Living Standards

Natalie Elphicke Excerpts

Thursday 1st February 2024 Westminster Hall

[Mrs Natalie Elphicke (Dover) (Con)]

It is a pleasure to serve under your chairmanship, Mr Mundell.

I am grateful to the hon. Member for Glasgow South (Stewart Malcolm McDonald) for securing this debate. Indeed, I was pleased to support his application for it, because the issue of living standards is of great importance to my constituents in Dover and Deal, and to people across the country.

Over the last 15 years, a series of major events have had a direct impact on our economy and on living standards. It started with the credit crunch and the global financial crash. More recently, we have had the covid pandemic, which has had a significant and lasting impact on our country and its finances. Even more recently, the disgraceful invasion of Ukraine by Russia has had severe negative effects on global prices and created major challenges for both global and local economies.

These big events have led many commentators to liken the current economic situation to that in the 1970s, because of the inflationary element that the Government have been grappling with recently. However, each recession or economic crisis is unique. If any historical comparison is to be made, perhaps the challenges we face today echo more closely the political and economic period after the second world war than that of the 1970s. The extreme costs incurred and the public debt overhang created in battling covid, the shortages of materials and supplies caused by global supply chain disruptions, and the simultaneous energy and food price spikes need particular and considered responses.



Following the second world war, problems with food, energy and housing plagued the economy for years. The rationing of goods, materials and even housing lasted long after VE Day, and the political consequences for Labour and the Conservative party were brutal. It was not just Churchill who faced a possibly ungrateful public when he was booted out of office after winning the war; Labour’s Nye Bevan truly transformed the country in his approach to health and housing, only to see Labour unceremoniously dumped for not delivering quickly enough. The lessons of history are that the Government need to be muscular and act single-mindedly to deliver at pace for the people.

The seriousness of the current situation requires the Government to have a laser-like focus on overall household costs, yet the machinery of government does not allow that to happen, because in the division of the Departments, no single Department has overall sight of housing and household costs. The responsibility for and regulatory oversight of the key household utilities—gas, electricity, water, telephone, broadband, TV licensing or council tax, as well as mortgages and rent—that are responsible for so much pressure on individual households is split between multiple Government Departments, each with differing priorities. No one is responsible or accountable for total household costs, yet that is what every household, up and down the land, is thinking about—“How much do all my bills cost? How much do I have, to pay for them? How am I going to make ends meet?”

This matters because we do not just pay for the utilities we use; our living standards are directly affected by the bills, which include commitments such as the costs of net zero and of building new physical infrastructure to meet future population growth. All those costs need to be tightly managed, like any other tax or national spending commitment. In my view, all household regulation should be under one roof, overseen by Ministers who can look at total household costs and the impact of regulatory decisions.

There is a real opportunity for Government to refocus regulators on getting the best deal for householders, rather than the best deal for the people they regulate. That means breaking down the existing silos of Government and regulatory structures to create a new, household-centred approach to allow better decisions to be made about how much households can pay at any time and when extra investment can best be afforded. That is one important way in which we could start to address living standards for the nation.

Back in 2009, as the impact of the financial crisis hit, I wrote about the likely impact of that massive event on household costs and repossessions, and the range of interventions that were available to the Government of the day. Things looked grim and hundreds of thousands of repossessions were forecast, in line with previous housing crashes. There were interventions that I could recommend, and recommendations were taken forward that helped people stay in their homes and weather the crisis. Judicial and financial regulatory policies were changed accordingly.

Given the immediate challenges facing our country, it is just as important today that the Government respond to support householders and households, because the distribution of housing today is very different from in those earlier recessionary events. The majority of rented housing is now owned by private sector landlords—about 20% of all housing stock. That is neither equitable nor feasible for renters, who need to pay high rents to fully shield landlords from challenging times. Rent needs to be affordable; otherwise we end up with inter-generational unfairness, but that is where we are today: unfairness not just for so-called generation rent but for people under 40 who have been unable to get a home of their own and find themselves having to pay more. We need to take a fresh look at how to deal with that, and at how renting is managed within the welfare bill. Too many people find themselves in overpriced, sub-standard rented accommodation with a housing allowance that does not meet the cost of the rent, so they are expected to make up the difference.

