Living Standards

Stewart Malcolm McDonald Excerpts

Thursday 1st February 2024 Westminster Hall

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

I beg to move,

That his House has considered living standards.

It is a real pleasure to serve under your chairmanship, Mr Mundell, to discuss what I think is the defining issue for all our constituents—not that you would know it from the acres of empty green seats surrounding us this afternoon—not just in the upcoming election campaign, but for many years and, arguably, for generations to come. There is no question but that living standards in this country are well below where they should be, and well below those of our western European counterparts on almost every single measure. Regardless of whether we are looking at wages, disposable income or things like business investment and investment in public services, we lag far behind what any Government in London or in the devolved capitals should be happy or comfortable with.

Broadly speaking, three strands of insecurity—economic, social and global—are eating away at living standards in the UK and causing our constituents anxiety. The economic insecurities include inflation, energy prices, food prices, and the disaster of the former Prime Minister’s so-called mini-Budget and what that did to household incomes, mortgage rates and rent. The social insecurities include the inability of many public services to properly recover from the covid pandemic—not just to get back to a pre-pandemic level, but to make the necessary modernisations that public services have to go through.

It is true that much of this is driven by global factors, such as the war in Ukraine and what that has done to food prices and energy prices, the more recent violence in the middle east between Gaza and Israel, and the attacks on international shipping carried out by terrorists in the Red sea, all of which is adding to the problems in this country and, indeed, countries around the world with regard to living standards. Then we have climate change, which is the biggest and most defining issue on which Governments, civil society, other institutions and the private sector must collaborate if we are to not just hit our targets, but deal with the effects of climate change here in the UK and around the world. Of course, as a result of violence and climate change, we also have the mass movement of people and irregular movements of people—a challenge that we need to deal with. I am grateful that the hon. Member for Dover (Mrs Elphicke) is here this afternoon, because I want to touch on the issue of immigration as well.

Those three factors—economic, social and global—eating away at our living standards are only made worse by the impact of the decision taken in this country in 2016 to leave the European Union. True, much of what I have mentioned is a problem that can be found in the capital of any country around the world, and certainly in any western European country, but there can be no question—certainly not over the past few days—but that we have added to those problems with Brexit. This is not a debate on Brexit, and I have no desire to relitigate that here today, but we must take our heads out of the sand and not pretend that it has not made matters worse for our constituents.

The other issue I want to discuss is how Governments intend to tackle the drop in living standards. We have a Government who are, essentially, dying on their feet. Although I am not looking to get overly capital-P political, I will say that the country at large will certainly welcome some fresh ideas—and my goodness, they cannot come fast enough. However, the idea that the answer to those challenges lies in tax cuts and running the public realm further into the ground is not backed up by the public. We can see from public polling, even if we go back to a few months ago and the results of the British social attitudes survey, that for the first time people, even Conservative voters, do not want tax cuts. They understand the need for taxes to be where they are or to go up so that we can invest properly in a battered public realm. Yes, it has been battered by many global factors and the covid pandemic, but it has also been battered by more than a decade of decay.

There is also a stark need to reimagine the public realm and what public services are actually for. Rightly or wrongly, post-pandemic people have new and heightened expectations of the state, and any politician worth their salt would seek to answer that new reality with a sense of ambition, not least because the challenges we are all presented with absolutely demand it. As this pandemic Parliament enters its dying weeks and days, we no longer even talk about the post-pandemic recovery like we did back in 2020-21, when the phrase “build back better” was absolutely everywhere—I would love to see when those three words were last used on the record in this House. The idea of not just getting things back to where they were, but building back better is redolent with opportunity when we consider the existing new technologies that are at our fingertips, which in the coming years will become more readily available to modernise and revolutionise the public realm and public services. They will touch everything: planning, health inequalities, income—all those things. They have a real ability to turn things around from where they are.

