Cost of Living

Martin Docherty-Hughes Excerpts

Tuesday 25th January 2022 Westminster Hall

[Patricia Gibson]

I absolutely agree with the hon. Gentleman that the cut to universal credit is beyond words in its cruelty and its insensitivity to the struggles that real people face every day. It is a cruel irony that, just as the Scottish Government introduced the Scottish child payment, the UK Government chose to remove the £20 universal credit uplift across the UK—pulling the rug away from struggling households in Scotland. That example really crystallises a tale of two Governments.

Yesterday, I heard hon. Members in the main Chamber say, “If the SNP is so concerned about the cost of living crisis, it should do more in Scotland to support people who are suffering.” I say to the Minister that in Scotland the hated Tory bedroom tax—a tax, incidentally, that hits the disabled hardest—has been fully mitigated by the Scottish Government. I do not have time to mention all the support that the Scottish Government have brought in, using their own fixed budget, to support those who are suffering. It is deeply ironic that Members in this House talk about how the Scottish Government could do more when they are the very people who imposed the constraints that limit the Scottish Government’s powers to do just that. Give us the powers; if we have the powers, we will do more. The irony of calling for the Scottish Government to do more while tying their hands behind their back is well noted in Scotland.

However, the UK Government have a rich array of powers with which they could help to tackle this cost of living crisis—if the political will existed. They could introduce a real living wage. A real living wage would, as it says on the tin, relate to the cost of living—unlike the current, pretendy living wage. They could increase statutory sick pay, which is among the lowest in Europe. Unless the real living wage replaces the pretendy living wage, more and more people will find that they have less to live on as their pay is eroded by the rising cost of living.

The sad fact is that, shamefully, the UK has the highest poverty rate and the worst levels of inequality in all of north-west Europe, with 11.7% living in relative poverty. Around two thirds—68%—of working-age adults in poverty in the UK live in households with at least one adult working. That figure is at an all-time high. Poverty is driving unsustainable debt, with around 3.8 million households carrying an estimated £5.2 billion of arrears in household bills—a figure that has tripled since the start of the pandemic. People are borrowing more to pay for basics and essential bills.

Further, the Chancellor could cut VAT on energy bills and provide emergency loans to energy companies that are teetering on the brink. He could rule out a rise in the energy price cap and reintroduce the £20 per week uplift in universal credit. If the political will existed—and I fear that it does not—the UK Government could replicate the Scottish Government’s child payment across the UK.

As household energy bills soar, fuel costs are rising too. That does not just hit motorists hard; it also has a wider impact on industry because it pushes up the price of food, goods and services. Amid all the pain being suffered by our constituents and communities, we are approaching the highest tax burden since the early 1950s because of the national insurance hike. The consequences for our poorest could not be more stark; they could barely be more harsh. The national insurance hike means that workers earning as little as £10,000 will soon pay a national insurance rate of 14.25%, regardless of income. If student loan repayments are included, graduates earning just over £27,000 will pay a marginal tax rate of 42.25%—and the Tories call themselves the party of low taxation! All of that will act as a drag on recovery. UK consumer confidence is at its lowest level for 11 months, as people understandably worry about surging inflation, which is expected to rise to a staggering 7% by the spring.

It looks much bleaker when we factor in the Brexit effect, which I know the Government do not like to talk about, but let us do so for a minute. The Office for Budget Responsibility—the UK Government’s own forecaster—suggests that the worst is yet to come. Make UK is an organisation representing 20,000 manufacturers, and it has said that Brexit will undoubtedly add to soaring consumer costs this year. Squeezed supply chains are under pressure, with customs delays, border red tape and labour shortages, and additional costs ultimately borne by consumers.

Last month, as the hon. Member for Weaver Vale (Mike Amesbury) indicated in his intervention, we saw £15 added to the average price of groceries. The rate of food price increases is set to increase further this year, just as the national insurance hike is set to bite into pay packets in April.

