Financial Services and Markets Bill

Stephen Timms Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Sir Stephen Timms (East Ham) (Lab)]

I agree with the case that the hon. Lady is making—indeed, I have signed her new clause. I wonder whether she has seen the report produced by the Work and Pensions Committee in September, which expressed concern about stepping across the advice-guidance boundary and constraining the ability of pension schemes and employers to give people helpful, sensible support as they make their choices about what to do with their pension savings. Would her new clause help in that regard?

[Harriett Baldwin]

I thank the right hon. Gentleman for signing the new clause, and for his Committee’s excellent report. He is right to suggest that the workplace is one of the best places for people to be given these nudges, and for employers to explore that boundary between advice and guidance.

Our constituents are craving advice of this kind, especially during this cost of living crisis. They want more guidance from their financial institutions. They are turning to online sources of often unregulated information to help them navigate their finances. They are finding the process complex and confusing. They are choosing investments that are often very high risk and not suited to them at all, such as meme stocks, crypto or spread betting.

It should not need to be this way, because the technology exists for financial services and fintech firms to guide people towards making better financial choices and following good mainstream investment opportunities, but MiFID-originated legislation is getting in the way. My new clause would enable the Treasury to introduce, with great urgency, the necessary legislation to allow regulated financial services firms to offer UK households personalised guidance. It is a great opportunity to unlock investment in our country, it will help our constituents to earn more, and it will allow innovation. Financial technology will help our constituents to level up their own economic futures. I am therefore delighted that the Economic Secretary has agreed today to look into this as a matter of urgency.

Autumn Statement Resolutions

Stephen Timms Excerpts

Monday 21st November 2022 Commons Chamber

[Sir Stephen Timms (East Ham) (Lab)]

On 10 November, a week before the Chancellor stood up to make his statement, the Trussell Trust published its latest figures on the number of emergency food parcels that it has delivered over the first six months of this financial year. The number was 1.3 million, which is an increase of one third on the previous year, and it looks as though around 2.5 million will be delivered over this financial year as a whole. That will be a more than fortyfold increase compared with the number of emergency food parcels handed out by Trussell Trust food banks in 2010-11.

Why is the number so much more in this financial year than it was in the previous financial year? Part of the reason is undoubtedly that there has been a big real-terms cut in benefit levels this year. Universal credit was increased by 3.1% in April, when inflation was nearly 10%. According to the House of Commons Library, the consequence of that is that the headline rate of benefit is at its lowest level in real terms for 40 years—since 1982-83. Of course, a real-terms cut this year means significantly more people being forced to go to food banks than in the previous year.

I was interested to hear the right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) say that he would not have increased benefits in line with inflation next year. In September I asked the then Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), what his intention was on uprating benefits and he did not answer, but I suspect that what was said by the right hon. Member for Middlesbrough South and East Cleveland, who was a leading member of that Administration, speaks for that Government as a whole and that benefits would probably not have been increased in line with inflation. That would have meant several hundred thousand more people going to food banks in the coming year. The question we have to ask ourselves is why our economy is failing so badly that so many people are unable to obtain, through their work and other efforts, the means to sustain the absolute basics of living for themselves and their families.

I am extremely relieved, then, that the Chancellor announced that benefits will be uprated properly next April in line with the usual formula, meaning there will be a 10.1% rise. I do not think that will significantly reduce the problem of people going to food banks, but it should at least ensure that that problem will not get a great deal worse next year, as it has this year. For that we can be thankful.

I am also pleased that the benefit cap is to be uprated. It was introduced in 2012, and at the time we were told that it was to constrain the total of benefit that a household could receive in relation to median earnings. There was some sort of rationale given for the level that was set. But then it was frozen—there was no link at all with median earnings beyond the initial announcement—until 2016. That was the only time the benefit cap was changed, and it was significantly reduced, to another, lower level, whose significance was never explained to us, except that it was a lot less than the level at which the cap had been introduced.

Now, thankfully, the Chancellor is finally going to uprate the level next year by 10%, in line with inflation, but surely it should be uprated each year. If there is some rationale for the level at which the cap is set—presumably it is linked to inflation in some way—we ought to know what that rationale is, and then it should be raised each year. All this time that the level has been frozen, more people have crashed into it each year and had to go to food banks to obtain the means to maintain their lives and those of their families. So I am very relieved that the cap will finally be uprated—although it is a one-off—next April.

As I understand the statement published by the Secretary of State for Work and Pensions, he has conducted a review of the level of the benefit cap—something that he is required by law to do every five years. I very much hope he will publish that review, so that we can see what the rationale is for the level at which the cap has been set and get some idea of what the Government’s intentions are for the future of that level. The Secretary of State will be coming to the Select Committee next week—we look forward very much to our discussion with him—when I hope he will be able to tell us that that review will be published.