The situation is exacerbated by what I call the invisible money and invisible tax position. I recently asked a group of people to say how much energy support the Government had given during the energy spike. There was a silence. Not a single person in the room could give a figure. The Office for Budget Responsibility says that the energy support policies in 2022-23 cost more than £50 billion—2% of GDP—and yet not a single person could say how much money the Government had given. That money is very different from the £300 direct payments under the cost of living programme, which went directly into people’s bank accounts. Invisible money contributes to the sense, but not the reality, that the Government are not helping, so I hope the Minister reflects on how the Government can better explain and make clear the money and support they are giving, and ensure it is done in such a way as to help people appreciate and understand what is happening.

It is the same for what I call invisible tax—the regulatory charges through utility companies. Again, they are not directly visible and do not form part of household assessment when the Government Budget is considered.

Living standards are crucial to all Members of Parliament and the Government of the day. It is right that we look at people’s ability to meet their daily costs, but we must have a firm eye on the fairness of where costs and obligations lie. I am grateful for the opportunity to speak in this debate, which is of great importance to us all. I hope the Minister will consider the ways in which the Government may better support the 22.6 million people on welfare—a third of the population. That should not just be through direct spending, or support of the type that households received during the pandemic, which protected lives and livelihoods. I recognise the Government’s commitment to upgrading infrastructure, but I should be grateful if the Minister would reflect on my comments.

--- Later in debate ---

[Bim Afolami]

I thank the hon. Member for that point. I have not seen the report, but, to take what he has said as read, the reason why, since the financial crisis in 2008-09, economic growth—trend growth—in all the western world, particularly in Europe, is down on where it was before the financial crisis, is due to the financial crisis. Indeed, it was this Government who had to spend years from 2010 clearing up the mess left by the Labour party when they were in office. That is the core explanation for the difference that the hon. Member describes.

Thanks to the efforts of the Bank of England, supported by the Chancellor, inflation is less than half of its peak, falling to 3.9% in November 2023—the lowest rate in more than two years.

But I do not deny that the outlook remains challenging. Nor do the Government. That is why we announced further action in the autumn statement in November to support the most vulnerable. In April, we will raise local housing allowance rates to the 30th percentile of local market rents. That will make 1.6 million low-income households better off, with an average gain of £800 in the 2024-25 financial year.

We will also uprate all working-age benefits in full for 2024-25 by the September 2023 consumer prices index figure of 6.7%. Now, why am I being so precise about that? Because that is three percentage points higher than forecast earnings for ’24-25. This will help to support the most vulnerable while inflation continues to fall; 5.5 million households on universal credit will gain an average of £470—almost £500—in the ’24-25 financial year.

We are maintaining the triple lock, too, to support our pensioners, whose hard work helped to build this country. They are on fixed incomes and need to be looked after. The basic state pension, new state pension and pension credit standard minimum guarantee—we need to find a better description of that because it is very wordy—will be uprated in April 2024 in line with wage growth of 8.5% in the usual reference period. Let me give a sense of what that means in cash terms: in the coming financial year of ’24-25, the full yearly amount of the basic state pension will be £3,750 higher than in 2010. To put it more simply, that is about £1,000 more than if it had been uprated in line with prices alone. For individuals needing further support, local authorities in England continue to provide it through the household support fund, which is backed by £1 billion of funding. That means that, from 2022 until 2025, total support to help households with the cost of living will be over £100 billion, which is roughly an average of £3,700 per household.

