Cost of Living

Patricia Gibson Excerpts

Tuesday 25th January 2022 Westminster Hall

[Judith Cummins (in the Chair)]

Before we begin, I remind hon. Members that they are expected to wear face coverings when they are not speaking in the debate. This is in line with current Government guidance and that of the House of Commons Commission. Please also give one another and members of staff space when seated and when entering and leaving the room.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I beg to move,

That this House has considered the cost of living in the UK.

I am delighted to have secured this debate today. It is very timely, and I honestly do not think that anything occupies the minds of constituents in North Ayrshire and Arran or indeed any other constituency more than this issue. It affects everyone. Everyone has noticed that their monthly outgoings are rising. Energy costs are up. Food prices are up. Fuel prices are up. Clothes prices are up. In that context, it is no surprise that consumer borrowing is also up, which will throw many into unsustainable debt as they struggle to keep up with essential bills. There can be no doubt that we are caught up in a genuine, biting cost of living crisis. It is simply not good enough that while our families, our communities and our pensioners are suffering, the Government are eating themselves alive over whether the Prime Minister knew he was actually at a party when he attended a party at the address where he lives.

I want to begin by saying a few words about the cost of energy. Gas and electricity bills are expected to rise significantly in April, when the energy price cap is predicted to reach £2,000 a year or £165 a month. That represents a 45% increase, although there are reports of even steeper rises. It is no wonder that National Energy Action believes that 6 million households will be in fuel poverty by April. That is a 50% increase from last year and it will hit hardest the poorest families, who spend most on energy as a proportion of their income. The reality is that wages are simply not keeping pace with the rise in the cost of living, as the Office for National Statistics has highlighted, with the Office for Budget Responsibility indicating that average real wages will be lower in 2026 than they were in 2008. Instead of a rising price cap, an emergency financial package must be introduced to support the most vulnerable and help families to cope during this crisis. The cost of living crisis is real and will only worsen as energy bills rise, alongside regressive tax hikes and inflation, pushing more and more people into poverty.

In addition the ending of the uplift to universal credit and working tax credit is imposing the biggest overnight cut to welfare in 70 years. The situation for too many of our constituents is critical. The changes to the universal credit taper rate are welcome, but they are not enough to help those who are struggling with this perfect storm of financial pressures. Let us not forget that apart from the suffering that the cut in universal credit will cause for those on low incomes, it will take £460 million out of Scotland’s economy. That money would be spent in local shops, stimulating local economies in communities in each and every town and city.

[Mike Amesbury (Weaver Vale) (Lab)]

I thank the hon. Member for securing this vital debate. Behind those headline figures is a 30-year high in inflation. As she rightly stated, that disproportionately affects the poorest in our communities. Jack Monroe, known on Twitter as BootstrapCook, has written for The Guardian and referred to those real-life experiences. For example, a 500-gram bag of pasta that was 29p is 70p today. That is a 141% price increase. And it goes on and on and on. The hon. Member is right to point out that people on universal credit have had that massive cut of £1,000 a year or £20 a week. That money must be restored.

[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 ---

[David Rutley]

The hon. Gentleman makes his point with characteristic commitment and compassion. We on the Treasury Bench note that and will make sure that it gets through. The particular levy he talks about is to tackle the impact of the pandemic on the NHS and to face a challenge that has not been faced adequately across many decades—to tackle social care—but the points he makes have been noted.

Coming back to the national living wage, the hon. Member for Edinburgh North and Leith (Deidre Brock) made some points about how we can move forward. Let me reassure her that the Low Pay Commission forecasts that the national living wage will reach £10 next year. That is consistent with the target for the national living wage to reach two thirds of median earnings by 2024. We will not stop at the 6.6% increase.

[Patricia Gibson]

I note the interesting comments from the Minister about the national living wage and the planned increases, which I am sure will be welcome, so far as they go. Do his Government have any plans to deal with the age discrimination that is baked into the national living wage, which is not really a living wage?

[David Rutley]

I know where the hon. Lady is coming from. The issue is that younger people typically and often do not face the same cost challenges as other older people, because they are able to share accommodation costs with others. I do not regard it as discrimination, but I acknowledge the different costs that people face.