But as my right hon. Friend the shadow Secretary of State rightly pointed out, the thing that has not been uprated is the local housing allowance. It is worth spending a moment on the history of this, because the local housing allowance, which limits how much housing support can be provided, was initially set at 50% of the median rent in each area. The idea was that support would cover at least half the homes available for rent in the area. In 2011 it was reduced to 30%, so that it would cover only the cheapest three in 10 homes available to rent in the area, and then it was frozen for years—it was not increased at all. People increasingly had to dip into the rest of their benefit to pay their rent, and the pressure on them became tighter and tighter—until the beginning of the pandemic, when it was raised back up to 30%.

That was a very helpful move, but since then the level has been frozen again, and we are told that it will also be frozen next year. That will be three years in which it has not been raised at all, despite the fact that, as my right hon. Friend the shadow Secretary of State rightly pointed out, rents are surging, and the only way people can pay the rent is by dipping into the other benefit they receive, which is supposed to meet their other living costs. I think the idea is that, by keeping the local housing allowance down, the Government will restrain the increase in rents, but I have seen no evidence at all that that is happening; it is just making things harder and harder for families.

I agree with what the Chancellor said about inactivity. There is a big problem with the large number of people—again, my right hon. Friend on the Front Bench made this point—who have dropped out of the labour market since the pandemic. The former Prime Minister told the House 12 times, between November 2021 and July this year, that we had more people in employment than before the pandemic. That was not true, he knew it was untrue, and what the Chancellor said is correct: a lot of people have stopped working. We do not quite know what they are living on—whether they have dipped into their pensions earlier, or what is happening. The Chancellor is right that that needs to be addressed. We need to find ways of giving incentives and encouraging people to return to work. Again, we look forward to discussing that with the Secretary of State at the Work and Pensions Committee meeting next Wednesday.

I want finally to come back to the points I made at the start. Can we not all agree there must be a serious effort to reduce dependence on food banks? We cannot keep on, year after year, seeing hundreds of thousands more people having to go to a food bank, including people who are working, in some cases full time, who are unable to obtain enough to sustain their life and the lives of their family members. Surely, where people are working a full week, that ought to be enough to sustain their costs. Where people are unable to work due to illness or disability, surely our society ought to be able to support them sufficiently. They should not have to go to a food bank.

[Mr Clarke]

The right hon. Gentleman makes a persuasive case for the need to ensure that work pays. Does he recognise that one of the most welcome measures in the Chancellor’s autumn statement was the increase in the national living wage, which will stand at well over £10 from next April?

[Sir Stephen Timms]

I am glad that it is being raised; it certainly needs to be, and it will need to go further. The right hon. Gentleman would probably agree that if someone is working full time at the legal minimum allowed, that ought to be enough to enable them to live and to support their family, but at the moment it is not. Why is that, and what are we going to do to put it right? Part of the answer must be an adequate social security safety net. We do not have that at the moment, and we are going to need it in future.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the Chair of the Treasury Committee.

Autumn Statement

Stephen Timms Excerpts

Thursday 17th November 2022 Commons Chamber

[Jeremy Hunt]

I thank my right hon. Friend—I always listen very carefully to what he says because of his enormous experience in economic posts in Government and in spending posts. The reason why growth matters is that it is not often something that can be delivered in one or two years—a long-term strategy is needed. I talked about Nigel Lawson’s big bang in 1986, but that actually took decades to come to fruition and turn London and the UK into one of the world’s great centres for financial services. Every Government have a duty to lay those foundations and make sure that, as far as possible, there is cross-party support for what they do.

[Sir Stephen Timms (East Ham) (Lab)]

I am puzzled by the Chancellor’s position on his predecessor’s mini-Budget. He appeared to acknowledge its foolhardiness but then attempt to defend it. I agree with him about the importance of tackling inactivity, and we on the Work and Pensions Committee look forward to discussing that with the Secretary of State on Wednesday week. I am relieved that working-age benefits and pensions are to be uprated in line with inflation, and I welcome—at last—the uprating of the benefit cap, which, logically, should happen every year. Will he also uprate the local housing allowance, which has been frozen since the pandemic at a time when rents have surged?

[Jeremy Hunt]

I will write to the right hon. Gentleman on the latter point. On the mini-Budget, let me be very clear that I agree with its priority of growth and with the energy price guarantee, which has given relief to thousands of families, but I do not agree with unfunded tax cuts.

