Cost of Living Support

Viscount Younger of Leckie Excerpts

Thursday 22nd June 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Sherlock, and the noble Lord, Lord Palmer, for their comments and questions. I will start by addressing a point the noble Baroness made. We wanted to use this opportunity to explain the help we have already given and are continuing to give to those who are definitely suffering as a result of the problems in the economy at the moment; “problems” is an understatement, and I am the first to say that. We wanted to make it clear that it is not just about the £150, which was the gist of the Statement; the Government are providing total support of more than £94 billion during 2022-23 and 2023-24 to help households and individuals with the rising cost of living.

Cost-of-living payments are only one part of the overall support. We want to get that message across if we have not done so already. It includes support for energy costs, which was alluded to by the noble Lord, Lord Palmer, and the extension of the household support fund in England, which helps with rents, which again were raised by the noble Lord. In 2023-24 we increased benefits, state pensions and the benefit cap by 10.1% and made further increases to the national living wage.

I want to say quite a bit more because one of the issues to raise, which is obviously very topical at the moment, is mortgages and inflation. I reassure the House that tomorrow, the Chancellor will meet with principal mortgage lenders to ensure that they are living up to their responsibilities to their customers, and to ask what help they can give to people who are struggling—I do realise that they are struggling—to pay more expensive mortgages and what flexibilities may be possible for families in arrears. Of course, I am aware of the announcement today.

We have a clear target to halve inflation this year and to support the Bank of England as it returns it to the 2% target. I remind the House that the IMF forecasts that inflation will reduce substantially to around 5% by the end of the year, which would be a large fall from the highs we saw last year. I remind the House that in March, the OBR forecast that inflation would be 2.9% by the end of the year, and that the last Bank of England forecast, which was in May, was for inflation to go down to 5.1% by the end of the year. However, we are not complacent. This is a serious time, as everyone has been saying. We remain focused on our very important ambition, which is to drive inflation down while providing a cost-of-living package worth about £3,300 per household on average over this year and last. The IMF has already noted the “decisive and responsible steps” that we have taken, and we will continue to take such steps to deliver on this priority.

The noble Baroness, Lady Sherlock, asked about other countries. I have already made the point that we are on track to halve inflation and continue to support the Bank in delivering the 2% target. We believe that inflation is on a downward trajectory, although I understand that it is stubborn. Even though the reduction is quite small, it is in part thanks to our action to hold down energy bills and freeze alcohol and fuel duty, which is having a direct impact on driving down inflation.

The noble Baroness, Lady Sherlock, and the noble Lord, Lord Palmer, asked about Scope. I am very aware of the report. They have been many studies estimating the cost of disability, including this latest Scope report and previous ones from Scope and other organisations. The common feature of these reports is that their findings vary due to the definitions of disability and methodology being used. Our view is that there is no objective way of deciding what an adequate level of benefits should be, as everyone has different requirements. Beneficiaries are free to spend their benefits as they see fit, and in the light of their individual commitments, needs and preferences.

The noble Baroness, Lady Sherlock, focused on the disabled and support for them, and she made some very important points. I hope she knows that we will be spending around £78.6 billion in 2023-24 on benefits to support disabled people and people with health conditions, which is around 3.1% of GDP. The Government are providing a further disability cost-of-living payment of £150, which is part of the gist of the Statement. The majority of these payments will be made to eligible claimants this week. Indeed, many have been made already.

The noble Lord, Lord Palmer, focused on fuel poverty. I make the point, which he would expect me to make, that advanced economies around the world share the challenge of high inflation arising from the energy shock, and the UK has been affected by those global factors. The energy price guarantee, as he will know, was extended at the same level for an additional three months, to the end of June 2023, and it will remain in place as a safety net until the end of March 2024. There are some signs that energy costs are reducing, but again, we are not complacent.

The noble Lord, Lord Palmer, asked a focused question about the use of food banks. He will know that we have some recent data from the latest Family Resources Survey. The Government are using that data to better inform them about the use of food banks. We are well aware that food banks are being used as never before—we are very aware of that.

