Cost of Living

Baroness Penn Excerpts

Thursday 9th June 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, I too thank the noble Lord, Lord Eatwell, for bringing about this important debate. If the noble Lord, Lord Davies of Brixton, thinks that it is intimidating to contribute, maybe he has some sympathy for the Minister trying to reply.

It is right to start with the first part of the question put before us: the cost of living challenges that millions of families up and down the country face. They are worried about high inflation, and many are struggling to make their incomes stretch. As the Chancellor previously set out, the Government remain deeply committed to helping with those challenges. We stand behind people, and while we cannot solve all the problems of inflation—especially the complex and global supply chain challenges and other causes of inflation—we will help the British people where we can, just as we did throughout the pandemic. However, alleviating these pressures alone will not be enough. We must continue our work to address the structural challenges that make some of our communities and households more vulnerable to these kinds of shocks. Our levelling-up agenda is precisely about ensuring that more communities are economically and socially resilient to the current and future shocks they may face.

It would be wrong for me to pretend that the cost of living pressures that we are all facing will soon subside. Worldwide shocks continue to be a major force in why we are experiencing such high inflation, as noble Lords have noted. Responsible fiscal policy is also essential for controlling inflation. It must be appropriately utilised to ensure that we meet our fiscal rules and keep public finances sustainable in the long run, while supporting the country in times of need. That is why the Government are providing support for the cost of living, but it is timely and targeted at those with the greatest need. In the announcement made a couple of weeks ago by the Chancellor, the Government said that the majority of households will benefit from at least £550 of support this financial year to help with rising energy prices. In addition to that, the most vulnerable households will receive at least £1,200 of support in total this year to help with the cost of living.

The noble Baroness, Lady Kramer, talked about the uprating of benefits, and the support that we have provided through this scheme will be more generous than if the uprating of benefits were brought forward from its planned date. Alongside the support for energy bills that is being provided now, the Chancellor has made clear that, next year, benefits will be uprated with the September inflation figure, which we expect to be high —and higher than the following April, so we have that commitment to those who are least well-off. My noble friend Lord Griffiths made the point that the long-term solution is to get inflation under control. I may have had only one noble friend on my Benches to support me, but I am glad to say that I agreed with everything he said.

The Government have a three-pronged approach, as expressed by my noble friend. In terms of setting interest rates, there is the independent monetary policy of the Bank of England; it is worth noting that, since the Bank of England got its independence, inflation has averaged 2%. There is also responsible fiscal policy, which involves investment in public services and support for the most vulnerable, but it must be paid for and within our fiscal rules. I thought the comments made by the noble Lord, Lord Eatwell, about the health and social care levy, and the link for the public between the taxes they pay and the services they receive, was an interesting one. The Government do produce a summary for people of where their taxes go.

Several noble Lords talked about fiscal policy and the balance between spending on public services and tax cuts. The noble Lord, Lord Desai, gave us a good history lesson about the Thatcher years and the affordability of tax cuts. My right honourable friend the Chancellor has been absolutely clear that he is a Thatcherite, not a Reaganite, and all tax cuts must be affordable. After the difficult years of the pandemic and the unprecedented support that the Government put in place for people, we had to make some difficult decisions to consolidate our public finances. I disagree with the noble Lord, Lord Desai, when he says tax cuts are for the rich. One of the first decisions that the Chancellor took last autumn was to cut the universal credit taper rate, which is, in effect, a tax cut for some of the poorest in our society. As the cost of living challenges became more apparent this spring, we increased the national insurance threshold, while keeping the health and social care levy in place. That has allowed us to provide more support for the poorest in our society, while also ensuring that there is funding for our National Health Service, which we heard about a lot in this debate, to improve outcomes for people after the pandemic and to invest in social care, which is a pressing area for reform in this country.

I do not think the noble Lords, Lord Desai and Lord Brooke, or the noble Baroness, Lady Jones, will be surprised to hear that the Government do not agree with them on the idea of a universal basic income.

In addition to the two approaches of an independent monetary policy and responsible fiscal policy, there is also supply-side activism. The Government’s energy security strategy will, over the long term, reduce bills by increasing energy supply and improving energy efficiency. We heard from the right reverend Prelate the Bishop of St Albans about the current energy crisis as an opportunity to invest in renewables. He will know as well as I do that the UK is the G7 country that has gone furthest and fastest in decarbonisation, but of course we have a lot more to do. He is right that we heard in a Question earlier today about the challenges of decarbonising our homes and buildings, but the Government are committed to tackling this through the heating and building strategy. And it is not all bad news on that front: the most effective part of that scheme was the social building decarbonisation fund, which has the joint benefit of reducing bills for those who may need the most support.

The right reverend Prelate asked a specific question about the feed-in tariff price; if I may, I will write to him on that. The noble Baroness, Lady Jones, also gave me several suggestions in this area which I will take back to the Government.