Economic Responsibility and a Plan for Growth

Stephen Timms Excerpts

Wednesday 19th October 2022 Commons Chamber

[Rachel Reeves]

On Monday, the Chancellor said that he could not rule out breaking the triple lock, and on Wednesday, the Prime Minister said something else. We do not know which one speaks for the Government, but Labour is clear that we support the triple lock. It was in our manifesto and, unlike the Conservative party, in government we would stick by what we promised.

Strong and independent economic institutions are essential for making Britain a great place to invest. That is why undermining the Bank of England, sacking the respected permanent secretary at the Treasury and gagging the Office for Budget Responsibility have all added to borrowing costs for Britain—for Government and for families.

On Monday, we saw yet again the ridiculous spectacle of a Conservative Chancellor coming to the House of Commons to announce huge changes in Government economic policy without any sort of independent forecast. Failing to publish a forecast was a significant contributor to the lack of market confidence when the Government unleashed their mini-Budget three and a half weeks ago, yet no lessons have been learned.

The Government cannot build confidence in Britain by flying blind. That is why we are asking all MPs to vote today to publish immediately the current assessments and forecasts from the Office for Budget Responsibility. For the sake of our economic stability, they must not remain hidden for a further two weeks. If the Chancellor refuses, the country will rightly ask, “What have they got to hide?”

[Sir Stephen Timms (East Ham) (Lab)]

My hon. Friend touched on the point that one of the new Prime Minister’s very first decisions was to sack the permanent secretary to the Treasury. Can my hon. Friend shed any light on why that decision was made? Was it, as appears very likely, because he was set to warn the new Chancellor about the consequences of the policies that he wanted to announce?

[Rachel Reeves]

As a former Treasury Minister, my right hon. Friend knows how things are supposed to be done. We cannot ask September’s Chancellor why he sacked the respected permanent secretary, because he is no longer in his place, but a Labour Government would respect the Bank of England, respect the independent civil service and remove the gag on the Office for Budget Responsibility.

Today’s inflation numbers show the impact that higher gas and electricity bills are having on family finances. The Government’s mistake when they announced their package a month ago was putting its entire cost on Government borrowing. Under Labour’s plans, energy producers—including the oil and gas industries, which have said themselves that they have more money than they know what to do with—would have been asked to pay their fair share. Our plan did what a responsible Government should: it put forward a fully costed and fully funded package to freeze bills this autumn and winter.

The Conservatives have left tens of billions of pounds on the table and have pushed all the costs on to current and future taxpayers for years to come. Now, because of their irresponsible and reckless approach, they have gone back on their word. According to the Resolution Foundation, that could mean that a typical bill will rise to at least £4,000 from next April.

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[Sir Stephen Timms (East Ham) (Lab)]

I am very pleased to follow the hon. Member for Hazel Grove (Mr Wragg), and I pay tribute to him for the frankness of the personal remarks with which he opened his speech. I must say that the whole speech contained a great deal of good sense, which I hope his hon. Friends on his Front Bench will have heard and paid attention to.

Christians on the Left organises a church service each year on the Sunday morning when the Labour party conference begins, and the preacher this year was the Archbishop of York. In the very fine address that he gave on that occasion, he said:

“Increasingly, the safety net in our nation is a foodbank, where more and more people have to go to get what our economy itself fails to provide.”

He is absolutely right: something fundamental has gone wrong in our economy. For many people, including those in employment, the economy does not work. More and more are turning to food banks to survive. Some 61,000 food parcels were distributed by the Trussell Trust’s food banks in 2010-11, whereas the number was 2.5 million in 2020-21—a fortyfold increase in a decade.

In the leadership election campaign in the summer, the Prime Minister acknowledged her party’s failure on economic growth, and she was absolutely right to do so. The new Chancellor told us on Monday that the record on growth had been very good. That is one of many things that he and the Prime Minister seem to disagree about, but on this one, I am definitely with the Prime Minister. As my hon. Friend the Member for Leeds West (Rachel Reeves) often points out, we are a high-tax economy because we have been a low-growth economy.

Last April social security benefits were raised by 3.1%, even though inflation was nearly 10%. That was justified on the basis that the regular formula for uprating benefits uses the figure for inflation from the previous September. That formula has, on several occasions, been disapplied since 2010, but never in the interests of the poorest families in the country—only ever to their disadvantage. This year, the formula was applied, piling on yet another real-terms cut in benefits, reducing them to the lowest real-terms level for more than 30 years. The then Chancellor and the then Prime Minister implicitly recognised that unfairness and promised to use the same formula next April, delivering, we have learned today, a 10.1% rise.

