Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)Low-income and Vulnerable Consumers
Lord Whitty Excerpts
Lord Whitty
That this House takes note of the cumulative effects of Government economic, public spending and regulatory policies on low income and vulnerable consumers.
Lord Whitty (Lab)
My Lords, the central statistics for this debate are these. For households in the lowest two deciles of income, since the financial crisis in 2008 the cost of their basket of essential goods has gone up by 28%, but their average income has gone up by 9%. Those central statistics underline my theme for today. The world financial crisis hit everybody, but I will be contending that the actions, or inactions, of this Government over the past five years of office have made the situation significantly worse and have placed the burden of the austerity programme on the poorest in the land. Even as we enter into a phase of recovery, that continues to be the case. As a result, they have deepened and exacerbated the polarisation of our society, to the detriment of our more vulnerable families and households. That is quite a charge sheet.
Most of what I say will be about the costs to these households, but I shall first say a few words on the income side and the state of the labour market. Employment is now growing, which is very welcome, but the nature of that employment is often very precarious. There is a growth in part-time employment, some of which is desirable, but quite a lot of people would like to work full-time, or, at least, significantly more hours. There is a growing number of people on zero-hours contracts, which is highly precarious work. There is a growth of what we used to call bogus self-employment: forced self-employment. At the bottom end of this dysfunctional labour market there are some really nasty practices indeed. Next week we will be debating the Modern Slavery Bill. The reality is that, in certain agricultural sectors and in parts of catering and construction, we are seeing trafficking of workers, which is undermining the conditions of everybody.
Meanwhile, the Government are continuing their attacks on the protection that workers have in the labour market—on trade union organisation, the individual rights of workers and their access to tribunals and legal redress. That affects not just people at the bottom; it drags everybody down, in particular those who are just a little above them. Of course, the other source of income for these bottom two decile families is social security benefits. Those, too, have been largely frozen and, in some cases, cut. They have been the subject of huge and negative political propaganda. I read in the Times today that the Government are telling us that 25% of tax is spent on welfare, which conjures up views of the work-shy—when, in fact, the bulk of that goes on pensions and the increase is largely in payments to people at work whose wages are simply inadequate.
Both low-income households, dependent on low wages, and households dependent on benefit payments have seen the real value of their income squeezed and their protection reduced. Who are these people? If you read the Daily Mail or listen to some government Ministers, you would assume that they are all in multigenerational, unemployed households; they are work-shy teenagers; they are benefit tourists from eastern Europe and beyond; or they are illegal immigrants. However, the reality is that there are large numbers of pensioner households in that group, and the vast majority of the rest have at least one person in work. Often the reality is that the main earner in those households is a woman, who is often in and out of work and is subject to very variable income. That of course relates back to the earlier debate today.
Those are the consequences of our so-called “flexible” labour market, in particular for households where the main earner is a woman. When we talk about the decline in real incomes for these people, the usual way in which statisticians calculate it is to set the income against the general consumer prices index. But for those households, the key issue is the price of essential goods and services. If we take a longer period from before the financial crisis to the end of last year, the CPI in general has gone up by 36% but the cost of water has gone up by 51%, housing by 61%, food by 61%, public transport by 111% and electricity and gas by 161%. Inevitably, that puts cost pressures on all these low-income households. The concentration of that pressure on the poorest is not inevitable. Government action and Government inaction have helped to aggravate or, indeed, cause it. I shall take just a few examples.
The first is that of energy. It is true that the Government have started, neatly, to statistically redefine fuel poverty. Whatever one thinks of that redefinition, the numbers are still going up in almost every part of the country, whether on the old definition or the new one. Gas and electricity prices for our poorest households are going through the roof. There was an item on the news today about heating oil. Many of our rural poor depend on heating oil; they are very dependent on it in Northern Ireland. Yet the cost of that, despite the fall in world prices of oil, is still going up. As for fuel poverty programmes, there has been a deliberate action by this Government to cut what was in England the Warm Front programme, so there is no direct taxpayer-funded improvement in the energy efficiency of their homes.
There is also, probably more importantly, a failure of the regulator, Ofgem, and of the codes by which the regulator operates, to gear tariffs to help those who have relatively low use and are in relatively poor households. The ECO, which is supposed among other things to replace the Warm Front programme, actually does nothing of the kind. The warm homes discount is welcome and valuable, but it is a sticking plaster over inequitable overall tariffs. Some of the interventions by government over the head of the regulator have made matters much worse. The Prime Minister called for a simplification of tariffs, which we can all agree with, then called for four tariffs—but, in the process of drawing up those four tariffs for gas and electricity, Ofgem has ruled out and dropped a number of the pre-existing tariffs that were geared particularly towards pensioners and low-income families. The net effect of that is that the whole structure of tariffs, against the background of rapidly rising energy prices, is making the situation of the fuel poor worse. I declare an interest as the head of a charity that makes grants for research into fuel poverty.
Another area is transport. The working poor by and large require public transport to get to work or to seek work, but bus and train fares are soaring. For buses we need a whole new deal, as the Labour Party has set out recently. As for trains, we need to relook at regulation, and at whether fares, which can benefit those who can afford to book substantially ahead, for those who are in and out of work on different days of the week and do not know whether they will be working from one week to the next, are unregulated, in effect, in the present system, and do not meet their needs.
