Working People’s Finances: Government Policy

Matt Western Excerpts

Tuesday 21st September 2021 Commons Chamber

[Mr Clarke]

My hon. Friend is right. For the first time, any adult without a level 3 qualification will be fully funded by the Government to access three courses worth £3,600 per person. There are 11 million adults across this country without level 3 qualifications; this policy is directly targeted to support them.

We have invested £2.3 billion to hire and retain work coaches, doubling the number to 27,000, a feat that we have achieved in just eight months, and we are spending over £200 million on providing unemployed people with tailored help with CV writing, interview skills and job search advice. [Interruption.] We have doubled free childcare for working families—we can carry this on all day. This is a comprehensive solution to a very challenging series of problems. The plan for jobs is not about quick fixes; it is about creating sustainable employment so that people can be confident about being able to support themselves over the longer term.

[Matt Western (Warwick and Leamington) (Lab)]

I understand the right hon. Gentleman’s point about job applications and employment but, as we have heard, this debate is about the cost of living. Can the right hon. Gentleman tell the House how much the average family has had to pay in increased petrol costs per year, as well as the average cost of filling up a car?

[Mr Clarke]

This Government have frozen fuel duty for 11 years, so we do not need to take any lessons on that.

It is vital that we keep bearing down on the skills crunch we have been talking about. Our employment strategy is supporting people through a variety of means to gain the knowledge, attributes and qualifications to find work in high-value sectors. Insofar as we achieve that, we will be achieving a much more sustainable, robust economy for the future. Our employment strategy is supporting the finances of people up and down the country, helping them back into work, and helping them earn more and succeed in the jobs of tomorrow.

Meanwhile, Labour offers absolutely no plan to tackle the challenges that the country faces. There is no plan to take the tough decisions on covid; the amounts of money to be raised that are talked about are a fraction of those required to support the demands they are making of the Exchequer. There is no plan to create the high-skilled, high-wage economy, no plan—they voted against it last week—to tackle the NHS backlogs. While we wait for the Opposition to reveal how they would do this, we are taking action.

In April we took definitive action, increasing the national living wage by 2.2% to £8.91 an hour, an increase worth more than £345 a year to a full-time worker on the NLW, and at the same time we extended the NLW to those aged 23 and over. Last year we took action to tackle rent costs by boosting the local housing allowance to the 30th percentile of market rates, and we are keeping cash levels at those higher rates going forward. That will cost more than £950 million this year and has meant that more than 1.5 million households benefited from an additional £600 last year compared with before the crisis. We have protected people from excessive council tax increases and given councils £670 million this year to provide families with help with their bills.

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[Matt Western (Warwick and Leamington) (Lab)]

It is a real pleasure to follow my hon. Friend the Member for Slough (Mr Dhesi), who is a good friend. He put his arguments so forcefully and cogently. So many of the contributions this afternoon, certainly from Opposition Members, have been impressive and consistent in their criticism of the Government’s attitude and policies for addressing a fundamental problem in our society.

That perhaps comes as no surprise. When someone has their lunch hand-delivered to them every day by a company based in the Cotswolds, they might not be totally in touch with what is going on out in the economy—the price of food, the price of sandwiches and so on—but as I understand it, that is exactly what happens for the Prime Minister; one of his donors delivers a sandwich to him every day. It is a very reputable and nice business, based in the Cotswolds; I actually visited it myself once.

That kind of out-of-touch-ness is at the heart of this Government. They are divorced from the harsh impacts of what is going on in our economy—of inflation and the real cost of living. We must think about what has happened in the past 15 or 18 months for our nurses, hairdressers, decorators, plumbers, brickies, care workers—all those who are now facing the severe impacts of really high inflation, with wage growth not keeping up.

Those of us who are in touch with the weekly shop, as was evidenced by my hon. Friend the Member for Swansea East (Carolyn Harris), know how much we are seeing in price increases—not just the standard price increases that are going on, but the price gouging that is happening on our high streets. I have seen that at first hand. We have a Tesco store on the Parade in Leamington, and there is sometimes a 60% price difference between what people pay in the Tesco superstore a mile and a half away and what the vulnerable, the elderly and so on pay in that store on the high street.