The current Chancellor must now decide whether to keep that promise to the poorest families in the country during a cost of living crisis. The Minister, in his opening remarks, referred to protecting the vulnerable. I really hope that he meant that, because those families have so often had a kicking from this Government over the past 12 years. If that happens again, dependence on food banks will get yet another large boost as thousands more people have to turn to them to survive—on top of the 700,000 households who did so in 2019-20. The food banks themselves are struggling now because donors cannot afford to give as much. Mass food bank dependence is a potent symptom of the economic failure of the past 12 years.

Yesterday, representatives from Muscular Dystrophy UK came to Parliament to spell out the hardship from rising prices facing the people they support, because, for example, those people depend on machinery—ventilators—that have to be permanently switched on and powered. On Monday, the Chancellor spoke of compassionate conservatism. If that is not just a vacuous slogan, those people’s needs must be recognised in the benefit uprating decision that could be announced on Monday week.

The benefit cap was introduced 10 years ago and was supposed to reflect median earnings. It was changed once in 2016, when it was cut, and it has never been increased. This time, surely, it must be. If it is not, at a time when inflation is over 10%, thousands more people will crash into the cap next April and be forced to depend on food banks, heaping yet another economic failure on the catastrophic blunders, as the hon. Member for Hazel Grove rightly pointed out, of the past few weeks.

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[Edward Argar]

I have just set out where we are and what the Prime Minister and the Chancellor have said about the approach we are adopting. It is my firm belief, and the Chancellor’s firm belief, that we wish to be a tax-cutting Government, but that must be done from a basis of sustainability. When taxes are cut sustainably, we see behaviours change that help to generate investment and growth, which is what the Prime Minister and the Chancellor seek.

[Sir Stephen Timms]

Will the Minister give way?

[Edward Argar]

I will make some progress on the contributions made by hon. and right hon. Members. I will address the right hon. Gentleman’s contribution, and he may then want to come back to me.

The concerns expressed by the SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), about economic turmoil are a little rich, given that his party seeks to impose the chaos, turmoil and economic cost of another referendum on Scotland, being unable to accept the democratic decision of the Scottish people in the last referendum.

On the most vulnerable, I highlight to the hon. Gentleman and, indeed, other hon. and right hon. Members the £37 billion of support that has been made available across the United Kingdom to support people with the cost of living. The SNP’s prospectus, set out a few days ago, on what independence would mean is a recipe for chaos and turmoil for the people of Scotland.

I am extremely pleased to see my hon. Friend the Member for Hazel Grove (Mr Wragg) in his place. I pay tribute to his courage in speaking out so openly about his own challenges and, in so doing, doing a huge service to many people up and down this country. He is a man of great integrity and great courage, and I pay tribute to him. Although I do not always agree with him, this Chamber is always wise to listen to him. He represents his constituents passionately and well in this place. He touched on a number of things, but he specifically mentioned institutions—as did the shadow Chief Secretary to the Treasury—including the Bank of England and the OBR. My hon. Friend knows me well and he knows that I have huge respect for both those bodies. Before I knew I would be occupying this place and that the right hon. Member for Wolverhampton South East would be my shadow, he and I were on television and I paid tribute to him for his role in a previous Labour Government for setting up the independence of the Bank of England, which I believe is important and needs to be respected.

The right hon. Member for East Ham (Sir Stephen Timms) is a distinguished former Chief Secretary to the Treasury and he highlighted a number of things, particularly the benefits question and the uprating of benefits, as did the hon. Member for Richmond Park (Sarah Olney). They will know that there is an annual process by which that is done. That process requires the statistics that were made available for the first time today—the September statistics. It is extremely important that that process is followed and I do not intend from the Dispatch Box to pre-empt a process that should be followed properly.

I listened carefully, as I always do, to the comments made by my hon. Friend the Member for St Austell and Newquay (Steve Double). He raised a particular point about stamp duty land tax thresholds and second homes. The increase in the SDLT threshold implemented on 23 September will remain, supporting first-time buyers and making home ownership more accessible. No one purchasing a second home or buy-to-let property will be taken out of paying SDLT entirely following the Government’s changes. The higher rate for additional dwellings introduced by the Government in April 2016 will continue to apply at 3% above the standard rate. I know that the Chancellor will have listened carefully to the points my hon. Friend made.

The hon. Member for Liverpool, Wavertree (Paula Barker) raised a number of points, including one about the NHS and my right hon. Friend the Chancellor’s role in it. This Government have invested record amounts in our NHS; I was the Minister who took through, in early 2020, the legislation that increased by £33.9 billion the funding for the NHS. My party has a strong track record of funding our NHS.

