Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what steps they are taking to (1) ensure that stabilising mortgage rates contribute to sustained growth in the housing market, and (2) address challenges faced by homebuyers concerning the increased cost of living.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The path to lower interest rates is through low inflation, and the Government is fully committed to supporting the Bank of England get inflation back down to the 2% target, including by keeping borrowing under control.
While the pricing of mortgages is ultimately a commercial decision for lenders in which the Government does not intervene, our plan is working, and the average offered mortgage rates on 2-year and 5-year fixed rates are now lower compared to their peak in Summer 2023.
The Government is committed to making the aspiration of homeownership a reality for as many households as possible and consequently operates a range of schemes that aim to increase the supply of low-deposit mortgages for credit-worthy households, including first-time buyers, increase the availability of new housing, and stimulate economic growth. These include the Mortgage Guarantee Scheme, which is open until the end of June 2025. We also help first-time buyers to save for a deposit through the Lifetime ISA and Help to Buy: ISA.
Over 876,000 households have been helped to purchase a home since spring 2010 through government-backed schemes.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the impact of the easing grocery price inflation on (1) consumer spending habits, and (2) household budgets.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
Inflation reduces real incomes, creates uncertainty, and threatens our growth outlook so it’s essential that the government continues with its efforts to keep inflation down. The government remains steadfast in our support for the Monetary Policy Committee of the Bank of England.
Food inflation has fallen from a peak of 19.6% in March 2023 to 5.0% in February 2024.
The latest data suggests real household disposable income per capita was 1.4% higher in Q4 2023 than in Q4 2022.
ONS retail sales remained unchanged on the month in February. This followed an increase in retail sales volumes of 3.6% on the month in January, fully offsetting the decline in December. Food store sales were 2.8% higher in February than in December.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of recent trends in consumer spending; and what assessment they have made of the impact of this on (1) the retail sector, and (2) the wider economy.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
Consumer confidence has strengthened considerably over the past year. The March 2024 release of the GfK index indicated that consumer confidence was 15 points stronger than in March 2023.
Government continues to back consumers and retailers. With the economy beginning to turn a corner, we are now able to make responsible tax cuts to boost growth while meeting the fiscal rules to ensure sustainable public finances. These include cutting the employee main rate of National Insurance to 8%, which will make an average worker on £35,400 over £900 a year better off than before.
At Autumn Statement 2023 we extended Retail, Hospitality and Leisure relief for 2024-5, a tax cut worth £2.4 billion, and froze the small business multiplier for a fourth consecutive year. At Spring Budget 2024, the government went further still by supporting small retailers by increasing the VAT registration threshold to £90,000 and extending the Recovery Loan Scheme, now the Growth Guarantee Scheme.
Consumer confidence is intrinsically linked to inflation, household finances and the broader economic outlook. To sustain consumer confidence, consumers need to feel assured that their government is taking the long-term decisions necessary to strengthen the economy and build a brighter future.
Combined, recent policy measures will place more money in people’s pockets, helping boost consumer confidence, and strengthen the UK’s retail sector.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, following the revision to the UK's sovereign credit outlook by global ratings agency Fitch from negative to stable, what assessment they have made of the impact of this on the UK's standing in (1) global trade, and (2) investment markets.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
On the 22nd of March 2024 Fitch returned the UK’s rating to AA- with a stable outlook, meaning all three major credit ratings agencies now indicate that the UK has a stable outlook.
This is further evidence that the economy is turning a corner. Inflation has fallen from over 11% to 3.4% and is forecast to fall back to target in a few months’ time. The economy has grown so far this year, with growth forecast to pick up both this year and next. Debt is falling in the final year of the forecast, meeting our fiscal rules.
Underlying demand for the UK’s sovereign debt remains strong and is supported by a generally well-diversified investor base. This reflects the UK’s central position in global trade and investment markets.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the factors contributing to the recent decline in consumer prices inflation.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The Monetary Policy Committee (MPC) has raised interest rates, which is helping to bring inflation down and return to the 2% target sustainably. The Government's responsible approach to borrowing has helped support the MPC as it brings inflation down.