I am not sure how this computes. If someone’s real concerns are about buying Lulu Lytle wallpaper at £840 a roll, I do not think that necessarily puts them in touch with what is really going on at the local DIY store, or the cost of timber down the timber merchant to build themselves a shed. I think that is at the heart of the policy and the Government’s inaction in addressing inflation and the pressures on families up and down our country. Certainly, the hard-working people in Warwick and Leamington are being very hard hit by rising costs. We are all facing the rising prices of energy, food, travel and housing, all of which are contributing to rising inflation, not to mention, as has been said repeatedly from the Opposition Benches, the sledgehammer of the universal credit cut and the pressure on pensions. When we put all that into the mix, together with tax increases, we realise how hard it will be for people and families up and down the country.

Looking at inflation—sadly, I am one of those who takes a real interest in this sort of stuff—the biggest jump on record was in August. The Bank of England expects inflation to peak at 4%. I think it is slightly underestimating the impact of what could happen—personally, I think it might exceed that—but even 4% is double the Bank of England inflation target of 2%. The Government, the Prime Minister and the Chancellor seem to be acting surprised that inflation will be peaking at 4%, but surely they will have access to briefings from the Bank of England and the senior economists—the likes of Andy Haldane and others—who will be saying what is happening to the UK and global economy and where the price pressures are that will impact on ordinary households. They track the data and get input data from businesses in the regions—in the west midlands, all the businesses will be feeding that information into the Bank of England’s regional office.

[Karin Smyth (Bristol South) (Lab)]

My hon. Friend is making an excellent point about inflation. He and I may be of a similar age and remember how, perhaps in our younger years, inflation was such an important issue that we were mindful of almost daily. However, there is a generation that does not really understand, or perhaps has not experienced, what inflation means to the daily and weekly cost of living for ordinary families. By not being up-front or public about this, the Government are perhaps not educating people on how to manage the coming crisis.

[Matt Western]

I thank my hon. Friend; she is incredibly generous to suggest that I might be of a similar age, but I will take that compliment from her. Of course, I agree. Certainly, I think about my generation and what happened to inflation in, say, 1990 and 1991, as someone who was paying a mortgage at the time and seeing 60% of my income going on the mortgage because of the excessive interest. Those on tracker mortgages and so on will be really worried about what is happening, because their incomes are certainly not keeping up with that kind of increase. I speak as someone who suffered—okay, I am nowhere near, and never have been, the sharp edge of the sort of extreme poverty that we are here to talk about. However, we should realise the pressure that that puts people under emotionally and psychologically, and the impact on mental health. What inflation can do, in eroding pensions and impacting on household budgets, should be a real concern to everyone in this House.

[Kirsty Blackman]

On that point, we got our first mortgage in 2009. People who have had a mortgage for as long as I have had, which is about 12 years, have never really seen interest rate hikes. There are people in the group that the hon. Member is talking about who are not worried because they have never met this in the face, and they are going to get such a shock when interest rates rise, as he is describing.

[Matt Western]

I thank the hon. Member, or perhaps I can suggest friend. Indeed, we have been insulated these past 10 years from the ravages of inflation that some of us know—perhaps my hon. Friend the Member for Stockton North (Alex Cunningham) would say this—can erode business confidence and have an extreme impact on household budgets.

[Alex Cunningham]

I well remember the Thatcher Government, when interest rates went up and up and up and up. Even those on good wages were struggling, so it was even more difficult for others. There is a storm ahead for many people. Does my hon. Friend agree that savings are very important? The average savings for a low-income household are £95, while a high-income person is likely to have £63,000 in savings. Who is going to come off worse?

[Matt Western]

My hon. Friend makes a very important point. We all have to understand that it is easy to talk about numbers and statistics in the abstract, but the reality for so many people, as he illustrates, is that they do not just have the uncertainty and insecurity of zero-hours contracts and the pressures of the cut to universal credit, but having so little money in the bank brings pressures on households. And here we have inflation about to rip into those households through the energy price increases I am going to come on to talk about.

I talked about the Chancellor and the Prime Minister. Those in corporate business and in senior positions in Government must know what is happening to inflation. They must know what forecasters are saying. When commodities are bought, all energy costs are forward priced—they know what is coming down the track—so the Chancellor could suggest only a 1% increase for nurses when he knew all along that there was likely to be a significant spike in inflation coming. Energy costs are a major issue, one that has perhaps been the driver to this particular debate, alongside the cut in universal credit. We have long known for months that there was going to be an increase in gas prices of 12% in October. That will have a significant impact on household bills. The average gas and electricity bill for customers will go up by £139 a year to just under £1,300. Now, we have to rely on the Government to get a grip to avoid further increases as a result of this unfolding crisis.