My hon. Friend the Member for Broadland (Jerome Mayhew) was right to highlight, as others have, the broader context in the global economy with which we are faced: the legacy of covid; and the challenges in Ukraine. During covid we did the right thing, supported by those on both sides of this House, to protect lives and livelihoods, but we should not pretend that that did not come at a significant cost.

[Sir Stephen Timms]

rose—

[Edward Argar]

I am very conscious that I have only about two minutes left and I would like to address the points made by a few other colleagues, including some on the right hon. Gentleman’s side of the House.

The hon. Member for Weaver Vale (Mike Amesbury) knows that I am fond of him—I do not know whether that will harm my career or his—but I just highlight to him the challenges that have driven the headline inflation rates we are seeing, which are higher in the eurozone than here at the moment. These are not Government-driven; they are energy costs and supply-chain challenges. If he looks at the analysis by the Office for National Statistics of the figures, he will see that those rates are particularly driven by food costs and food supply chains. We also have to look more broadly at the geopolitical context.

My hon. Friend the Member for South Suffolk (James Cartlidge) genuinely understands business and knows what it takes, and he highlighted the need to support the most vulnerable. That is something that my right hon. Friend the Chancellor has made clear will be at the forefront of his announcements. My hon. Friend also touched on the social care levy and the social care cap, and I know that he has views on it. I know that my right hon. Friend the Chancellor will have heard that, but I am afraid that my hon. Friend will have to wait until 31 October for announcements from the Chancellor, which I will not pre-empt.

Significant contributions have been made by Members from both sides of this House. These are challenging times and the Government will take the difficult decisions necessary to ensure there is trust in our national finances. We will also remain completely committed to our mission to go for growth rooted in economic stability and confidence, but let us not forget that our economic foundations remain strong.

We are a Government with a record of action: we acted to support families and businesses on energy costs, we have acted to bring stability, and we will act to grow the economy. As the Chancellor said to the House on Monday, despite all the adversity and challenges we face, there is enormous potential in this country. Our job, now and always, is to fulfil that potential.

Question put.

The House proceeded to a Division.

Economic Update

Stephen Timms Excerpts

Monday 17th October 2022 Commons Chamber

[Jeremy Hunt]

Well, I think that not just Scotland but England, Wales and Northern Ireland get a fantastic dividend from being in the Union. I say to the hon. and learned Lady that we have not reneged on our commitment to help people on low incomes with energy bills next year. We have said that we will review it and that we need a more targeted scheme, but we absolutely want to give help to her constituents and everyone’s constituents.

[Sir Stephen Timms (East Ham) (Lab)]

Does the Chancellor recognise that there was a very heavy blow to the lowest-income households in the country in April when social security benefits were uprated by 3.1% and inflation was nearly 10%? It was justified at the time on the basis that that was what the regular uprating formula had delivered, and that the same formula would be used next April. That assurance was given by both the then Chancellor and the then Prime Minister. Will the Chancellor recognise, when he reflects on his announcements in a couple of weeks’ time, that that is a matter of compassion, yes, but also of fairness?

[Jeremy Hunt]

I do accept that, and I think compassion and fairness are two sides of the same coin. I have told the right hon. Gentleman that while I cannot give the answers to any of these decisions, it will be through those prisms that we make those very difficult choices.

The Growth Plan

Stephen Timms Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

My hon. Friend is absolutely right; I pay tribute to his service as Science Minister when I was Secretary of State for BEIS. We worked closely together then and I hope that we can do so now, to make sure that the Treasury and other Departments are as focused on the science and technology agenda as my hon. Friend.

[Sir Stephen Timms (East Ham) (Lab)]

Will the Chancellor give the important assurance that his predecessor gave—that social security benefits will be fully uprated in the usual way, in line with this month’s inflation figure?

[Kwasi Kwarteng]

We will make announcements about that in due course.

UK Gross Domestic Product

Stephen Timms Excerpts

Monday 13th June 2022 Commons Chamber

[John Glen]

My hon. Friend always makes constructive suggestions. He will be aware of the interventions that have already been made, including the cut on VAT on energy efficiency measures, equivalent to £240 million, as well as the £6.7 billion of investment across this Parliament in energy efficiency measures. None the less, he makes a reasonable point and I am very happy to follow it up with him and discuss it further as we construct that set of interventions in the autumn.

[Sir Stephen Timms (East Ham) (Lab)]

It is, I think, clear that, as anticipated, we are starting to see an economic penalty from the new barriers to our trade with the European Union. Does the Minister agree that we need to work hard to improve relations with the EU with a view to reducing some of the barriers that are causing problems for us?