Look at some of the very real issues that people face now—for example, financial strain. Four in 10 people are struggling with energy bills and rent. Some 5.5 million UK adults are behind on energy bills, and four in 10 adults are spending more than usual when food shopping. Just think about how corrosive that is to the average family, household and citizen and their sense of ambition for themselves, their community and their country.

Let us look at rent in particular—I have a constituency with a lot of renters. UK annual private rent price growth remained at 6.2% in the 12 months to December 2023. A third of adults find it difficult to afford their rent, and that is before we even start to discuss the issue of mortgage payments. Homeowners face a £19 billion increase in mortgage costs as fixed rate deals expire.

Income inequality in this country is greater than in any other large European country. Some 9 million young workers have never experienced sustained wage rises. Millennials are half as likely to own a home, and almost a third of young people in the UK are not undertaking any education by the age of 18. All those things are an attack on our society. How on earth do we get young people to buy into the idea of a fair marketplace and fair capitalism if they cannot accrue any capital, because at the moment everything is stacked against them?

[Alyn Smith (Stirling) (SNP)]

My hon. Friend has hit on a crucial issue. All our citizens need us to focus on the cost of living crisis and he is outlining the problems very well. We see them in Stirling as well. Start Up Stirling has had a fall in donations of food for its food drives. A survey recently published by Citizens Advice Stirling found a 900% increase in people getting in touch for problems with energy bill arrears, and 64% of people have reported skipping meals in order to pay their energy costs. I am sure that, like me, my hon. Friend wants to see action in the UK Budget in March. All of us need to put the badges to one side and focus on the cost of living crisis. It is what our citizens want to see happening, and the UK Government are in the best position to really assist households with their energy costs.

[Stewart Malcolm McDonald]

My hon. Friend is absolutely right. The problems that he mentions will manifest themselves in the constituency of every hon. Member present, without question. The idea that come the Budget, the answer is more tax cuts or maintaining an uncapped right for bankers to receive exorbitant bonuses is completely for the birds.

It cannot be overstated how deeply young people feel that things are stacked against them. Then they read in the papers that there is a new debate to be had on conscription. Get real! Give young people a stake in the society that they might well be called on to defend one day. There is an entire debate to be had about how we get the armed forces up to the scratch, size and modernised style that we need, but the answer does not lie in telling young people that they have to be conscripted in order to defend King and country. Good luck to any politician who wants to go out and sell that message at a time like this.

Among all those domestic challenges, which are being compounded by global factors, there are opportunities to tackle things such as health inequalities, and to modernise public services with real investment in the public realm and, of course, reform and new technologies. However, another area we need to think about is population growth. The way we debate immigration leaves me staggered. The bar gets lower with every passing day in this House. The truth is that if we want to keep a competitive advantage, whether in university research or key sectors and industries, we need people to come to this country. With the mass movement of people only growing around the world, we will have to rethink how we manage people coming into or leaving the country, and the reasons for that. I have spoken before in the House about how young researchers at universities up and down the UK—Scotland, England, Northern Ireland and Wales—are staggered at the fact that everything costs a fortune, they cannot get appointments to see a doctor and trains do not run properly on time. So who is surprised when they tell us that they want to move to another European city that has just as good opportunities for their research and a much higher, easier and better standard of living?

I am conscious that I say all these things representing a party that is also in Government, but we are going to have to seek to create a new consensus to drive up living standards, and an element of that has to be a much more realistic discussion about immigration and population growth. It needs to move away from this dark, ugly debate that we see all often, which starts with a desire to drive the numbers down. Those arguing for reduced immigration are arguing to make the country poorer. There is no question about that.

This is what I think a policy platform that could generate some kind of new consensus looks like. We can see the lessons from institutions such as the European Union and in legislation in the US in the style of the Inflation Reduction Act. I can understand entirely why the right hon. Member for Leeds West (Rachel Reeves), the shadow Chancellor, wanted to move on to that ground, albeit that Labour’s £28 billion green pledge is getting more and more diluted to the point of being hopeless and useless. Nevertheless, such a pledge is exactly where we need to go by using industrial policy. being realistic about immigration policy, and using those policies to tackle the challenges of our time, including climate change and technological development, in order to drive up living standards, while also pursuing our own economic interests and national security interests.