It is fundamentally a failure of long-term Government planning over the past decade that we, as a country, are so exposed and vulnerable to rising gas prices. We should have been building energy resilience, instead of being one of the countries most reliant on foreign gas. We should have been investing in domestically produced renewable energy. Instead, we squandered 10 years burning fossil fuels. When I was working on Warwick District Council as a councillor seven years ago, I proposed the Warwickshire energy plan to save people money, create energy resilience and address energy poverty. Sadly, there was not the gumption to follow through on that, and I am disappointed it never materialised.

[Mark Tami]

A perfect example of the point my hon. Friend is making is Wylfa nuclear power station in north Wales, in Anglesey. Building could have started on that and it would have been part of a growing nuclear programme, but the Government failed to support it. A spin-off would have been high-tech jobs, but the Government are not interested—they just step back.

[Matt Western]

I thank my right hon. Friend for that point. I think the important thing is that the Cameron-Osborne Government in particular became obsessed with fracking and took their eye off the ball with other energy sources. In Warwickshire, we had Algy Cluff come and visit; he was a significant donor to the Conservative party, I think, and he was really interested in having blocks under Warwickshire that he would frack. That undermined long-term planning for projects like the one that my right hon. Friend mentions.

If the Government had followed through, we could have been building zero-carbon homes since 2016. Instead, the Cameron, Osborne and—dare I say it—Liberal Democrat Government scrapped the regulations for housing developer donors. A million homes could have been built since 2016, but something like 10% of households in my constituency are in fuel poverty already and I can only see that figure rising. Several thousand homes in my constituency could have benefited from forward-thinking house building and zero-carbon homes, because we have seen such an explosion in house building across south Warwick and south Leamington.

[Alex Cunningham]

My hon. Friend might not know this, but I was in the gas industry for many years, as I mentioned earlier, and I was involved in a warm homes system. We went door to door, systematically insulating people’s homes and windows doing all manner of other things, but the current Government have done away with that. They have also done away with much of the responsibility on energy companies to do more in that space. Does he agree that energy companies could be expected to do much more to insulate our homes?

[Matt Western]

I absolutely agree—it is such a key point. There are so many schemes that could be introduced, and there is some excellent practice across Europe; I think it is currently beyond the wit of the Government, but as chair of the all-party parliamentary group for council housing I am certainly keen that we should push for it.

On energy costs, I go back to the point about heavy manufacturing. I am passionate about our manufacturing sector—not just the automotive sector, which I have talked about often, but chemicals, aerospace and steel. We have heard the comments that my hon. Friend the Member for Aberavon (Stephen Kinnock) made about the impact on steel, but the impact will be felt throughout our manufacturing: steel goes into the food and drink sector as much as into automotive and elsewhere.

The reality is that the price varies for energy. For gas in the UK, I think that I am right in saying that there is a 40% premium against the average in Europe, which is making us uncompetitive in comparison and will have an impact on future investment and, ultimately, on jobs.

Food prices are another big driver of inflation. The price of food and drink in shops and supermarkets has risen by more than 1% in August, the highest growth since 2008. Food commodity prices have increased by 17% since the start of the year. The Food and Drink Federation says that the cost per household of food and drink shopping will increase by more than £160 per year because of Government policies—that is the federation speaking, not me.

Various hon. Members have mentioned the supply chain disruption, which will lead to higher prices. We have heard about the shortages of heavy goods vehicle drivers, but there are also shortages of refrigerants and carbon dioxide, and of course there is the additional complexity of delays at borders and ports.

I turn to travel. I asked the Minister about the price of petrol, but in July petrol prices hit their highest level in almost eight years. It now costs £74.26 to fill a 55-litre family car with petrol, a 17% increase—17% seems to be a repeating figure—since the start of the year, by the Government’s own data. Diesel, by comparison, has risen by just 14%.

Rail fares are not faring any better. The Government are planning fare rises of 4.8% next year, way ahead of inflation. The average commuter faces paying £3,300 for an annual season ticket, 50% more than in 2010. An annual season ticket from Leamington to London, incidentally, now costs £8,700, a significant amount of money.