Let us not forget the promises that were made—the pictures that were painted of the sunny uplands—as we approached Brexit. We were told that VAT on energy bills would be scrapped. Now we are told we cannot do that because it would be a “blunt instrument”. We were told that the price of food would go down. In the wake of Brexit, this message slightly changed to there will be “adequate food”, but we see the price of food rising fast.

It seems that there is one rule for one and one rule for another. As the Minister will stand up and tell us, there are lots of reasons why he cannot do more, there are lots of reasons why the Government cannot do more and hard choices have to be made. In that context, I cannot help but remember the words of Lord Agnew yesterday when he talked about the £4.3 billion of covid loans conveniently written off by the Treasury. He said “arrogance, indolence and ignorance” were at the heart of Government and were freezing “the Government machine”. He said:

“Schoolboy errors…allowing more than 1,000 companies”

that were

“not even trading when Covid struck”—[Official Report, House of Lords, 24 January 2022; Vol. 818, c. 20.]

to have loans could not be justified. I wonder how much pain people like the ordinary man in the street would have been saved by a cash injection from the Treasury of £4.3 billion.

We cannot forget the poor deal for pensioners in this crisis. The WASPI women—the Women Against State Pension Inequality Campaign—have already been left high and dry as their pension age was increased with little or no notice, throwing their retirement plans into chaos. I want to head off once again the allegation that if the SNP Government are so concerned, they can help the WASPI women. I simply quote that section 28 of the Scotland Act 2016 prevents the Scottish Government from providing support on reserved areas, including pensions assistance or assistance by reason of old age. Once again, we need to burst the myth that the Scottish Government can solve the WASPI problem. It is a problem of the Government’s own making and it is down to them to fix it. If the Scottish Government had the powers, we would be happy to do so with all the levers of an independent country.

Those who have finally reached state pension age now find they are being clobbered again as the triple lock has been abandoned—right in the middle of a cost of living crisis. State pensions have to keep pace with the cost of living, otherwise, we will see older people languishing in poverty as the threat of a rise in morbidity from the cold looms large this winter. I will say that again, because it is outrageous: there is an expectation this winter that the death from the cold among older people will rise. I do not even know what to say about that, it is so appalling.

Pensioner poverty has risen to a 15-year high under this Government’s watch as 985,065 pensioners have been directly impacted by the breaking of the triple lock, despite the fact that UK pensions are the least generous in north-west Europe. Not only are they the least generous but they have been clobbered by this Government in the middle of a cost of living crisis. It is simply not good enough for the Government to fiddle while households, pensioners and one in four children in the UK suffer poverty as a result of the choices the Government are making—and it is a result of the choices they are making. The cost of living crisis is not inevitable, although of course there are factors at play such as global energy challenges and the all-too-predictable consequences of Brexit driving up prices due to supply issues.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I am grateful that my hon. Friend mentioned energy prices. Does she agree that the UK Government’s penchant for reducing investment in onshore wind farms, as well as removing subsidies for offshore specifically in Scotland, undermines not only renewable energy but the production of the cheapest energy that this United Kingdom of Great Britain and Northern Ireland can provide, which would otherwise lower energy costs for our constituents?

[Patricia Gibson]

Absolutely. That is yet another example of this Government’s skewed priorities—no joined-up thinking, no strategic thinking. Of course, at the moment, they are a Government who are not focused on governing, but are tearing themselves apart with their own internal struggles.

However, there is action that the Government can, and should, take to see people through this perfect storm of rising costs. To stand by and do nothing to alleviate this very real crisis while so many of our constituents across the UK suffer—including the Minister’s constituents—is not acceptable and, as I said, shows skewed priorities. It punishes those on low pay. It punishes those seeking work and pushes them further away from the job market, because poverty creates barriers to work that need not be there. Perhaps worst of all, it punishes those whose health prevents them from working. Among all that, it punishes the children in all the households that are struggling during these difficult times, because it blights their childhood with poverty. I can tell the Minister that the scars of childhood poverty do not easily heal and are never forgotten. If this Government wanted to, they could do more. They could use their powers for good, to protect and support those they are supposed to serve. I urge the Minister to make the case to his Government to do so.

