Cost of Living

John Glen Excerpts

Tuesday 16th May 2023 Commons Chamber

[The Chief Secretary to the Treasury (John Glen)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“welcomes the Government’s action to halve inflation, grow the economy and reduce debt; further welcomes the Government’s action to take advantage of the opportunities presented by Brexit, including the passage of the Genetic Technology (Precision Breeding) Act which will boost UK food security; supports the Government’s extensive efforts to support families up and down the country with the cost of living through significant support to help with rising prices, worth an average of £3,300 per household including direct cash payments of at least £900 to the eight million most vulnerable households; and notes that the SNP and Labour would fail to grip inflation or boost economic growth with their plans for the economy, which would simply lead to unfunded spending, higher debt and uncontrolled migration.”

The world has been challenged by a series of events, including covid and the war in Ukraine, with knock-on effects to economies in every continent. In each of those, the Government have risen to the challenge. When covid hit our shores and the entire country had to isolate to save lives, we delivered groundbreaking and historic support to keep businesses afloat and families going. When our ally and friend Ukraine was invaded, we led the way to provide support internationally, and we continue to do so. The Prime Minister just yesterday announced further air defence missiles and support for our ally. Now, with economic challenges at our door, we continue to take the actions necessary to support the most vulnerable and set our country up for long-term, healthy, sustainable growth.

Already, as a consequence of the steps we are taking and decisions we have made, our country has avoided a recession. The International Monetary Fund has said that we are on the right track. Measures in the spring Budget deliver the largest permanent increase in potential GDP the Office for Budget Responsibility has ever scored in a medium-term forecast. That is as a result of Government policy. We have grown the economy faster than France, Japan and Italy since 2010, and at about the same rate as Germany since 2016. Just today, we see the unemployment rate remaining historically low. Inflation of course remains a concern, and we cannot afford to be complacent.

While I would not usually seek to give economic lessons to Members on the SNP Benches, it seems to be worth explaining in this instance that the reality is that high inflation in our country cannot be separated from global events. Other countries are experiencing similar situations to the UK. In the UK, inflation has primarily risen because of Putin’s illegal invasion of Ukraine and global supply chain pressures, which have pushed up the price of energy, goods and raw materials. Domestic inflationary pressures have also risen, as the UK labour market has remained tight, and challenges in recruitment have been reflected in strong wage growth. That has also pushed up the cost to firms of producing their goods and services, and that has been passed on into higher prices.

If we are to answer the challenge of high inflation, we must first accept that high inflation is a global challenge, which many major central banks are tackling. Nevertheless, I know that right now for many in society rising prices, including rising food prices, are causing worry and significant anxiety. People want to know when things will get back to normal and how they will be supported in the interim. Let me answer that directly. The Prime Minister pledged to halve inflation this year, and the latest Bank of England forecast published last Thursday shows that we are on track to meet that pledge. From its peak above 11% at the end of last year, inflation has begun to fall. Both the Bank of England and the OBR forecast that inflation will quickly fall later this year. We are also focused on growing the economy, reducing the burden of public debt, cutting NHS waiting times and stopping the boats. Those are all priorities of the British people, and therefore they are this Government’s priorities, too.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

How does stopping the boats help the cost of living crisis?

[John Glen]

The point I was making was that stopping the boats is a priority for the people of this country, and this Government are focused on the priorities of the people of this country. We are on track to meet these pledges to make our country and all nations, including Scotland, better off. It is also worth remembering that Scotland already has one of the most powerful devolved Parliaments anywhere in the world. The Scottish Government have substantial tax powers, including in relation to income tax, and agreed borrowing powers to further increase their spending, which I am sure the First Minister will be considering.

[David Linden (Glasgow East) (SNP)]

The Minister talks about Scotland having one of the most powerful devolved Parliaments in the whole world. How does he feel about Lord David Frost’s accusations that it has too much power and some of it should be taken away? Is that official Government policy now?

[John Glen]

I am not aware that Lord Frost is a member of the Government. I speak for the Government, and I am clear about what the situation is.

As it stands, the Scottish Government are well funded to deliver all their devolved responsibilities. The 2021 spending review set the largest annual block grant in real terms of any spending review settlement since the devolution Act, and that provided an average of £41 billion a year for the Scottish Government. That settlement is still growing in real terms over the three-year spending review period, despite inflation being higher than expected. On top of record spending review settlements, as a result of UK Government decisions at the autumn statement and the spring Budget, the Scottish Government will receive an additional £1.8 billion over the next two years. All that means that the Scottish Government are continuing to receive around 25% more funding per person than equivalent UK Government spending in other parts of the UK.

[Chris Stephens (Glasgow South West) (SNP)]

Since the autumn statement, food inflation has risen and is now at 19.2%. Can the Minister tell us what specific measures the Government will put in place to address food inflation?

