Lord Hunt of Chesterton
Main Page: Lord Hunt of Chesterton (Labour - Life peer)Low-income and Vulnerable Consumers
Lord Hunt of Chesterton Excerpts
Baroness Crawley (Lab)
My Lords, we are indeed grateful to my noble friend Lord Whitty, in National Consumer Week, for securing such a valuable and important debate. Although noble Lords opposite and my noble friends on these Benches may come to very different conclusions about the cumulative effects of government policies on low-income and vulnerable consumers, after nearly five years of strict austerity it is vital that those policies are scrutinised and challenged frequently in your Lordships’ House.
For “low-income and vulnerable consumers” read “hard-pressed families”. By far the greatest pressure facing families today is, as we know, economic. For many, we have seen living standards fall to their lowest for a decade. Real wages have plummeted and the price of living—especially in energy costs, housing and childcare—has soared. If all families were experiencing such pressure it would be bad enough, but the injustice is that it is families with children that have taken the hardest hit. The Institute for Fiscal Studies has shown us that families with children have been penalised economically three times harder than work-age households without children. The bankers land us in it and the children pay the price.
So far the Government have done next to nothing to mitigate the issue of falling real wages in the bottom half of income distribution, where a family’s fight to reach the end of each month with bills paid and food on the table is most pronounced. The campaign for a living wage must be congratulated on having signed up, as we heard from the noble Lord opposite, 432 living wage employers, including 18 FTSE-100 companies. Indeed, that number may well have doubled in the past year.
However, much more needs to be done. The minimum wage has not kept up with inflation, and we call on the Government, even at this late stage, to intervene to do more. In its recent report, Low Pay Britain 2014, the Resolution Foundation states that one in five employees is currently on low pay. This can so easily result in toxic reliance on payday loans, as my noble friend Lord Whitty quite excellently illustrated, and other exploitative forms of credit. This is an issue which the Labour Party has taken a prominent lead in tackling and in encouraging regulators such as the FCA to take action.
The seventh report of the House of Commons Business, Innovation and Skills Select Committee, dated December 2013, states:
“In 2011-12, the payday loan market was worth between £2.0 and £2.2 billion, up from an estimated £900 million in 2008-09. This rapid expansion has been accompanied by a significant rise in the number of people experiencing serious debt problems as a result of using these products”.
All too often in homes all round the country there comes a crunch point—and often that point is reached many times—when the payday loan is reached for, not just to fund one-off emergency events such as a funeral, job loss or illness but to pay for everyday things such as utilities, food and housing, with little attention being paid to the miserable consequences of compound interest.
Many people are desperate and the Government need to wake up to that fact. However, lecturing people on the evils of legal payday loans will not put food on the table, and the danger is that the illegal moneylending merchants will become even more prominent. As president of the Trading Standards Institute, I am all too aware of the misery brought to families by these despicable moneylending criminal gangs, many of them international, which prey on the vulnerable and those at the end of their tether. It is often the case that people in debt to illegal moneylenders become their slaves, face dreadful violence and, in the case of women, are forced into prostitution, and are rarely, if ever, free of that debt. Realising, of course, that no single action of government can lead to a resolution of these current very serious issues of debt, it would help in this case to track those illegal international moneylenders if the Government opted back in to the European arrest warrant. I wish the Prime Minister every success with his upcoming vote and with his UKIP-flirting faction.
It would also help to tackle those international gangs and our homegrown criminals who prey on vulnerable consumers if enforcers such as trading standards officers, who are responsible for enforcing 250 pieces of consumer legislation, did not have to face the double whammy of drastic local authority budget cuts, outlined by my noble friend, and a legislative handcuff in the form of proposals in the Consumer Rights Bill—which we have shared with the Minister over the past four weeks—that introduce 48-hour notice periods to be given to businesses before their premises can be routinely inspected. Individual trading standards services around the country have had their budgets slashed by up to 86% over the lifetime of this Parliament.
In a time of such economic pressure on consumers, the enforcement community is needed more than ever. On the doorstep and on the internet, consumer-facing crime is rising. Credit-brokering websites are ripping off consumers and draining their bank accounts after promising to find them cheap credit, only for the loans never to materialise. Rogues and scammers are particularly targeting elderly and vulnerable people on the doorstep, pressurising them to pay extortionate prices for unnecessary jobs or goods. We have read this week, National Consumer Week, of many cases of this kind, such as that of Elizabeth, the 89 year-old lady in north London, who was targeted by a serial conman appearing at her door and offering to do a minor repair. He told her that £15,000 was needed to repair a damp problem. Bank staff raised the alarm when Elizabeth came in to get the cash to give to the conman. I understand that he was jailed for 18 months this year.