[John Glen]

Absolutely. We must always, with all our trading partners, seek to develop the best possible relationships. That has been my objective in conversations that I have had on visits to Berlin, Luxembourg, Madrid and the US over the past six months on financial services and as regards the work that the right hon. Gentleman is undertaking as we advance the conversation with the Swiss on the mutual recognition agreement. I was there last week to build on that. It is absolutely right that we build those trading relationships in goods and services across the globe in markets that are mature and in those that are yet to develop fully.

North Sea Oil and Gas Producers: Investment Allowances

Stephen Timms Excerpts

Monday 6th June 2022 Commons Chamber

[Lucy Frazer]

I think the hon. Member is aware that the Scottish CCS is a reserve. [Interruption.] I am grateful to the hon. Member for confirming that he is aware of that.

[Sir Stephen Timms (East Ham) (Lab)]

It has been reported that this concession will deliver an additional subsidy of £200 million to Shell for its development of the Jackdaw field, which was going to go ahead anyway. How can that be justified?

[Lucy Frazer]

The investment relief should not be available for investments that are deadweight. It should be for new investments. However, I am happy to look into the point that the right hon. Member has made.

Economy Update

Stephen Timms Excerpts

Thursday 26th May 2022 Commons Chamber

[Rishi Sunak]

I agree wholeheartedly with my right hon. Friend. He makes excellent points, and he can expect me and this Government to deliver on all the things he thinks are important.

[Stephen Timms (East Ham) (Lab)]

I welcome the recognition in the Chancellor’s statement that benefit rates have fallen too low in real terms, given current inflation. Does he agree that it is time now to rethink the mechanism through which benefits are uprated—he has referred to the IT problems that have constrained him—and the level at which benefits are set?

[Rishi Sunak]

I am sure my right hon. Friend the Work and Pensions Secretary is the best person to talk about the implementation of benefits, but the right hon. Gentleman will know that next year, benefits will most likely be uprated by September’s consumer prices index, subject to review. That will mean a very significant increase in benefits next year, in excess of the rate of inflation, which will be very positive for those in receipt of them.

Tackling Short-term and Long-term Cost of Living Increases

Stephen Timms Excerpts

Tuesday 17th May 2022 Commons Chamber

[Rishi Sunak]

I will give way in a second.

To suggest that no help is available, as some have said today, is both misleading and irresponsible.

[Stephen Timms (East Ham) (Lab)]

The other day, the Chancellor said that he could not increase benefits because of IT problems. At the start of the pandemic, quite rightly, he increased universal credit by £20 a week. Will he do that again?

[Rishi Sunak]

Given the right hon. Gentleman’s experience, he will know, perhaps better than me, that there are multiple different benefits on multiple different systems, and while universal credit does have the flexibility of being changed at different times—a policy, by the way, that the Labour party opposed at every step of the way—the remainder of benefits and pensions cannot be uprated mid-year. I am sure that my right hon. Friend the Secretary of State for Work and Pensions will speak to that later.

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[Mel Stride (Central Devon) (Con)]

I rise to very much welcome this debate, which addresses one of the great challenges of our time: the cost of living. Right at the centre of that lies the rate of inflation, which many Members have referenced in the debate so far, and that responsibility is with the Bank of England. In very recent times, the Bank has come in for a good deal of criticism for apparently not having got on top of that rate of inflation. It is currently above 7% and will rise to 10% in the autumn, before falling back again next year. That is well detached from its target of 2%, so the question arises: is the Bank of England culpable for having missed that target to that extent? I want to speak—partially, at least—in defence of the Bank of England, which is one of the most important independent institutions in our country, and to make the following observations.

First, as the Chancellor has already pointed out, the level of inflation across the world is elevated. There are some exceptions to that, but most leading economies are facing very high levels of inflation. In fact, the United States, Spain and Germany have higher rates of inflation than we do in the United Kingdom, and our rate is broadly similar to that across the eurozone.

My second point is about what one can expect from monetary policy under the current circumstances. The main drivers of inflation are a war in Ukraine; surging energy prices; surging food prices; some of the effects of the unlocking of the economy and its rapid growth, and supply chain bottlenecks that developed as a consequence; and then what played out in the labour market as the economy opened up. Very few of those factors are amenable to being controlled through interest rates and monetary policy. Of course, it takes time for monetary policy to take effect. If interest rates are put up, it typically takes about a year or more, through the transmission mechanism, to have an effect on demand and to start to bear down on inflation.

For about 80% of the rise in inflation above the 2% target, therefore, we should not hold the Bank of England particularly culpable. The notions of those people—some of whom are on my side of the House—who have called into question the independence of the Bank of England as a consequence of high inflation are misplaced. We should firmly defend the Bank of England in that respect.