What did we get here in response? Such low ambition. I forget the actual name for it, but the then Secretary of State for Energy and Climate Change, the right hon. Member for Welwyn Hatfield (Grant Shapps), was announcing his “green new deal day”, or whatever he was going to call it. Such was the fear of the hardliners in the Conservative party that the Government had to take the word “green” out of it. That is not serious Government.

We might be able to create a new consensus that seeks to create prosperity and a sense of economic fairness, and that plans for the long-term resilience that—surely to God—the pandemic, the war in Ukraine and the conflict in the middle east tell us we all need. I have not even mentioned China, Taiwan and the South China sea. However, as I was saying, if we can work on creating a consensus built around prosperity, fairness and long-term resilience, it could be transformational, not just for our constituents now but for generations and generations to come. I have little faith that that consensus will come out of this Parliament or that we will will see much of it in an election year, when these contests become all the more bitter because of the election, but if we look at any of the polling, we will see that our constituents and the public at large are far ahead of politics and the politicians on this stuff.

I look forward to hearing what colleagues, particularly the Minister, have to say today. A big reimagining of the state and citizen is what is badly, even starkly, needed. We are so far behind where we should be and we are so far behind many of our western European counterparts. If we do not see that reimagining emerge from this place, and I suspect that we will not, in Scotland the answer lies, yes, in our becoming a member of the European Union, which would put rocket boosters under Scotland’s prosperity in the future.

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[Patricia Gibson]

rose—

[Stewart Malcolm McDonald]

rose—

[Michael Shanks]

I knew that would prompt something. I give way to the hon. Member for Glasgow South first.

[Stewart Malcolm McDonald]

I am glad that the hon. Gentleman is talking about economic competence. When the Scottish Labour leader described removing the cap on bankers’ bonuses as economically incompetent—he went further than that, saying that it was “economically illiterate and morally bankrupt”—was he right or wrong?

[Michael Shanks]

The leader of the Scottish Labour party—my good friend, Anas Sarwar—is always right. Of course, we opposed lifting the cap at the time. Since then, we have outlined that this is not the moment to bring it back, but we have very clearly said that bankers should be on notice that, if we see the behaviour that led to the cap in the first place, it would be very easy to implement it again.

--- Later in debate ---

[The Economic Secretary to the Treasury (Bim Afolami)]

It is a pleasure to spend time with you and serve under your chairmanship, Mr Mundell. I want Members to be clear: I have heard the strength of feeling today. I am grateful for all the contributions. I want to start by saying that the issue is complex. Those who know me in the House know that I always try to take things seriously and think carefully about the issues. I hope to do so in my response.

I thank the hon. Member for Glasgow South (Stewart Malcolm McDonald) for securing today’s debate. I am pleased to have this opportunity to set out the measures that the Government are taking to support people across the United Kingdom during this difficult time and to respond to the points raised.

The shadow Minister, the hon. Member for Rutherglen and Hamilton West (Michael Shanks), speaks with the confidence of someone who has been here for years rather than months, so I commend him on his speech. I say to him gently that economic competence and credibility are key for any Government of any political colour in this country. When he talks about economic competence, he has to address the fact that the whole growth plan of the Labour party is a £28 billion green growth plan. That is a legitimate thing for any party to suggest, but, as the hon. Member for Glasgow South made clear, when a party has its entire economic strategy bound up in such a plan and then seems to flip-flop from one day to another about whether it is doing the plan—whether it is an ambition or a commitment, and when the money is going to be spent—what that says to investors, households and businesses all over the country and abroad is that there will not be economic competence if his party is in government. I ask him to reflect on that point.