As for housing, rents have risen at their fastest rate since 2008, at a time when we are seeing declining home ownership, and the vulnerability that confronts so many people as more and more are living in the private rental sector. Rents in the west midlands are now £1,192 higher than they were in 2011, and incomes have certainly not kept pace with that.

[Lilian Greenwood (Nottingham South) (Lab)]

My hon. Friend is making a powerful speech. I think those who are listening will appreciate that for some families the combination of rising prices, rising rents and rising costs of travel to work will lead to absolute desperation—and, of course, this does not just have an impact on individuals and families; it has a wider societal impact. If people are unable to pay their rent, if they are made homeless and if that affects their mental health, an enormous strain will be placed on our public services and on society more broadly. Measures such as the cut in universal credit are complete madness, because the longer-term costs for the Government will be even higher than the costs of maintaining the uplift.

[Matt Western]

My hon. Friend is spot on. Short-term thinking often costs much more in the long term, and impacts of that kind will have very long-term consequences on people. We all know about the impact on mental health and how that can then affect people’s home lives, social lives and family lives, but it can also affect their working lives, which can have an economic consequence too, as well as increasing costs in the national health service and elsewhere.

We need to build more social housing for rent. Just 21 social rent council homes have been built in the Warwick district since 2010.

Let me now turn to the unimaginable and, I think, inadmissible cut in universal credit. It just underlines how out of touch this Government are that they are cutting the £20 uplift. Reversing that decision would prevent families from experiencing an even sharper hit during this cost of living crisis. I think it shameful that the very workers who got us through the crisis are now in the firing line for a £1,000 cut in their income every year. I think about the carers, the shop workers and the delivery drivers—all the people who kept the wheels of the economy turning through such difficult times. Data from the Joseph Rowntree Foundation shows that in Warwick and Leamington, which I think many people would assume to be a prosperous area, 13% of working-age families—6,300—and 29% of working-age families with children will be affected by the cut. This really is a poverty policy.

We have heard a great many claims about levelling up, but the one area in which the Government seem to be succeeding is levelling up on taxes which are more regressive than ever. We may think back to the increase in VAT from 17.5% to 20%; now we are seeing a rise in national insurance and rises in council tax across our local authorities. The average band D council tax set by authorities in England in 2021-22 is just under £1,900, a 4.4% increase on the 2020-21 figure. These are real costs to people. As we have heard, the national insurance increase is the biggest tax rise for families—the most significant change—in 50 years. Graduates now face a marginal tax rate of nearly 50%: that, surely, is a tax on aspiration.

[Alex Cunningham]

My hon. Friend talks about tax rates. He will be interested to know that a tweet has just come in from the Joseph Rowntree Foundation saying that

“191 Conservative seats will see more than a third of working-age families with children affected by the cut to #Universal Credit and Working Tax Credit. There’s still time for the Government to listen to the huge opposition to this cut and change course”.

I know that my hon. Friend will agree.

[Matt Western]

I can assure my hon. Friend that I absolutely agree with that. It was so telling that five or six former Conservative Work and Pensions Ministers said that they were absolutely against this cut. Of course, everyone on this side of the House is against it. It is also quite obvious to economists that the uplift should not be cut but left in place. The cost is £6 billion, I think, and in the context of some of the overspends that the Government have been guilty of during the pandemic, that is actually very little.

The cost of living tsunami that families will face in Warwick and Leamington and across the country this winter shows just how out of touch this Government are. Instead of making positive plans to tackle it, I am afraid that they are simply making it worse. We have the national insurance and council tax increases, and now we have the universal credit cut. The Government are failing to tackle the supply chain disruption that has been exacerbated by covid and Brexit, and we now have rising energy prices, rail fare increases and rising rents. The Government seem to be happy to waste huge amounts of taxpayers’ money on outsourcing and crony contracts, and I just feel that they are really out of touch. They seem to know little about the true cost of living.

We have a Prime Minister who spends—or rather, gets his donor friends to spend—tens of thousands of pounds on the refurbishment of his flat, and a Chancellor who is happy to spend a significant amount of money on a swimming pool, but they will seemingly not listen to all of us saying that there is a need to retain the £20 uplift. I was really surprised when the Chief Secretary to the Treasury, the right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke), did not know how much it cost to fill up a car. I will tell him: it is 77 quid. He had no idea how much people spent on petrol a year. I can tell him that it is 17% more than it was at the beginning of the year.