There is one area, the other perhaps 20% of the growth in inflation, which relates to what has happened in the labour market, where the Bank is at least partially culpable, because it was slow to establish the fact that the market was getting overheated. What appeared to be isolated areas, such as among HGV drivers and other pools of labour in the labour market, soon spilled over into a more general price increase across labour. The danger now is that we will have a wage-price spiral in which wages chase prices and, in turn, drive up wages further. There is a real danger that we are in a position where future expectations of inflation have become substantially de-anchored from that 2%, which will be a challenge in the medium and longer term.

Overall, however, it is extremely important that we have confidence in the Bank of England, imperfect though it is, and even though it is presiding over a situation in which there are high levels of price increases.

[Stephen Timms]

I agree with the right hon. Gentleman about the independence of the Bank of England. At the Liaison Committee in March, he suggested to the Prime Minister that there should be a one-off uprating of benefits, given that inflation is much higher than the 3.1% by which uprating was applied. I agree with him about that and I wonder whether he stands by that suggestion.

[Mel Stride]

I thank the right hon. Gentleman for that intervention, and I do indeed stand by that. I still believe that it is possible, in a relatively fiscally neutral manner, which would not require a fiscal loosening across the period of the Office for Budget Responsibility forecasts, to smooth the way in which benefits are indexed. It seems particularly regrettable that benefits such as universal credit are tagged to a 3.1% increase, which goes back to what inflation was in September, given that we are now facing 8%, 9% or 10%-plus inflation. There is the possibility of smoothing that out, so that on the way up it becomes less painful for people, and some of it will be taken back as it all comes out in the wash for everyone down the line. I am happy to continue to work with him with that in mind.

That brings me to other fiscal measures that can be taken to ease things for our struggling constituents. We have heard about a windfall tax in great detail today, which I would support. Although I would not be as partisan as the way in which the right hon. Member for Doncaster North (Edward Miliband) made his case earlier at the Dispatch Box, I think the arguments that he has put forward are largely sensible. I am pleased that in turn the Chancellor has indicated that the door is at least partially open, albeit caveated on the investment performance of the companies concerned.

Unlike the Opposition, I think that it is important to look at the size of the civil service and to have an ambition to get it back to its size in about 2016 before a number of these different crises struck and we had to gear up the numbers involved. If we were to do that, it would be possible to save a total of £3.5 billion a year, which would be a useful amount to have.

I am sorry, Madam Deputy Speaker, but I have completely run out of time. I had much to say, as I know many other hon. Members will.

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[Stephen Timms (East Ham) (Lab)]

I am pleased to follow the right hon. Member for Central Devon (Mel Stride), who chairs the Treasury Committee. I agree with much of what he said.

Cost of living rises affect everybody. The Work and Pensions Committee focuses on families with the lowest incomes who depend on social security. The prospects for them at the moment are bleak. The Committee argued—unanimously, cross-party—against the removal of the £20 a week uplift in universal credit last October. The Government went ahead anyway and cut the main benefit rate to the lowest real-terms level for more than 30 years. As a proportion of average earnings, it is lower now than when Lloyd George introduced unemployment benefit in 1911. Benefits are at a historically low level and no Minister can justify that—we have asked.

We now have a massive cost of living surge. Citizens Advice reports that a single unemployed person spent 15% of their benefit on energy bills two years ago. It is now 25% and it will be 50%—just on energy—when the cap goes up again in October. How can people pay their other bills, which are also going up? National Energy Action told the Select Committee that, after last month’s energy price rises, 6.5 million UK households are in fuel poverty. It is a disaster for families with long-term health problems; being cold at home makes respiratory and circulatory problems much worse.

The Gracious Speech provided no help at all to people dependent on benefits. At the Liaison Committee, I asked the Prime Minister why the spring statement did nothing. His answer was that

“we want to support people into work wherever possible”,

but a large number of people cannot work and they have to survive too. Surely, the Government must now respond to the immense pressure on those families.

Mike Brewer of the Resolution Foundation pointed out to our Committee the obvious problem with benefits going up by 3.1%, as they did last month, when inflation is 8% and rising. He proposed revisiting uprating, immediately for universal credit, as the Chancellor confirmed that he could and as he did at the beginning of the pandemic, and in October for those benefits needing longer—there are some of those, as he has pointed out to the House. That must surely now be done.

Universal credit was raised by £20 a week before, so the Chancellor should do it again. I agree with the Chair of the Treasury Committee, who has just reaffirmed the case for an interim uprating, about which he pressed the Prime Minister at the Liaison Committee. The Prime Minister said that he would look at it. It is urgent.