Further support for working parents has been put in place, doubling free childcare for working parents to 30 hours and increasing the value of healthy start vouchers by over a third, to boost the long-term health of young children. We are investing over £200 million a year from this year to continue the holiday activities and food programme, which provides enriching activities and healthy meals to children in all English local authorities.

I have noted discussion, not just today but yesterday, on concerns about the cost of living. We recognise that those exist, particularly in the case of energy costs. However, let me remind hon. Members of the measures we have in place to combat the adverse effects of the increase in worldwide oil and gas prices, which is a reaction to demand surging after the pandemic and the effect that has had on the global economy and our own economy. The energy price cap will remain in place at least until the end of 2022, to protect millions of customers and ensure they pay a fair price for their energy. Despite the rising costs for said energy, Ofgem has confirmed that the cap will stay at the current level this winter.

Secondly, winter fuel payments will be made to over 11 million pensioners this winter, ensuring that older people have the security and dignity they deserve. Households with someone of state pension age will receive £200, and households with someone over 80 will receive £300. Thirdly, cold weather payments help vulnerable people in receipt of certain income-related benefits to meet the additional costs of heating during periods of unseasonably severe cold weather. That includes older people receiving pension credit and those receiving an income-based benefit with a disability component or where the household includes a child under five. In 2020-21, just over 4 million payments were made, at a cost of just over £100 million.

Finally, this Government are supporting 2.2 million low-income households by issuing a £140 rebate on their energy bills through the warm home discount, which is worth £354 million. From this year, proposed changes will increase the scheme by £121 million, to be worth £475 million a year, with nearly 3 million households receiving a £150 rebate. As I said at the start, we are working across Government—I reiterated this yesterday, as did my right hon. Friend the Chief Secretary to the Treasury—to determine the appropriate response to assist vulnerable people facing rising energy costs. We recognise that people will be facing unexpected challenges with essential household costs. That is why in October we introduced a £500 million support fund to assist vulnerable households across the country this winter. The £421 million household support fund in England has enabled local authorities to provide targeted support to households in need of help with the cost of food, utilities and wider essentials; and the devolved Administrations received a total of almost £80 million through the Barnett formula, with Scotland receiving £41 million of that. I am pleased to see that they have all used the money to help households this winter.

Beyond this package of support, some people are struggling with debt pressures. The Government work closely with the Money and Pensions Service, and the wider free-to-client debt advice sector, to provide access to high-quality debt advice. The service remains the biggest funder of free debt advice in England. The DWP also uses appropriate touchpoints to ensure that those in receipt of benefits are signposted quickly and directly to expert financial help. To help those people, the debt respite scheme, also known as Breathing Space, came into effect in England and Wales on 4 May 2021. That gives someone in problem debt the right to legal protections from creditor action.

It is important to place the cost of living challenges in context. Prices are rising in countries around the world. As the global economy recovers from the pandemic, consumer demand is surging at the same time as global supply chains are being disrupted. We recognise and understand the pressures that this is exerting on people’s wallets, and their worries as they see the cost of food, energy and other essentials increase. My right hon. Friends the Prime Minister, the Chancellor of the Exchequer and the Secretary of State for Work and Pensions—indeed, all of us in government—are listening to those concerns and watching what is happening in the markets. As has been shown during the pandemic, this Government will do what it takes to support those most in need. I can assure hon. Members that we are continuing to actively work across Government to build on the existing support, already available, and to determine the appropriate response to assist vulnerable people facing rising energy costs.

--- Later in debate ---

[Patricia Gibson]

I did not expect a dramatic policy announcement from the Minister today, but I was hoping, and I think we were all hoping, for a change of tone to signify that more would be done. I was hoping that, even if the Minister could not be specific, he would make a commitment that more would be done; that this Government would look more carefully at what could be done for those at the sharp end of the cost of living crisis. We in Scotland understand that, to truly tackle the cost of living crisis, we need all the powers over tax and welfare. That is what is needed to properly address those challenges in order to build a fairer and more just society. For Scotland, it is clear from the Minister’s answer and from yesterday that we must take our future into our own hands and build the just, fairer and more equal society that people in Scotland actually want.

Question put and agreed to.

Resolved,

That this House has considered the cost of living in the UK.