--- Later in debate ---

[Derek Thomas]

I completely would, and I welcome that intervention. However, in parts of the country, including my constituency, families with fairly decent incomes who would never qualify for that list are also seeing their rents rocketing. We are talking about the nurses, teachers and police officers we need to come to take jobs in Cornwall, or stay in the county, and who cannot afford the rents they are expected to pay.

I absolutely agree with the hon. Gentleman’s point. Cornwall County Council, now under a Conservative administration, is ramping up the provision of social rental properties. That meets the needs of a particular group of constituents, but does not reach or solve the whole problem.

In view of the rising costs of housing, Cornish MPs are arguing in favour of protecting new buildings for permanent residents only, which will help to protect those homes for local need. I agree that we need to look at every tool available to ensure that people have secure homes for life that they can feel safe in. Those homes should be built efficiently, so that rising energy costs, which I will address in a minute, can be managed, so that we are not just heating up the planet when we are trying to heat our homes.

I want to touch briefly on energy costs. My understanding at the moment is that the cost of production of energy has not risen. Companies that are producing it, not all of them based in the UK, are making colossal sums of money due to demand. I am interested to hear from the Minister what the Government are looking to do to bring the cost that suppliers pay for energy closer to the cost of production.

Another area to look at is the feed-in tariff. For example, customers are seeing energy prices increase and that is expected to carry on this year, but those who are feeding into the energy supply, through solar panels or wind turbines they have invested in, are not seeing any change in the money they receive for that energy. It seems sensible for the Minister to look at whether the feed-in tariff should be tracked against the energy costs people pay.

There is no doubt that the energy market needs reform, but right now urgent help is needed for households most hit by energy prices. I heard the calls for a cut in VAT, but householders concerned about energy costs have already worked extremely hard to reduce the amount of energy they use, sometimes choosing not to heat their homes in order to feed their families. The VAT element of the bill for those families will be tiny: they might save £20 or £30, perhaps a little more, a year in VAT. If I owned several electric cars, a couple of hot tubs, maybe a swimming pool, and a massive house with lights on all the time, the savings I would make from the VAT cut would be significant. We are not helping the households that most need it with the headline-grabbing promise to cut VAT on energy.

There must be targeted and effective help for the families I have referred to, the pensioners, people on fixed incomes and low-income households. There should be cash to help with energy bills and, at the same time, an effective way to improve people’s homes. We have had lots of schemes recently where large amounts of money have been made available for people to retrofit their homes. In Cornwall, builders—people involved in construction—were already run off their feet with building homes and looking after Cornwall’s homes and did not choose to take up those offers. People came in from different parts of the country to retrofit homes, not doing it properly or effectively, and often going bust before they got found out.

Lots of Government money was wasted while the homes were not actually improved. The Government need to look carefully at how we retrofit homes, probably through local authorities, where that can be targeted and effective. Ultimately, not now but in the near future, the Government with their sizeable majority could properly reform the energy market so that the poorest families paid hardly anything—if anything—for energy, and those more demanding homes paid more.

[Martin Docherty-Hughes]

rose—

[Derek Thomas]

I will give way to the hon. Gentleman and then I ought to finish, because I am getting the eye.

[Martin Docherty-Hughes]

Does the hon. Gentleman agree that energy market reform also requires a reform of transmission charges? While in most parts of England a subsidy will be given to provide energy, north of a certain line north of London people have to charge to produce energy to put it on to the national grid, and that reduces the ability of renewables to lower energy costs.

[Derek Thomas]

I agree that there is a need for a time out to properly look at the energy market and how it works. The price cap we introduced a few years back was helpful and certainly it is helping right now; my understanding is that the variable tariff is the best to be on. However, I met policy advisers some years ago to discuss some sort of block tier energy price, where the first units paid are extremely cheap or free and the more units someone uses, the more they have to pay. We have to retrofit the poorer homes to make sure that does not penalise them, but there is a need in the energy market to make those who can afford it contribute to the cost of energy for those who cannot. It is not a luxury; it is something that we need to care about. We do care about it, and we need to do something.