Household Debt

Lord Haskel Excerpts

Monday 13th November 2017 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I too congratulate the right reverend Prelate on tabling the Question. He really has been a persistent campaigner on household debt. Sadly, he does not seem to have much support from the Government Benches this evening.

In this House, we have frequently heard how household debt is incurred not through reckless spending but by borrowing to pay for the necessities of life and for expenditure on basic living—costs such as food, clothing and accommodation. Quite rightly, noble Lords speak of the risks. The problems of household debt are rarely contained within the household. The risk is that they spill out into the rest of the community and become society’s problems in the form of broken families, disruption of work, homelessness, stress and mental ill-health. These problems are passed on to the next generation. We are told that more than a third of British children will soon be growing up in relative poverty. Surely this transcends left/right politics.

A third of households with serious debt problems have people in work. The Government are proud of the employment figures, but there is something wrong with an economy where working people cannot afford to live. Yes, the Financial Guidance and Claims Bill should help by improving the quality of assistance and, I hope, by providing some respite to desperate people, but such a large number of working households in this kind of financial difficulty must indicate that the minimum wage, tax credits and housing benefits are just not working.

Surely another indication that the system is not working is the fact that four years ago there were hardly any food banks. Today, there are 2,000. Another indicator is the rise of a third in county court judgments regarding consumer debt. Yes, tax credits are being merged into universal credit with the intention of improving the incentives to work, but the right reverend Prelate and several reports have shown that this is not working either.

Economics will not solve this problem quickly. Household incomes are virtually static. Inflation is rising and the recent interest rate rise will not help. The Office for Budget Responsibility has given up forecasting a meaningful rise in productivity. So we fall back on government action. That is why the Government should support the Living Wage Foundation, which encourages companies to pay the voluntary living wage, which is above the national minimum wage. Some 3,600 companies have signed up to it, including some FTSE 100 companies. Many companies have found that it also makes good business sense. The living wage is independently calculated and reflects the real cost of living. Yet many of our largest companies still pay people less than the independently calculated living wage, preferring bogus self-employment or having low pay subsidised by us, the taxpayer, in the face of soaring executive pay and aggressive tax avoidance. No wonder the present system is under attack. Obviously the Government have to get it to work better.

All noble Lords who have spoken have mentioned the concerns of the Financial Conduct Authority. The Monetary Policy Committee is in charge of monetary policy and the Financial Conduct Authority in charge of financial conduct, but clearly they are in conflict. As we have heard, the FCA is very concerned about the rise in private debt. The Monetary Policy Committee is concerned about inflation and the money supply. There is clearly a conflict in achieving both objectives. Have the Government issued any guidance as to where the priorities lie and whose concerns in fairness should take priority? Or are the Government just drifting along hoping for the best and waiting to see what happens?

The right reverend Prelate is right. Insupportable household debt is a big contributor to the economic and social conditions causing the alienation and discontent which have captured our political life. Action is required, and quickly. What are the Government going to do?