The noble Lord, Lord Palmer, makes a very good point about repossessions. At the moment, although we are not complacent, repossessions remain at a lower rate than before the pandemic. We are not complacent because of course we see the pressures around.

[Lord Young of Cookham (Con)]

My Lords, unlike others, I find much to welcome in the Statement, not least the increase in the maximum payments of 50% to those on universal credit for childcare, which will help them find work. However, is my noble friend confident that the childcare market will be able to respond to the increased demand that is likely to result from this increased beneficence from the department?

[Viscount Younger of Leckie (Con)]

My noble friend makes a good point about childcare, and the House will be aware of the announcements that were made recently. We are determined to support as many families as possible with access to high-quality affordable childcare, which is why the Spring Budget announced these significant new investments to expand free early education entitlements from 2024-25, together with uplifts in 2023-24 and 2024-25 for the existing entitlement offers.

On his specific question about demand versus supply, that is a very good point. We are confident that supply will meet demand, but we are also aware—certainly I am aware of some anecdotal evidence—that demand is going up, and we want to be sure that demand meets supply. Although I do not have any figures, I reassure my noble friend that we are aware of this particular matter.

[The Lord Bishop of St Edmundsbury and Ipswich]

My Lords, we recognise the value of the immediate and urgent provision that is being suggested and those points being argued for. However, in the light of our experience of the deepening crisis, I wonder whether, because of the interlocking nature of so many factors, now is the time to be looking at a comprehensive anti-poverty strategy.

[Viscount Younger of Leckie (Con)]

We have already taken a number of initiatives, which the right reverend Prelate will be aware of, to look at poverty. As I say, this is a particularly difficult time. Although I cannot comment on a particular poverty strategy, the important point is that we have a number of initiatives across government to address specific aspects of poverty. That includes families and children, and of course it includes those who are homeless, who we are very aware of, as well as the increasing homelessness issue.

[Baroness Hollins (CB)]

My Lords, at the same time as the cost of living crisis, local authorities’ social care budgets are under pressure. I have heard from some disabled people who have a personal budget that they are being asked to make an increased contribution, thus significantly reducing their direct payments. I do not think the proposed new payment will eliminate even those increased contributions, let alone really help with the cost of living situation.

[Viscount Younger of Leckie (Con)]

As I said earlier, the £150 should be taken at face value, and I think I made the point that there are a number of other initiatives to help those who are disabled. It is important, as the Minister in the other place said on Tuesday, to look at the total package, including the £150, that we have in place to help those who are disabled.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, I thank the Minister for repeating the Statement. However, neither his remarks this morning nor the Statement acknowledge the real size of the problem that we now have. I am almost sorry for him that so many things have happened since the Statement was first made on Tuesday, one of which was yesterday’s Joseph Rowntree Foundation report showing that 5.5 million people in lower-income households did not have food last year—they skipped meals and had poor meals, which of course affects their health—while 4.5 million lower-income households are now in debt, many of them to people who will then demand very high rates of interest and so on. They cannot get credit in the way that he and I could get it, at lower interest rates—although all the interest rates are going up now. These are really scary numbers, and the JRF has shown that this is now embedded across our society.

I talked this morning for an hour and a half with organisations in the north-east that are working with the most vulnerable families. I came off that call really scared about the future, because of the numbers involved. Does the Minister understand that this is far more serious than the way we have paid attention to it so far suggests? We really need a serious, overarching strategy to tackle poverty and improve public services, so that the most at risk get the best and the most help, which they cannot get at the moment.

[Viscount Younger of Leckie (Con)]

I hope the House will recognise that I am certainly not playing down the seriousness of the position at the moment. I am very aware, as the House is, of the further interest rate rise today. The Government absolutely recognise the pressures that people are facing and have acted, providing total support of over £94 billion, which I mentioned earlier, over 2022-23 and 2023-24. I have already mentioned the uprating, which I will not go over again, and that we will be making further cost of living payments totalling £900.

