices, we should not have closed down nuclear power stations, as happened under the last Government. We should be taking advantage of shale gas, as we propose in the Queen’s Speech. One area in which we can make common cause on the means as well as the ends is the need to reform the common agricultural policy, which puts £400 on the average family’s bills. The hon. Lady will recall, however, that Tony Blair rather meekly gave up on CAP reform as well as sacrificing the British rebate.

The hon. Member for Ogmore (Huw Irranca-Davies) mentioned regional impacts. The recovery is often described as London-centred, but this week’s figures from the Office for National Statistics show that gross disposable income per person has risen 4% in the north-east, which is higher than the UK average and considerably higher than the figure for London. The shadow Secretary of State, the right hon. Member for Leeds Central (Hilary Benn), is also a wonkish type—again, I mean that in the best possible spirit—and if he and other hon. Members on both sides of the House look at the raw data, they will see that we have done a good job in relation not only to economic stewardship but to social fairness. I might even manage to get the shadow Secretary of State to agree that Thomas Piketty would have to accept that Britain is not just economically better off but fairer under the Tories. Let us see whether the right hon. Gentleman can bring himself to do that when he winds up the debate later.

We cannot rest on our laurels, however. There are important measures in the Queen’s Speech to strengthen the economy further and to curb the practice of public sector employees claiming redundancy and subsequently taking another job in the same sector. It is important that we get the public sector pay bill down, and that should be done in a way that targets the bureaucracy, the highly paid managers and the waste while protecting front-line services.

We are going to simplify the national insurance paid by the self-employed. I would like us to go further and cut employers’ national insurance contributions, because they can deter companies from hiring people as well as from paying better wages. I was delighted to read in The Times today—I am sure that the Parliamentary Secretary to the Treasury, my right hon. Friend the Member for North West Hampshire (Sir George Young) will confirm this—that the No. 10 policy unit is considering raising the threshold for employees’ national insurance contributions. I have argued for that for a long time. If we really want to do something about low pay, as the hon. Member for Stretford and Urmston does, raising the threshold for employees’ contributions is by far the clearest way of doing it. The Resolution Foundation, the Institute for Public Policy Research and all the left-wing think-tanks agree with me on that, and I am glad that the Government are looking seriously at that proposal.

I am delighted by the proposed reforms to speed up infrastructure projects and to allow fracking firms to run shale gas pipelines. I should like to comment on a couple of the points that the hon. Member for Stretford and Urmston made about shale gas. Ofgem has made it clear that our back-up energy stocks will fall to 2% by 2015. The chances of blackouts will increase from one in 47 years to one in 12 years. The previous Government allowed this stark energy crisis to creep up on us, and we must address it now. The renaissance in nuclear power will play an important role in achieving that; it will be good for meeting our energy demands and for decarbonisation.

We must also bear in mind our unique national comparative advantage in relation to shale gas. In 2013, the British Geological Survey—hardly a Thatcherite body by disposition—estimated that there were 1,300 trillion cubic feet of shale gas in the Bowland-Hodder basin alone. The reserves equate to 47 years of total UK gas consumption or 90 years of the UK’s North sea gas production. Of course, not all of it will be extracted, and it will take time to develop the right regulatory regime. That is important, but the opportunities over the medium term are immense. The Institute of Directors has estimated that shale gas could meet one third of UK gas demand and support 74,000 jobs, not to mention boosting manufacturing and helping us sustainably to rejuvenate the economy of the northern region.

I understand the concerns about fracking, but the Royal Academy of Engineering and the Royal Society—again, not Thatcherite bodies by any stretch of the imagination—have looked at the risks to aquifers and the risk of earthquakes and concluded that the risks are very, very low. They have concluded that, with a decent set of regulations, the process could be properly managed and monitored. Frankly, the spectres of polluted drinking water and of earthquakes have been massively exaggerated by ideologically driven activists. We ought to get cracking with fracking, and I am delighted that this Queen’s Speech will bring that about. It will also help us to wean ourselves off energy dependence on places such as the middle east and Russia; we need to consider that given the stability in those regions.

In this Queen’s Speech we also want to reward the great economic virtues of saving and grafting, both in the short term and over the long term. That is what our reforms to annuities are about. People will not in future be required to buy an annuity with their pension savings and they will be able to draw their retirement income in one go, if they so choose. If people save hard and do the right thing, we trust them. Our tax break for child care, worth up to £2,000 a year per child, is crucial to dealing with the cost of living. Many couples in our changing society are between them—both men and women—grappling with the balance of bread-winning and child caring. I have to declare an interest in the tax break for child care at this point, because No.2 in the Raab household will be on its way by the end of the year, and we will be delighted to take advantage of this new piece of legislation.

Finally, the European elections showed the level of the corrosion of public trust in the political class, and I welcome the introduction of a right of recall in the Queen’s Speech. I am very conscious of the debate that is being had in government and with parliamentarians such as my hon. Friend the Member for Richmond Park (Zac Goldsmith) about getting the right balance. We do not want something that is abusive, but we should not set up a right of recall and then torpedo it by allowing a committee of politicians to veto or vet it. I am sure we can strike the right balance to give the public greater trust in our political class, and I hope that as that Bill comes forward we can do so.

I am conscious of the time and know that others wish to speak, but I want to make one final point about immigration. It relates both to the economic pressures in this country and specifically to housing, which is the subject of today’s debate. The Government have already cut net immigration by a third; we have cracked down on bogus colleges, which sprouted up left, right and centre under the previous Government; and we have cracked down on the sham marriages and the abuse of the family route. A Bill will be going through this Parliament to strengthen immigration controls. I have argued passionately for us to strengthen some areas of that Bill, but I recognise the important steps that have already been taken. It is a bit rich if all the Labour Front-Bench team and the shadow Home Secretary can do is criticise the target of reducing net immigration to tens of thousands, given that her Government made it so difficult to accomplish that. It is a bit rich coming from the party of open-door immigration, which boasted in office that there is “no obvious” upper limit on immigration—that was said by a past Labour Home Secretary, whom I shall not name for fear of embarrassing him. It is a bit rich coming from the party that failed to impose transitional controls on immigration from the eight countries from central and eastern Europe in 2004.

I am no clearer today as to what positive agenda the Labour party is offering this country to take it forward. As Winston Churchill once said of the Soviet Union, Labour policy is a puzzle inside a riddle wrapped in an enigma; it has no clear vision, no serious policies and no credible leadership. The Government have a clear agenda, of fresh reforms cast against a Conservative vision of a more prosperous and fairer Britain grounded in sustainable public finances, and in the virtues of rewarding enterprise, hard graft and saving. I commend the Gracious Speech to the House.