Lord Hunt of Chesterton (Lab)
Does my noble friend agree that that shows that it is a good idea to have banks?
Baroness Crawley
I agree absolutely with my noble friend.
Often today low-income consumers are forced to make purchasing decisions based almost entirely on cost, and by seeking cheaper options they are exposing themselves to cut-price, counterfeit and often dangerous products. One local authority receives a call every day from a new victim who has lost their life savings to scammers and rogue traders.
We all need to look out for our neighbours, we are told by the consumer campaign, National Consumer Week. Yes, we do need to look out for our neighbours, particularly if they are elderly and vulnerable, but I also ask the Government, in the same spirit, to look out for the excellent trading standards enforcement services across the country, which do extraordinarily good work even when their numbers are verging on the unsustainable. Local authority cuts are no laughing matter and central government cannot keep washing its hands of responsibility.
In the analysis accompanying the Budget Statement of 2014, the Treasury concluded that, up to 2012, on average households in the bottom two deciles saw their incomes protected against the effects of inflation. The Labour Party begs to differ and has put forward a cost of living contract with hard-pressed families that will see gas and electricity bills frozen until 2017 and a reform of the energy market. The contract will see up to 200,000 homes built each year by 2020, and a ban on exploitative zero-hours contracts, as well as making work pay by strengthening the national minimum wage, and providing tax breaks to firms that boost pay through the living wage. Among other pledges, the cost of living contract will also help working families with 25 hours of free childcare for three and four year-olds.
It is right that I end my short contribution to this important debate where I started, and that is with children in families: the consumers of tomorrow. The Children's Society and the StepChange debt charity combined a survey of 2,000 families with children and in-depth interviews with 14 families in problem debt. They identified a number of impacts on the children in those families, such as bullying, worry, family argument, early exposure to loans and having to cut back on essentials such as food, clothing and heating for the children, in order to keep up repayments. Instead of Her Majesty’s Government coming up with yet another new wheeze—in this case, that government departments must apply a family friendly test to all policies—let us instead listen to children in hardship themselves, who need immediate government action. We will then know what to do—or none of us should be in public life.
Lord Hunt of Chesterton
My Lords, I congratulate my noble friend Lord Whitty on introducing this debate and I am very pleased to follow the right reverend Prelate the Bishop of Norwich. I visit Norwich from time to time, as my daughter is a GP there, and she has told us stories that endorse what he said.
This debate is about issues that I am sure the electors will be considering very strongly next year. Following the global financial crisis in 2008 and the political and economic troubles in Europe, and with the looming problems of energy and the environment, the UK is in a period of great uncertainty, at least as great as other countries in the EU. The duty of Government and society during such periods should be to minimise the effects on the vulnerable and those on low incomes, who suffer most, both materially and in terms of their morale, their health and, often, the breakdown of social relations—the subject of a previous debate this afternoon. The noble Baroness, Lady Noakes, implied that all these issues are economic, but, as the right reverend Prelate suggested, that is perhaps a simplification.
Curiously during this period, although we normally think of this as all a matter for the Government, it has been quite interesting that the role of the Opposition has been quite strong. For example, on the freezing of energy prices, it was quite remarkable how, after a speech from the Opposition, energy prices suddenly started to move downwards in a positive way.
Government actions in dealing with these issues are generally about changing governmental institutions. It is not just a question of moving deckchairs—a favourite sport in Whitehall—but changing institutions is very important, as is improving executive operations. I was head of the Met Office and was hired to change that institution and to try to get good forecasts, so I know these two aspects of government. As equally effective as legislation and executive operation by Government is the Government’s use of finance, legislation, regulations and the Civil Service to influence non-governmental organisations and institutions, as we have been hearing. This is where there are quite large differences between the policies and actions of the parties—less so than 50 years ago, say, but still significant.
Since the 1970s, the Labour Party has broadly worked with the UK’s existing governmental and non-governmental institutions, including private sector commercial organisations and trade unions. These principles are set out on the party card—I have not seen a Conservative Party card, but I do not think it has those on it. The Labour Party has also worked effectively and positively with other countries in the EU. The significant broad changes introduced by the Labour Party in government included Scottish and Welsh devolution, reform of the House of Lords and the hiving-off of Whitehall departments to more effective agencies. These were all broadly accepted by all parties.