[John Glen]

I fully acknowledge the pressures of food inflation—they are in line with those of many of our friends and neighbours, but less than in Germany, for example—and I will come on in a moment to set out the interventions the Government have specifically made to deal with that.

In addition, we are investing directly in Scotland, with £349 million of funding allocated through the first two rounds of the levelling-up fund, as well as establishing two new green freeports. As the Prime Minister has already said,

“all this talk of needing any more powers is clearly not appropriate”.

The SNP and the Scottish Government do not fully use the powers they have already. While, as we have seen today, SNP Members speak about a referendum that I do not believe they have a mandate for, we are levelling up and investing directly in local communities across Scotland.

Let me address the points raised by the hon. Member for Glasgow South West (Chris Stephens).

[Alan Brown]

If this Union is so successful, so good for Scotland and we benefit so much, why do we need money out of a so-called levelling-up fund?

[John Glen]

I think the principle of levelling up across the United Kingdom recognises that we do not have symmetry across the local economies of the United Kingdom, and it is about investing to improve the productive capacity. Let me make some progress.

Let me look at the economic matters at hand. As I mentioned earlier, energy costs have contributed significantly to price rises. That is why we are paying half of people’s energy bills. At the Budget, we announced that the energy price guarantee will remain at £2,500 for the next three months, funded in part by the energy profits levy. Just under £26 billion between 2022-23 and 2027-28 is expected to be raised by the levy, on top of around £25 billion in tax receipts from the sector over the same period through the permanent tax regime. This measure is saving the average family a further £160 on top of the energy support measures already announced. That includes this Government’s help for all domestic electricity customers with £400 off their energy bills through the energy bills support scheme, and in providing a £200 payment for households that use alternative fuels such as heating oil through the alternative fuels payment scheme.

Alongside holding down energy bills, increasing benefit payments, increasing pension payments, a council tax rebate, the multibillion-pound household support fund—attracting Barnett consequentials—and freezing fuel duty, we are giving up to £900 in cost of living payments to households on means-tested benefits. That means that more than 7 million households across the UK have been paid a £301 cost of living payment by Wednesday 3 May as the first of three payments. This will be accompanied by a £150 payment for people on eligible disability benefits this summer, and a £300 payment on top of winter fuel payments for pensioners at the end of 2023. The latest payment follows on from up to £650 in cost of living payments delivered to households on means-tested benefits by the Government in 2022, with an additional £150 for individuals on disability benefits and £300 for pensioner households. Altogether, support to households to help with higher bills is worth £94 billion, or £3,300 per household on average across 2022-23 and 2023-24. Aside from helping the most vulnerable, the OBR’s analysis shows that, taken together, the freezing of fuel duty, changes to alcohol duty and the extension of the energy price guarantee will further lower consumer prices index inflation by 0.7 percentage points this year.

[Peter Grant (Glenrothes) (SNP)]

Could the Minister explain to me what has happened to the energy coming out of a country such as Scotland, which is a net exporter of energy, that suddenly makes it almost three times as expensive as it was before? Where is the 200% or 300% increase that people are paying on their fuel bills going? It is not going to the people of Scotland, so who is taking that money?

[John Glen]

I have set out the number of interventions we have made to support individuals and the taxation levies on energy companies that we have set.

With inflation running high, I understand the temptation of some to accuse companies of profiteering, and the hon. Member for Paisley and Renfrewshire South (Mhairi Black) mentioned that in her opening speech. I would like to be clear with the House that the Government stand against that practice. At a time of high inflation, companies should not be seeking financial gain at the expense of their customers. Fortunately, we have not seen widespread evidence of this in the UK thus far. Corporations’ gross profits as a percentage of GDP were 21.4% in the third quarter of 2022, which is in line with an average of 22% over the last 20 years. The net rate of return for non-financial companies—a measure of company profitability—fell in the third quarter of 2022 and remains lower than 10 years previously. Instead, companies have been hit by a combination of rising labour, energy and raw material costs, and have reacted accordingly. As I have said, and it bears repeating, we do not expect them to profit excessively, but we cannot expect them unsustainably to absorb all cost increases, so the best course of action is the course we have charted thus far—to bear down on inflation.

This is a Government of action and delivery, as I have set out. We have pledged to tackle inflation, bring down debt and grow the economy, and we are doing just that. We said we would help the most vulnerable through these challenges, and we are, and we have refined and developed those interventions to suit the evolving circumstances. We are focused on strengthening our great Union, halving inflation by the end of the year, easing the pressure on households, and boosting the economy and protecting growth—proving our economy is more resilient than predicted—as well as boosting employment to well above pre-pandemic levels and ensuring more people have the security of a steady wage. As a united Government, we will continue to remain focused on what really matters to the British people.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Secretary of State.