However, there is more to say, given the noble Baroness’s question. I have already mentioned that the Chancellor is meeting mortgage lenders tomorrow to see what more can be done, but he has already met the Competition and Markets Authority, to be sure that there is fair competition between the supermarkets so that we make sure that food prices come down. As we are all aware, food inflation is still far too high. It was 19% last month; it has now nudged down a bit but it is still far too high. That is really important, particularly for those who are the most vulnerable. I reassure the noble Baroness that we really do take this seriously. I think we all know that it is a defining moment.

[Lord Bilimoria (CB)]

My Lords, I remind the Minister that, in February 2021, when I was president of the CBI, I asked Rishi Sunak, when he was Chancellor, if he was worried about inflation, because I was worried about it then. Today, we have the highest inflation in the G7, while the United States of America is already at 4% inflation—less than half our rate. Today, our interest rate is at 5%, the highest in 15 years, and we have the highest level of tax burden in seven decades. Today, we have a debt to GDP ratio of 100%; the last time it was at that level was over six decades ago. Does the Minister acknowledge that two of the Prime Minister’s five priorities are growth and halving inflation? Given the situation we are in now, where households are struggling to make rental and mortgage payments, which are increasing as a proportion of their income, is a recession likely? What are the Government’s plans to help people deal with their mortgage and rental payments, because there is a crisis looming in front of our eyes?

[Viscount Younger of Leckie (Con)]

I hope I can help the noble Lord. As I have already mentioned, inflation really is one of the Prime Minister’s key priorities. He has made it clear, as we have, that reducing inflation is absolutely key. He also speaks about growth, while making it clear that growth comes as a secondary item to inflation. However, it is also important that the economy grows. In previous answers, I have made it clear that we are doing as much as we possibly can to look at what more banks can do to be helpful. One thing which I have not said is that we are working closely with the Bank of England, while making it clear that the Bank is independent in also working as hard as it is in the fight to bring down inflation. It is not just us in the UK; as others have said, there are similar issues in other countries, particularly in Europe. However, I realise that in the UK we still have a lot of work to do.

[Baroness Kramer (LD)]

My Lords, the Minister looks to a negotiation with the banks to provide better terms to mortgage holders who are under pressure. He must surely accept that the banks will offer those terms to those they deem their most attractive customers, not to low-income house owners, who cannot take the required flexibility of interest-only or a long extension to their mortgage’s life. That is the group, surely, which needs to be served by an emergency mortgage fund to rescue this situation. Surely he could find the money to support those who will see their mortgages rise by more than 10% of their disposable income and take the money back from the banks, which are seeing bumper profits off the back of rising interest rates.

[Viscount Younger of Leckie (Con)]

I certainly note what the noble Baroness has said. I have mentioned already that the Chancellor is meeting the banks. I do not want to pre-empt the outcome of those discussions. What is important are the initiatives we have taken already to help people. There is support for people who have mortgages. We have increased the generosity and availability of the support for mortgage interest scheme, meaning that those on universal credit can apply for a loan to help cover interest repayments after three months rather than nine and can now receive support while working.

A new Financial Conduct Authority customer duty, coming into effect next month, will ensure that firms put customers first, delivering fair value and ensuring good outcomes for those in financial difficulty. The noble Baroness raises a very important point and I hope that further measures can be produced. We await the outcome of discussions.

[Lord Liddle (Lab)]

My Lords, I have a great deal of personal sympathy for the noble Viscount in having to make this Statement to the House on this of all days. I do not doubt his personal commitment to ensuring fairness and help for the people in the most desperate situations in our society, but I would like him to respond to two observations.

First, the main problem we have, which my noble friend Lady Armstrong referred to, is the number of families who can no longer afford the basics of life. In thinking about policy as it goes forward, we have to think harder about the generational distribution of impacts. I am a wealthy pensioner. I got the generous support for energy bills. Is that right, when families are in such desperate need?

Secondly, Conservative Back-Benchers need to stop talking about the urgent need for tax cuts. The fact is that we face desperate pressures on public services and benefits. We have debt at 100% and there are no proposals coming forward from the Government for credible reductions in public spending. The consequence of tax cuts is that there would be a tension between the monetary policy of the Bank, which is trying to deal with inflation through interest rates, and the fiscal policy. We would be at risk of prolonging high interest rates if we went ahead with irresponsible and unfunded tax cuts.