By contrast, during this last five years the Conservative Party, which leads the coalition, has not been sure what institutional reforms it wants to introduce or whether it wants to be part of Europe. I did my homework for this speech and looked at what the last Conservative Party manifesto presented. On one page there is a gloomy Chinese-like picture, as if the sad figure was trying to say, “This is the role of big government”. Two or three pages later on, the party put down a very nice statement, which I thought I would read to your Lordships—I do not often read from the Conservative Party manifesto. It said:
“We will make Britain the most family-friendly country in Europe … We will support and improve Sure Start, and introduce a new universal health visiting service. We will give targeted help to disadvantaged and dysfunctional families”.
That is not exactly how it has turned out in practice. Some of the words may be the same, but the actions have been rather different.
One of the sad things about the Conservative Party—finance is another aspect—has been the attitude of its leadership to some of the really important institutions and areas of this country. Twenty or 30 years ago, there were shocking campaigns to weaken some of the communities, particularly coal-mining communities, but even during the last five years we have had rather shocking campaigns criticising social groups and taking money away from things such as the citizens advice bureaux. The way in which this has been done—essentially, through a tax on certain regions of Britain and on types of people by reducing their benefits—is simply inconceivable in any other country in Europe. If you look at the extreme difficulties that they went through in Belgium, France and Germany as their coal-mining areas went down, we never saw that ugly rhetoric from party leaders. We saw both social democratic and conservative leaders accepting and moving their Governments forward in those areas. Regrettably, that bitterness still continues in this country.
In the last period before the present Government, there was significant progress under the Blair and Brown Governments to improve social infrastructure in the poorest areas of the UK, particularly in schools and through focused welfare such as Sure Start—which appeared in the Conservative Party manifesto—and regional development plans. Regional development was, of course, cut back when the Conservatives appeared. One Member of the House of Lords—I will not name names—is now chairman of a certain local enterprise board. He has said that the amount of money he gets each year is enough to build two roundabouts, so there has not been a proper continuation of the regional development plans.
The subject of this debate is to review whether the present Government’s policies have been effective. One of the facts which one has to recognise, although it was not recognised in the interesting speech of the noble Baroness, Lady Noakes, is that there was a global recession between 2008 and 2010 and that, in order to enable its impact to be minimised, the Government considerably increased social expenditure at that time. This has been analysed by many economists in recent months. The destabilising cut-back policies that we saw from the incoming Conservative Government and the accompanying rhetoric—quite unlike what you heard in the rest of Europe—has had very damaging effects upon families involved in public sector employment. Thousands of public sector employees were dismissed. Some of them had to do the work of course, so the work came back in self-employment but with fewer benefits and lower pensions.
An important point for many local communities is that people who were employed by public agencies and local government were allowed to participate in public sector activities—for example, working with the council and many other social units. Once people become self-employed with fewer funds, that kind of activity is often reduced.
Another feature that we might consider is whether this rigorous approach that we have seen in the last five years has led to a higher level of workforce, which is what is needed in modern technological industry. The answer seems to be no. The figures are that UK productivity is 20% lower than that of other countries such as France—the country endlessly attacked from the Benches opposite. By this business of pushing down on poorer people, we are not necessarily actually improving our total economy.
I have put down questions about government agencies being encouraged to employ and use contractors or companies that make best use of advanced technology and productivity, rather than just going for the cheapest price. I believe that there really has been some improvement, and I give some commendation to the Government. In many private companies and public organisations, staff are now being paid more, with a living wage. Last week, DECC reported it was now employing staff on a living wage. However, the government policy is still not clear. It could do more to ensure that these contracts improve UK standards, including technical standards, such as in housebuilding, where there are still considerable differences between this country and other countries on the continent.
Another feature of the topic of this debate is the question about the role of different levels of government —local, regional and central. Because most of the money comes from the centre, we still have the situation in Britain that local government relies on central government funding. Of course, fortunately, we still believe in local government, which is still a very important part of communications between individuals, communities and central government—many policies have to be implemented in this way.