Crisis highlighted that local housing allowance rates have been frozen for two years in a row. Average rents went up by 8.3% just in the last three months of last year. Families on the breadline face an average £372 deficit between the local housing allowance and the cheapest rents in their area. In research just published, Lloyds Bank Foundation reports that 44% of universal credit recipients are having money deducted, averaging £78 a month—nearly a fifth of what single over-25s can claim. Deductions are for advance repayments, old tax credit overpayments, energy or rent arrears. The foundation says that that is

“driving impoverishment and further debt, particularly hitting the most vulnerable.”

We need major changes, especially to the five-week wait for a first regular universal credit payment, which forces people to take out an advance.

Pensioner poverty is now surging. We know that, in 2019-20, 850,000 families entitled to pension credit did not claim it. We need real vigour behind raising take-up. The Department for Work and Pensions should have a take-up target for pension credit and a plan to deliver it. In 2010-11, the DWP trialled automatic payments of pension credit, and it should do that again.

The least well-off in our society need urgent help. As Sir John Major said yesterday:

“Everyone needs to believe that The State cares about them”,

too. There is no time to lose.

--- Later in debate ---

[Dr Coffey]

The hon. Gentleman is trying to be clever, as he knows the answer is that it is a redistribution within the energy policy. [Interruption.] Would he rather not have it? Would he rather be with his fellow SNP people who voted against any rise in benefits at all? That is what several of his colleagues did. They did not vote for a lift in benefits.

After a decade of rising employment, we are building on our track record. We are ensuring that people have stronger incentives to work and can keep more of what they earn. Some 1.7 million working people on universal credit are, on average, £1,000 a year better off following our cut to the taper rate. Last month’s 6.6% rise in the national living wage has provided the lowest paid with an increase of £1,000 a year in their income, and in July the increase in the national insurance threshold will benefit 30 million working people, with a typical employee saving over £330 a year.

[Stephen Timms]

The Secretary of State mentioned today’s labour market statistics. Will she confirm that they show there are now half a million fewer people in employment than before the pandemic?

[Dr Coffey]

In my discussions with the chief statistician, he has said that more people are on the payroll than ever before. That is good news. I am conscious that there are people who are economically inactive, and the Government will set out how to challenge that. As the right hon. Gentleman knows, my main priority is those people to whom we pay benefits to look for work and making sure they get into work, but of course we will be extending our activity to try to get people back into the marketplace who have dropped out since the covid pandemic.

As I pointed out, 30 million working people will benefit from the rise in the national insurance threshold in July. With a record number of vacancies in the economy, we want more people to have the benefits that work brings. That is why we are focused on getting more people into and progressing in jobs, where they can boost their pay, prospects and prosperity. Building on our plan for jobs, our Way to Work scheme is getting people into jobs even more quickly, with the aim of getting half a million claimants into work by June. We can see a kind of magic in our jobcentres, as people really want to break free from that unemployment poverty trap. By the end of April we were more than halfway to our goal, and we know there is more to do. But our Way to Work scheme is helping people move into any job now, to get a better job tomorrow and to build a longer-term career. To help people lift off at work when they land a job, we are rolling out extra support for claimants to build the skills they need to progress in work.

All of this is underpinned by our programme to deliver on what Parliament voted for in 2012: to replace all the legacy benefits with universal credit, because people will always be better off working than not working, unless they cannot work. That is the magic of UC, unlike the cliff edges of tax credits, which stop people progressing the amount of time and skills they get in work. So we are getting on with it, having resumed the process to complete the move to UC by 2024. Given that we estimate that two thirds of people on tax credits would receive a higher entitlement on UC, this will be important in helping to increase incomes.

All of this stands in contrast to what is put forward by those on the Opposition Benches. I believe the Leader of the Opposition would scrap UC—it was certainly in his pledges when seeking to be elected as Leader of the Opposition. They would undo a decade a progress, leave people further from the labour market and penalise the taxpayer by failing to realise the benefits of a modern system.

My right hon. Friend the Prime Minister summed up our focus in his speech last Tuesday at the start of our debates on the Gracious Speech: “Jobs, jobs, jobs!”. We are talking about high-skill and high-wage jobs. These are clearly challenging times, but we will continue to provide the leadership needed to rise to those times, continuing to drive up the skills our economy needs and employment prospects across the country, and putting more pounds in people’s pockets. This Queen’s Speech will grow the economy, level up our country, spread opportunity, and strengthen security and prosperity for all the British people, through the covid aftershocks and for decades to come. We therefore continue to commend the Loyal Address, unamended, to the House.

Question put, That the amendment be made.