What is the principle here, because I know that I have just given the House a blizzard of figures? The principle is that this Government believe that the people of this country deserve to keep more of their hard-earned money and that, where we can, we should reduce their burdens, as long as it is fiscally responsible to do so and as long as we are supporting public services as we need to. This is not ideological; it is because it will reduce the cost of living and help to grow our economy. That is why, from the end of January 2024—it is 1 February—millions of employees across the country will see their main national insurance contribution rate cut from 12% to 10%. That means that the average worker on £35,400 will receive an annual tax cut of over £450 a year, and we are also cutting national insurance rates for the self-employed. This tax cut is worth over £9 billion a year, which is the largest ever national insurance cut to employees and the self-employed. I repeat: this helps with the cost of living and helps to grow the economy.

We are also delivering on our commitment to end low hourly pay. Although they may not have agreed with everything I have said, I am sure that Members across the House will support that. From 1 April, the national living wage will increase by almost 10% to £11.44, with the age threshold also lowered from 23 to 21 years old. That represents an increase of over £1,800 to the annual earnings of a full-time worker on the national living wage, and is expected to benefit more than 2.7 million low-paid workers.

These actions must be underpinned by a robust and growing economy. Only a healthy economy can spread jobs and opportunities through the country. Only a healthy economy allows the Government to make the long-term decisions needed to strengthen it. Growth is generated by providing individuals with the freedom to learn, the freedom to innovate and the freedom to succeed. That is why it matters so much to create the right environment for the private sector to thrive. That means prioritising the strengths of the UK and focusing on the biggest opportunities for growth.

How have we done that? We did that in the autumn statement, in which the Government set out plans to drive growth and productivity that the independent OBR has estimated will have increased business investment by £20 billion a year in a decade’s time. The OBR also estimated that the autumn statement would increase real GDP by 0.3%. That is one fiscal event! Key elements of the package include a new £2.5 billion “Back To Work Plan”. In combination with measures from the spring Budget last year, the OBR thinks that will add around 200,000 people to the labour market.

The hon. Member for Glasgow South made an interesting point about immigration and numbers and people and population. What I would say to him is that although one can always have a debate about the right level of migration—to some degree, it depends on the nature of an economy and what gaps need filling in the workforce—I think we can all agree that the primary aim of any Government should be to improve the prosperity of the people in the country by strengthening the economy. However, what we should not do is adopt the ideological position that it is inherently good to have high levels of migration, because we need to make sure that we have the right level for what our economy actually needs. Indeed, that should be the focus of our debate.

Making full expensing permanent represents a tax cut of over £10 billion a year for companies, meaning that they can invest for less—something that more than 200 businesses and trade bodies have called transformational for business investment. That is another example of the Government taking a long-term approach. The hon. Member for Rutherglen and Hamilton West playfully suggested that there are only weeks left of this Parliament, but we still have almost a year to go. I would not pre-judge the timing of any election, but I do think his suggestion may be a little premature. What I will say is that politicians often get accused of doing things for the short term—indeed, sometimes they do—but nobody can accuse this Chancellor and this Government of acting in that way.

Full expensing, a tax cut for businesses to improve their productivity over the long term, is worth about £10 billion a year. This is one of the most transformational long-term measures that will improve our country’s potential growth rate. That is a very good example of the measures I have been talking about. It underpins a strong, growing, robust economy, which allows us to provide the support for the vulnerable that I described at the start of my speech. Indeed, we have provided over £4.5 billion in funding for the UK’s strategic manufacturing sectors.

It is important to note that we are talking about the entire United Kingdom, not just London and the south-east. That is why we used a combination of local growth policy and national economic policy, taking into account the inequalities that exist at all levels of decision making—I do not deny that—to underpin our approach to tackling them. According to the Department for Levelling Up, Housing and Communities, the UK Government provided a package of cost of living measures worth £7 billion in Scotland, more than £3.5 billion in Wales and more than £2 billion in Northern Ireland to help households and businesses weather the impact of soaring energy prices between 2022 and 2024.