This Government started with the term “the big society”—I have not heard about that from the other side today—but one of the roles that one imagines would be performed by the big society would be that you would have local government and local communities do the work and you would need to have methods of making sure that the money was spent properly. What did this Government do—a Government who believe in “money, money, money”? It removed the local government audit organisation. When things go wrong, you will have ad hoc interventions at a local level—which, of course, we have just seen in the case of Tower Hamlets. We had a perfectly good system of local audit. I was a city councillor and we spent a lot of our time thinking about exactly what the local Audit Commission would do; there was a similar situation with schools inspection.
I would like to end with a positive note about how the Conservative Party might improve. I looked up in Google today about the role of the Conservatives and trade unions. There used to be an organisation called the Conservative Trade Unionists, but then it disappeared. Wikipedia says, “We haven’t heard about this for 10 years. Could anybody volunteer to add to the Wikipedia description of Conservative Trade Unionists?”. So there is an opportunity. The Lib Dems, however, do have an organisation of Lib Dem trade unionists, and I am very pleased about that. The only trouble is that they do not agree with the Conservatives about exactly what they should be doing. There is some row going on—you should read Wikipedia.
Baroness Hayter of Kentish Town (Lab)
My Lords, I thank my noble friend Lord Whitty for introducing what has been a valuable debate and thank the right reverend Prelate the Bishop of Norwich for his warning of the normalisation of food aid in a rich society. We should also pay tribute to the noble Baroness, Lady Noakes, who, sadly, was the only non-Minister to speak from the government side. Needless to say, I very much disagree, along with my noble friend Lord Hunt, with her analysis and particularly with her hopes for the outcome of the next general election.
The essence of consumer policy is not just about putting things right after someone has been ripped off; it is about preventing such action in the first place. Yet, as my noble friend Lady Crawley has demonstrated, without robust trading standards to act on our behalf, consumers are left weak in the face of poor service or shoddy or dangerous goods. There is a proud tradition in the co-operative and Labour movements of fighting for consumer rights. We embedded the consumer voice in regulators, set up ombudsman schemes, established the National Consumer Council—sadly, now demolished by the Government—and we have championed the user voice across both public and private services. As our leader, Ed Miliband, has said:
“In every area, you have to call time on the surcharge culture. Making a fair profit is important, but it can’t be done in an underhand … way … This is about power in relation to … services and how government can be on the consumer’s side … It’s … how you build a competitive economy … It’s about the rules that government sets”.
However, it is not just our leader. I appreciated the quote from my noble friend Lord Haskel, who reminded us that the then leader of the Opposition, David Cameron, said that there is a,
“disconnection between capitalism and people’s lives”.
We see it in housing, where the private market has failed, as rents and house prices drive working people out of the centre of London, putting pressure on transport as well as reducing take-home pay, as more money goes on travel, as well as taking the stuffing out of our communities. It is about water, where one in eight finds bills to be unaffordable. About a quarter of all households, and the majority of the poorest ones, spend more than 3% of their disposable income on water. During the passage of the Water Bill, my noble friend Lord Whitty sought to ensure a national affordability scheme to set targets and minimum standards for company social tariffs, but that was not accepted by the Government. It is not as though the water companies have struggled. Of their £2 billion profit last year, nearly all of it—£1.8 billion—was paid out as dividends.
Baroness Hayter of Kentish Town
It certainly did not go to domestic users.
It is about energy, where prices have soared, which has allowed profits from households to double in a year. Those profits comprise 8% of bills. Labour will break up big energy companies, introduce a simple new tariff and replace Ofgem with a tough new energy watchdog.
Travelling by rail to work is essential for many. In Birmingham, Bristol and York the average commuter travels 35 miles every morning; yet half of rail users do not think that they get value for money and commuters’ fares have jumped by an inflation-busting 20% since 2010.
Housing is another area. No one should have to live somewhere substandard, nor with such insecurity of tenure that they fear being chucked out before they can put down roots. Often they are chucked out simply for asking their landlord to do necessary repairs. However, many face such insecurity. There are more than 9 million people renting in the private sector now, including 1.3 million families with children. Yet this is a barely regulated market. These families want the same stability as any of our families would want: to get to know the community, so that their children can get to make and keep friends. However, many families are denied such stability. The bedroom tax, described by my noble friend Lady Lister, often makes them move, sometimes away from the areas close to mum, where they had a ready-made babysitter and a support network. We need longer tenancies and restrictions on rent increases to improve this volatile, unstable market.