I think that all of us in this place recognise the difficult times through which the people of this country and people across the world have lived. Putin’s illegal war in Ukraine caused an energy shock that was the kickstarter for inflation across the globe and created a perfect storm for vulnerable people. The Government have consistently fought back against covid alongside our Ukrainian friends and, critically from a Treasury perspective, against the economic headwinds that resulted from those external shocks. Over the past two years, the Government have provided one of the largest support packages in Europe.

I was struck by a remark from my hon. Friend the Member for Dover (Mrs Elphicke), who, if I may say so, is a fantastic Member of Parliament. If I recall, she mentioned that it was important that the Government were able to explain clearly to members of the public what support has been given in what different ways. She talked about utilities and various other important things across the economy. I agree with my hon. Friend that one of the things that, as the Government, we always have to work on—I will continue to do so, and I am sure that my colleagues will—is much more clearly demonstrating and explaining the support that is out there: the support that is being given. I will take that away and reflect on it very seriously.

This financial year alone, more than 8 million UK households on eligible means- tested benefits, 8 million pensioner households and 6 million people on eligible disability benefits received cost of living payments. That came on top of the significant universal support made available by the Government, as all households were eligible for the energy price guarantee, the £400 energy bills support scheme, the £150 council tax rebate, and fuel and alcohol duty cuts. Energy support alone has paid for almost half of the typical family’s energy bill from October 2022 to June 2023. Almost half—that is considerable support. It is in part thanks to those measures, and strong labour markets delivering robust wage growth, that growth and real incomes have been stronger than expected in the year before.

I know that the hon. Member for Rutherglen and Hamilton West, the shadow Minister, talked about growth and wages, and I want to address him precisely on this point. Aggregate real incomes have outperformed expectations, both from the OBR and independent forecasters, and are now 1.4% above pre-pandemic levels. In per capita terms, between 2010 and 2022, real incomes—so after inflation—have increased more in the UK than in certain major European economies, our competitors, such as both France and Italy.

Wages now are rising at a level ahead of inflation, contrary to what the hon. Member for Glasgow South said. Although we have been through a very tough time, and I do not minimise the difficulties that have occurred—indeed, I will talk about more of those throughout the rest of my speech—we are now at a point where the economy is turning a corner and wages are now growing at a rate faster than that of inflation.

[Stewart Malcolm McDonald]

I do not know where the Minister gets his figures from, but he should look at the research that came out last week from the Centre for Cities. If we take my home city of Glasgow, if wages had gone up at the rate they went up between 1998 and 2010, the average wage in Glasgow would be £23,500 higher than it is today. Why is that so? Why has it not gone up?

[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.

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[Stewart Malcolm McDonald]

I will be brief—that is normally followed by a long speech. I am grateful to the hon. Members who came here today, to the hon. Member for Dover (Mrs Elphicke) for her co-sponsorship, and to my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson), who granted the debate as a member of the Backbench Business Committee.

It has been a useful debate. I recall the Minister’s maiden speech, which I was in the Chamber for; I knew that he would be a star of his parliamentary group. The speech he just gave was so good that I think he even believed some of that glowing assessment of the Government’s record on these affairs. Although we have some disagreements about the rather glowing assessment that he adumbrated so eloquently, some of what he had to say was agreeable. I know that the whole issue of intergenerational fairness is close to his heart, for example. I read some of the publications that he puts out, and we are starting to see the new shoots of a consensus that this subject requires urgent and less partisan attention. In the debate, we can see the confluence of domestic and foreign policy come alive on the issue of living standards, which touch every single part of our constituencies.

I am grateful to my friend—and he is a friend—the hon. Member for Rutherglen and Hamilton West (Michael Shanks). It is good to see him in his place, and I look forward to us winning back his seat at the upcoming general election. Finally, I thank my hon. Friend the Member for North Ayrshire and Arran, who always gives a stout defence of the record of the Scottish Government in Edinburgh.

Question put and agreed to.

Resolved,

That this House has considered living standards.