I am reminded of the point made by my hon. Friend the Member for Dover that a single Government Department should be responsible for housing and household costs. I do not think that we will do another reorganisation of government, but Ministers and my officials in the Treasury work very closely with DLUHC. I am happy to hear any ideas from her about how we can do that more effectively, but it is important that we do not spend too much time working out how to reorganise Departments, and that we focus on the issues at hand.

[Mrs Elphicke]

I am grateful to the Minister for addressing that issue directly, but does he acknowledge that the timeframes for the investment and spending settlements are not within the control of the Treasury, but within the control of the regulatory frameworks that are in place? The ability for either DLUHC or, indeed, the Treasury to bring them all together in a meaningful way is currently limited. It was in that spirit that I hoped he would reflect on the impact of all these things on households, and on how they build up for the individual household purse.

[Bim Afolami]

I thank my hon. Friend for that remark. I am very happy to think about and consider more deeply how we make sure that—whether it is a regulatory impact, is at national policy level or is legislation made in this House—we focus on achieving the right outcomes for the right people at the right time. I can give her that commitment today.

All households in Scotland, Wales, Northern Ireland and England were provided with support, but the poorest households gained the most. The average level of support was most generous in the devolved nations, compared with the UK average. Alongside that, we have announced a comprehensive levelling-up strategy that not only addresses the immediate challenges but lays the groundwork for sustained prosperity. As part of that, we are continuing to support local growth through funds such as the £2.6 billion UK shared prosperity fund and the £3.2 billion towns fund. The shared prosperity fund empowers local leaders who know their areas best to take the action that best meets the needs of their local labour markets. In addition, the refocused investment zones programme will catalyse high-potential knowledge-intensive growth clusters across the UK in our key future sectors, bringing investment into areas that have traditionally underperformed economically.

The three watchwords of the hon. Member for Glasgow South were prosperity, fairness and resilience. He expressed uncharacteristic pessimism about the idea that they would be addressed by this Government or in the coming weeks and months of this Parliament, but I want to make the case for why we are doing that. On prosperity, I mentioned full expensing, tax cuts in national insurance and various other measures that support all regions of the UK. They are designed to build long-term prosperity in our economy. They deal with our economic weaknesses and build on our strengths.

On fairness, I think I have comprehensively set out today the support that is being given to the most vulnerable —indeed, to a majority of households. That is done in order to be fair.

I should not stray out of scope and go into other policy areas, but the fundamentals for resilience are having a robust, sustainable economic growth strategy that, over time, increases the growth rate of our economy. Upon that foundation everything else is based.

In conclusion, these measures are a clear demonstration of the Government’s unwavering commitment to promote living standards and support households up and down the country. We firmly believe that the key to a prosperous future lies in creating opportunities for everybody. The boost to the national living wage and the historic reduction in national insurance are powerful tools in driving employment and improving living standards. By putting more money into the pockets of hard-working people, we are not just bolstering their financial wellbeing but fuelling economic growth.

As always, we need to balance support for households with fiscal sustainability. As I have said, the economic position remains challenging. Inflation has more than halved, but it remains too high: it is not at our 2% target. We are not complacent about that, which is why the Government remain steadfast in our support for the Bank of England as it acts to reduce inflation.

Our long-term objectives are crystal clear—increasing prosperity, improving the long-term growth rate of our country, improving our resilience, levelling up every corner of this country and fostering sustained economic growth. It is through these robust economic policies that we lift communities, create opportunities and enhance the quality of life of all our citizens.

Our commitment to growth is not about numbers in a spreadsheet. It is not for the short term; it is for the long-term, tangible improvements in living standards that result from a thriving economy. We continue to keep all options under review as we take tough decisions to drive down debt and inflation and increase our prosperity. These complex issues affect all our constituents, wherever we call home. I thank all Members for their constructive contributions.