[Viscount Younger of Leckie (Con)]

I think the noble Lord made three points altogether. I can only reiterate that I am aware of the impact on households, particularly those at the vulnerable end of society. I have already mentioned a number of initiatives and points that are being made outside government, particularly what the supermarkets are doing. At the end of the day, it is the basics that count. That includes, as the noble Lord alluded to, where the next meal is going to come from.

The noble Lord made a good point about the generational aspect, which ought to be in all of our minds. Whatever is happening now, we need to think about the next generation and generations after that, helping children and looking at the educational side and the health aspects of children. Of course, I understand that the current situation does not particularly help.

Finally, on the noble Lord’s point about tax cuts, we have made it clear that we on this side wish to make tax cuts but are not in a position to do so. It is important to make the point again that tackling inflation is by far the biggest challenge. Although there are some signs that it will come down—we have the predictions and forecasts—there is a lot more work to do. But that is the most important point, and No. 10 made it as well.

[Baroness Thornhill (LD)]

My Lords, the Minister mentioned homelessness, and the best model currently available for that predicts 300,000 more homeless people over the next year. The group in that category that I believe is most vulnerable is low-income earners in the private rented sector. Of course, evictions in the private rented sector have more than doubled in the last year. As rents have risen, their benefit, based on the local housing allowance, has been frozen at 2018 levels—we all know that a lot has happened since then. So have the Government given any thought to unfreezing the local housing allowance, even if only temporarily?

[Viscount Younger of Leckie (Con)]

We keep it under review, but we are not looking at that at the moment. I understand the point that the noble Baroness makes about the LHA, but she will know that we have the discretionary housing payments, which are currently being delivered through local authorities to the most vulnerable. I reassure the noble Baroness that we keep a close eye on that to be sure, and to get the feedback, that these payments are being given and are helping those at the vulnerable end of society. Echoing the noble Baroness’s point, I am very aware that rents are very high—far too high—in the private rented sector, and seeing what more can be done is certainly very high among the Government’s priorities.

[Baroness Donaghy (Lab)]

As my noble friend Lord Liddle said, some of us are sympathetic to the noble Viscount’s predicament. It cannot be easy when the Bank of England has just announced a 0.5% increase in Bank interest rates. He said seven times—I counted—“We are not complacent”, and I know that he is sincere; he is much respected by this House. It would have helped if the Statement from the Government had not been quite so complacent. The reference to “global factors” does not seem to take any account of government responsibility over the last 12 or 13 years. Do the Government take any responsibility whatever for trashing the economy? Did Prime Minister Truss actually exist? If she did not, does that mean that she will not be able to put forward any peerages to this House? It would be interesting to know what precise responsibility the Government take for the current predicament: that our inflation rate is higher than in any other country in the G7, as the noble Lord, Lord Bilimoria, said.

The Minister himself said that 3.1% of GDP is not that high for helping our most vulnerable. Why will the Government not consider uprating some of these benefits to assist them? Even the 10.1% rate for pensioners scales into insignificance when the rate of inflation is 8.7%. It is probably still going up—the Minister said that it was going down, but that is slightly misleading, if he does not mind me saying so. Inflation is going not down but up. I think he is referring to the rate of increase slowing down, which is a very different matter. In view of the urgent situation, will the Government not think of more emergency uprating for some of these benefits?

[Viscount Younger of Leckie (Con)]

There are a number of points from the noble Baroness, who I respect very much, but I will not be drawn into some of the political points that she started off by making. What I will say—and this was in the Statement—is that a lot of what we are facing is to do with the post-pandemic issues that have arisen. As the House will know full well, the war in Ukraine has certainly been quite a factor in that.

I remind the noble Baroness—I think she said it herself—that the uprating of 10.1% we have made to a number of benefits was, we felt, generous. Others would say that we should have done more, but we felt that it was generous at the time. To go back to the beginning of her remarks about the Statement itself, whatever she made of the Statement, as I have said before, we are continuously looking at what more we can do to help those people at this particular time.