The Office for Budget Responsibility expects CPI inflation to fall to the 2% target in the second quarter of 2024, a year earlier than they expected in November.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, further to the announcement by the Chancellor of the Exchequer on 2 March concerning the requirement by 2027 for pension funds to disclose how much they invest in British businesses, what steps they are taking to assess the potential consequences on overall competitiveness and attractiveness of the UK as an investment destination.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The Chancellor announced at Spring Budget that the government will introduce new requirements for Defined Contribution pension funds to disclose publicly their level of UK equity investments, working closely with the Financial Conduct Authority (the FCA) who share responsibility for setting requirements for the market. The FCA will consult in the Spring. The government will introduce equivalent requirements for Local Government Pension Scheme funds in England & Wales. The government will review what further action should be taken if the data does not demonstrate that UK equity allocations are increasing.
This complements the wider reforms that the Government and regulators are already undertaking to boost UK markets.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what steps they are considering to mitigate the potential inflationary effects of the increase in the National Living Wage and the National Minimum Wage.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
In March 2020 the Office for Budget Responsibility estimated that meeting the National Living Wage target of 2/3rds of median earnings by 2024 would increase the level of consumer price inflation by less than 0.1 per cent across that period. Evidence shows employers respond to minimum wage increases in a variety of ways, most commonly by absorbing the additional cost and accepting lower profits.
Inflation reduces real incomes, creates uncertainty, and slows economic growth. It’s essential that the government continues with its efforts to keep inflation down. Inflation has more than halved, falling from its peak of 11.1% in October 2022 to 3.4% in February. The OBR forecasts that inflation will return to the 2% target in the second quarter of this year, a year earlier than forecast in November.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, following reports that the economy returned to growth in January after entering a recession in the second half of 2023, what steps they are taking to (1) support, and (2) sustain positive momentum in, sectors of the economy which have shown signs of growth in 2024.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The government is pursuing an ambitious policy agenda to increase growth and productivity across the economy. This includes making full expensing permanent, a tax cut to companies of over £10 billion a year, to ensure the UK has one of the most generous capital allowances regimes in the world and backing the UK’s priority growth sectors. At Spring Budget 2024, the government set out the next steps in delivering a £4.5 billion funding package for strategic manufacturing sectors over the five years to 2030 and announced over £1 billion of new tax reliefs for creative industries.
The IMF forecasts that the UK will have the third fastest cumulative growth in the G7 over the 2024-2028 period and the OBR expects that policies announced in the previous three fiscal events will increase the size of the economy by 0.7% by 2028-29.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, following reports that public expectations for inflation have fallen to the lowest level in over two years, what assessment they have made of the impact of falling expectations on (1) wage growth trends, and (2) employment dynamics; and what steps they are taking to address any potential challenges in sustaining wage growth while maintaining price stability.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
Inflation has more than halved, falling from its peak of 11.1% in October 2022 to 3.4% in February 2024 and nominal whole economy total pay has fallen from a peak of 8.9% in the three months to June to 5.6% in the three months to January 2024.
In the three months to January 2024 the unemployment rate was 3.9%, up by 0.1ppt on the year but low by historical standards. The OBR forecast that there will be a moderate rise in unemployment to a peak of 4.5% in Q4 2024 before declining to 4.1% by 2028.
Whilst inflation has fallen it still remains above the 2% target. The Monetary Policy Committee (MPC) continues to have the government’s full support as it takes action to sustainably return it to target.
Asked by: Lord Taylor of Warwick (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the impact of slowing wage growth on household finances and consumer spending; and what steps they are taking to mitigate any negative impact.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
Real wages have increased for seven consecutive months and are 1.1% above their pre-pandemic level.
ONS retail sales volumes increased by 3.4% on the month in January, representing a full recovery of the decline seen in December 2023.