The other area is housing. Many in this House have heard me rant on about housing many times over the past few months, and I shall not repeat my continued analysis of this, but I will say a few words on it. I have always accepted that the Government did not inherit the greatest situation on housing; the crisis was already there. For nearly 30 years, we failed to build enough new housing. But this Government have made matters worse. They cut the affordable homes budget by 60%—that was almost their first action. The soaring prices in the overheated south-east and London are affecting all forms of tenure and all parts of the country to a greater or lesser extent. For the young—and by that I mean those under 40—on average or below incomes, house purchase is now out of the question. That of course puts huge pressure on the private rented market, where there is a soaring level in most of our urban areas, particularly in London, of private rented accommodation. The average private renter uses 50% of their income simply to pay rent and housing.
The Government have deliberately reduced the supply of social housing. Access to new tenures within social housing in most parts of the country is almost nil. For those who are in social housing, they have geared the level of social housing rents to reflect those within the private sector, or 80% of the private sector. So where rents are rising highest in the private sector, at a cost to private tenants, that is also being reflected in the social sector. The Government and Treasury rules prevent local authorities and, to a large extent, housing associations investing in new social housing. Worse than that, the Government are allowing developers to move in, in a number of areas where social housing does exist, both local authority and housing association owned, and to replace what was social housing with luxury flats. You do not have to go very far from this building to see exactly that in operation.
Meanwhile, the pressure on the private rented sector has brought a number of landlords into the situation who do not act in the best interests of their tenants or in the best interests of the reputation of the private rented market—yet the Government have refused even to register private sector landlords, let alone to engage in any degree of rent control or setting the minimum level of tenure of lease. So we have families with children who are being brought up in inadequate conditions, who are seriously affected by insecurity and who are being bullied and often evicted by landlords. Of course, mothers in this situation may themselves want to go out to work or extend their hours of work—but then there is a real problem with childcare. Net childcare costs in this country are the highest in all OECD countries with the sole exception of Switzerland. That is a deplorable state of affairs.
So what do those families then do? If they seek credit to tide them over this period, the mainstream banks do not want to know. They will not advance credit to these people, who are then forced into the hands of payday lenders, pawnbrokers, doorstep sellers and worse. Until very recently—until the last few weeks, almost—the Government had failed to respond to the campaign to do something about this.
Meanwhile, in the rest of the market, there are other rip-off situations. There are scams on insurance, food and buying second-hand cars. There is a failure by the Government to ensure proper enforcement of existing regulations. In particular, they have allowed the decimation of the trading standards role in local authorities. I declare another interest as vice-president of the Trading Standards Institute. The workforce in trading standards has been cut by 50% over the last six years. That puts greater pressure on voluntary organisations, Citizens Advice and local authority-funded schemes, but the grants to those schemes from local authorities have also been squeezed.
The Minister may well say that this is the local authorities making their own choices. However, the Government have cut local authority spending at three times the rate that they have cut central government spending. They have targeted the poorer local authorities, so that Hackney has had a bigger cut than Westminster and Somerset has had a bigger cut than Surrey. Those authorities have had to cut back on discretionary areas, which include all the back-up services and advice for consumers and other hard-hit households.
By a threefold knock-on, the services that were there to help people out of poverty have begun to disappear—and in many parts of the country they have disappeared. For example, there is only half a trading standards person in a large number of local authorities. The result has been greater indebtedness. We now have half of households in the lowest two deciles spending more than a quarter of their income simply paying the debt and the service on that debt. We have £4.8 billion-worth of debt from payday lenders. The pressure on these households leads to stress. As we said in the last but one debate, it leads to domestic violence, the breakdown of relationships, mental health problems and family break-up. There are now 2.4 million children living in families with huge debt problems. This is an appalling outcome. It is not inevitable. It occurs only if the Government allow it to occur. I believe it to be a disgrace that this Government have failed to take steps to mitigate the effects of these developments.
Lord Whitty
My Lords, I thank the Minister and everybody who has participated in the debate. I do not have time to re-endorse all the interventions from the right reverend Prelate and my colleagues here that underlined my point.
I cannot agree with the Minister or with the noble Baroness, Lady Noakes. The tale that the noble Baroness tells would not be recognisable to the kinds of household that we have been talking about today. It is all very well blaming the previous Government, but that is a debating point within this House. I could debate it had I time. What this Government are doing now to ensure that matters do not get worse is the key issue.
I do not accept much of what the Minister has said. On the point of fuel poverty she said that the numbers are going down. However, DECC’s latest report says that numbers are due to increase by 2.3 million and that the fuel poverty gap—the difference between what people can afford and what they must pay—is growing to £480 per annum. Those are DECC figures. It is the reality of life for a lot of low-income families.
I am bit disappointed by the Government’s response. I do not expect them to get away from blaming the previous Labour Government, but they do need a more substantial defence of their position. As I understand it, it relies largely on the trickle-down effect on the one hand and some demonising of the poor on the other. As the right reverend Prelate said, we are blaming the poor for their own condition. That is not a policy. It is socially disruptive, politically dishonest and economically fairly illiterate. I am sorry to hear it repeated in the Chamber today.
In National Consumer Week, I recall one of my noble predecessors as chair of the National Consumer Council, Michael Young, and almost the first publication for that organisation, more than 40 years ago, called Why the Poor Pay More. They still do, 40 years on. In an entirely different context, Michael Young said that these things are not acts of God or forces of nature, but decisions. The Government took their priority decisions, as the noble Baroness, Lady Noakes, rightly said. They took them in a way that meant that the burden of the austerity programme fell on the narrowest and not the broadest shoulders. Historically, that will be seen as a very serious mistake. I hope that the Government recognise that and recognise Michael Young’s words, just referred to, which related to the 1945 Labour manifesto. I hope that our new manifesto will be in equally ringing terms and begin to reverse the policy we have heard outlined today.