My noble friend Lord Griffiths asked what the Government are doing to ensure responsible lending, as people may turn to credit in these times. The Government legislated to require the FCA to introduce a cap on the cost of payday loans, which came into force in 2015. We are also taking action to regulate “buy now, pay later” providers, although it is important to note that they provide an interest-free service, so it is not considered high-cost lending. None the less, the pace of expansion of those services means that regulation is important. We have also provided record levels of funding to the Money and Pensions Service this year, which includes free debt advice.

The noble Viscount, Lord Stansgate, asked about prepayment meters. I was asked about this when we announced our support for the cost of living just before the Recess, and was able to reassure noble Lords that the support for energy bills will go to people on prepayment meters, either through being added directly to those meters if they are smart or through vouchers. However, I have an outstanding letter to write on the higher tariffs that people can face on those meters, and I will ensure that all noble Lords receive a copy of that. He also mentioned the impact of cost of living pressures on nutrition. The Government have extended free school meals and the holiday activity and food programme will be really important in ensuring that children have access to healthy meals not just in term-time but in holidays.

The noble Baroness, Lady Kramer, talked about the pressures of the cost of living on mental health. After the pandemic, the Government instituted the mental health recovery plan, which has seen significant additional investment in mental health services in 2021-22. As part of the long-term plan, we have committed to increasing spending on mental health as a proportion of health service spending each and every year.

In terms of government action on the cost of living, we will continue to tackle the underlying, long-term factors driving cost of living challenges. In addition to these measures, we must also focus on building successful and resilient places. That is at the heart of the Government’s levelling-up White Paper. The noble Lord, Lord Eatwell, has given us the opportunity to discuss social capital, and the right reverend Prelate talked about the work of Robert Putnam, whom I was lucky enough to study under. I think we actually need a bit more sociology in our policy-making; fashions for it have come and gone in people’s thinking. I have found that it can be a really useful tool for analysis, but it can be a much more challenging job to turn that into concrete policy solutions. That is something the Government have been trying to do through their levelling-up agenda.

The levelling-up White Paper highlights six capitals, including social capital, which must be strong in order for places to flourish—if one is deficient, it has knock-on impacts on others. The 12 levelling-up missions will support stronger places by 2030, by boosting productivity, jobs and pay, spreading opportunity, improving public services, restoring local pride and empowering local leaders. For example, those places with poor educational outcomes often experience lower pay and productivity, and are some of the areas where people are hit hardest by cost of living pressures. As part of our levelling-up strategy, we have 55 education investment areas across England, in the lowest-performing third of places, to which we will give additional investment.

However, I need to challenge the picture painted in this debate of education in this country. Some 87% of schools are now rated good or outstanding, up from 68% in 2010. On inputs, we are the top spender in the G7 on schools and colleges, but it is also about outputs—from 2011 to 2019, the gap between disadvantaged children and others narrowed at each assessed stage from primary to secondary school. There is a different side of the education picture to the one we have heard today.

My noble friend Lord Griffiths also expressed very well the importance of strong, empowered local institutions. We are extending and deepening devolution in England. Our mission is that every area that wants one will have a devolution deal by 2030, allowing places to take greater control of their own destiny.

As well as robust institutions, strong economies are also built on strong communities, as we have heard. There is a clear correlation between the most deprived places in the UK and those with the lowest scores for social capital, the lowest scores for positive community relationships and infrastructure, and where there are fewer quality places for people to meet. We are trying to help strengthen the heart of communities through investment in pride in place, and funds such as the levelling-up fund, the UK shared prosperity fund and the towns fund will all enable local authorities to invest in local priorities.

We are significantly increasing spending on arts and culture outside of London, investing in sports pitches and tennis courts across the UK, and taking forward a new national youth guarantee to give young people in England greater opportunities for out-of-school activities. Our new approach to regeneration will see towns across England transformed. The community ownership fund, which notably supported fans of Bury FC to assure the future of their club, has recently been expanded to help more communities take ownership of their treasured local assets.

The levelling-up White Paper is very much the start of a process, not the end of it. Levelling up is now the golden thread throughout our domestic policy. Our forthcoming strategy for community spaces and relationships will further set out our approach to strengthening community infrastructure and social capital across the UK.

This has been a wide-ranging and important debate on an issue of crucial social, as well as economic, importance. I would like to thank all noble Lords for their contributions. The Government’s position on this is clear: levelling up the entire nation and supporting households through the cost-of-living challenges up ahead continue to be a key priority. We have taken significant action this year in terms of support for the cost of living, with £37 billion of support announced, targeted at those most in need, and in the longer term, in terms of social capital, through the commitments made in our levelling-up White Paper. There is much more to do, but improving living standards, restoring local pride, spreading opportunity and empowering local leaders across the country are at the heart of this Government’s agenda.