Families: Cost of Living

Lord Horam Excerpts

Thursday 31st October 2013 Lords Chamber

[Lord Horam (Con)]

I, too, congratulate the noble Baroness on having brought about this debate. She made a thoughtful speech because she acknowledged in her introduction that these are global trends. Whether you look at America, Canada or this side of the Atlantic in Germany, France or Britain, inequality has increased over the past 10 years. People on low incomes and middle incomes have been squeezed and in many instances their standard of living has reduced over long periods. The noble Lord, Lord Monks, also made an issue of the balance between profit and labour. That has in many cases gone the wrong way. I agree that there would have been a reason for that if investment had been as high as we would have liked it to be but obviously that has not happened, and that changing balance is an important part of what has gone wrong in the past few years for all sorts of reasons.

However, as the noble Baroness, Lady Prosser, said, tackling these big issues is difficult for any Government, whether they are Labour, Conservative or coalition. None the less, we have to be positive. There is no point in sitting back and letting all this flow over our heads. We have to do what we can. In that respect, the initiative by the leader of the Opposition, Mr Miliband, at his party conference was notable and certainly made a big political impact, if nothing else. Sadly, I am afraid that such an initiative is unlikely to bring the relief to ordinary people that they would hope for. In particular, the truth is that if there were to be a 20-month freeze it would be easy for companies to get around that, either by increasing their prices in anticipation of the freeze or, if it happened, looking at their situation and increasing their prices afterwards by more than they would otherwise have done. So the net effect over quite a short period may not be much different from what it would have been anyway. I am afraid that that is the difficulty of introducing freezes of that kind.

I heard what my noble friend Lady Tyler said. I prefer to look at the green subsidies, but not because we want to change them in any way. All three parties have, quite rightly, had a part to play in bringing in green subsidies to produce decarbonisation and to contribute to dealing with climate change. However, as my noble friend rightly pointed out, the way they are now weighted on gas and electricity prices means that they hit the poorest hardest, because those prices are regressive, whereas taxation is progressive. If a way could be found of shifting some of that burden from prices to taxes, we would make progress. I have no knowledge of what the Government may do but I know that not only Simon Hughes but the Prime Minister made a point about this. Much though I like my right honourable friend Mr Hughes, I think it is more important that the Prime Minister takes this on board and I am glad that he has. I hope that some progress can be made in this very delicate area.

When it comes to looking at the sustained effect on gas and electricity prices, one should also look at a well regulated competitive situation. I stress good regulation, as well as good competition, as both together are needed. I think that it was the managing director of Ovo Energy, Mr Fitzpatrick, who said precisely that to the Select Committee in the other place—that sometimes the “six”, as they are called, look like a rather cosy cartel which is immune to competitive good practice. People coming into the industry need to have that competitive good practice so as to make the energy companies bring down their costs and thus their prices. Those two arguments should be looked at by the Government, as we want to make a sustained impact on this problem.

I would point out to the Opposition that the Government, as my noble friend Lady Tyler said, have done quite a lot to keep down prices and costs for ordinary people. For example, mortgages have been at their lowest ever rates. The average bill for energy prices is £1,500 a year—a very high level for the average household—but mortgages are obviously even higher. They are a huge cost in many people’s budgets, and keeping them down has been a massive achievement by this Government.

Council tax has been frozen. My own borough of Hammersmith and Fulham has brought down its council tax charges three years in a row without any reduction in the quality of public services. That is a huge achievement by a Conservative council. The Government have also cancelled planned rises in fuel duty three years in a row. Fuel duty now stands at 13p per litre less than it would otherwise have been. The noble Baroness, Lady Tyler, mentioned childcare. That has been something on which the Government have honed in, and I am glad to say that the Labour Party is also talking about it. As a grandfather who occasionally looks after five grandchildren, I am aware that the cost of childcare is a real issue. I think that we should pay attention to that and be glad that the Government are doing so.

As was said earlier, we have also raised the tax threshold and are in the course of raising it further, so there will be help from April onwards. The lowest point of the threshold will be £10,000 a year, bringing a saving of about £705 to the average family. Frankly, that is a terrific saving. Therefore, there is help, and I am glad about that.

Again, I make the point to the Opposition that, as a result of all these measures that have been brought in under the coalition Government, inequality has in fact reduced. The fall in the income of the top 20% of the population has been 6.8%, whereas the income of the bottom 20% of the population has risen by 6.9%, I am talking about income, not living standards, and I accept that prices have gone up even more. The noble Lord, Lord Davies of Oldham—a good friend of mine—made the point the other day in Question Time that inequality was in the DNA of the Conservative Party. I am afraid that inequality was in the DNA of the Labour Party when it was in power: the Gini coefficient, which is the acknowledged measure of inequality, reached its highest point ever in our history under a Labour Government. Now, we are becoming more equal because of the measures that a Conservative Government are taking. I do not think that we will take any lectures from him or anybody else on inequality. In practice, the Labour Party talks a lot about equality but the Conservative Party has delivered more equality than the Labour Government ever did.

Obviously there is a big political battle going on but I will close by saying that we need to be positive, as the noble Baroness said, and do what we can to help low-paid families and people facing tough times at the moment. I agree with all those, including the noble Lord, Lord Monks, who said that there should be strenuous efforts to make the Low Pay Commission work effectively. A lot of work needs to be done in that area. The minimum wage is £6.31 and the London living wage is £8.55; there is a big gap between the two. I am talking about London only at the moment. We need to home in on this issue and make sure that people’s cost of living is reduced by as much as possible and that they have the income to cover it. There is hope but we must be positive. I am pleased that this debate has taken place as it has raised an issue that is important to every family in the land.