It is a market in which letting agents are disadvantaging tenants. The average fee charged to tenants by letting agents is £355, with some having to pay more than £500. For those in a position to buy, estate agents’ fees can be equally unfair. Despite that, yesterday the Government resisted our amendment to the Consumer Rights Bill to prevent letting and estate agents charging both tenants and landlords, or buyers and sellers, for the same service. We will bring this back to the House on Report to stop this exploitation of our overheated housing market, which sucks money out of housing, as it goes neither to the homeowner nor to the landlord, but to people profiting from the desperation of people to find somewhere to live.
Without better regulation and without having someone on their side to champion their rights, consumers will never get a fair deal. Back in 1962, President Kennedy said:
“If consumers are offered inferior products, if prices are exorbitant … if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers”.
Today we have new challenges. We sought yesterday to get the Government to take action on nuisance calls, but we failed. Yet we know that it is the vulnerable on whom the scammers prey, selling high-cost credit, false PPI claims and post-accident help, by nuisance calls or junk mail. Indeed, one campaign group estimates that victims send more than £10 billion to scammers every year. Increasingly, rip-offs are via copycat websites, ads for loans on gambling sites, or payday loans advertised before the watershed, all of which the Government have refused to act on; or there is illegal activity, such as scamming people’s bank accounts, which banks fail to publicise for commercial reasons, and the regulator seems hesitant to act on.
Meanwhile, there are those who operate within the law but take advantage of the vulnerable, such as the new rent-to-own shops, whereby people supposedly rent a household good, which they will finally own, having paid perhaps three times the price through their weekly payments. This ruse gets around regulation. They are not offering loans or hire purchase that would be covered by the FCA, as people are theoretically renting rather than buying the product. What then happens is a new business model; they add compulsory but useless insurance to the product, charging 60% to 90% APR and encouraging repayment by direct debit, which of course comes out of the bank the day after benefit goes in, giving preference over other payments. Those companies can repossess for a missed payment as the consumer has no protection.
We have seen banks fail to act ethically or in the interests of users. Yet the Government rejected our attempts to introduce a code of conduct for financial services, despite the record of misselling PPI, interest rate swaps and inappropriate mortgages, all the time managing to suck out huge bonuses. Today we welcome, as I think the noble Baroness, Lady Noakes, would, the announcement of a CMA investigation into personal current accounts and SME banking. We urge all haste to this.
Our political system faces a fundamental challenge. In our globalised world, many feel that they have no influence over their surroundings and that no one is standing up to the strong on their behalf. This feeds the rush towards parties offering apparent simple solutions—everything will be better if we leave the EU or the UK is broken up. That is something that we have to challenge but, as my noble friend Lord Whitty said, the Government have made all of this worse by placing the burden of austerity on the poor. Our vision is different. It is to protect the vulnerable and to remove the fear and shame, as my noble friend Lady Lister called it, of some groups in society. It is to spread the benefits of any growth to all workers and not just to the rich, including to the 30,000 in Norwich who live on the edge of poverty. It is to tackle the cost of living crisis and put families and consumers at the heart of policy.
The Government have resisted all our attempts to get the Consumer Rights Bill to deal with the issues raised today. We will try again; we will bring back those issues on Report; and, if we fail then, we will act from May of next year.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, first, I extend my gratitude to the noble Lord, Lord Whitty, for securing this wide-ranging debate and to all noble Lords who have given their very different perspectives—some cheerful and some rather gloomy. It has been a great opportunity to discuss how government can best support those on low incomes and vulnerable consumers. I have often agreed with the noble Lord on consumer and local government issues, but today his big picture is one that I just do not recognise. I could say the same about the noble Baroness, Lady Lister of Burtersett.
In this Government, we are all committed to helping those on low pay and protecting our most vulnerable consumers. We have taken action across government to tackle poverty, allow people to keep more of the money that they earn and give the most vulnerable a loud, clear voice. We have brought forward legislation when it is needed. As the noble Lord, Lord Whitty, said, the Modern Slavery Bill is about to come into our House. Later in the year, the Small Business, Enterprise and Employment Bill will come to this House and will deal with the operation of zero-hours contracts.
First, I would like to step back and look at fundamentals. I agree with my noble friend Lady Noakes. When the Prime Minister spoke at Davos in 2009, as the noble Lord, Lord Haskel, mentioned, he was looking at the problems in Britain then. Following that, the coalition arrived in Government in 2010 and found an economy and institutions reeling from the deepest recession for many years, of which one cause was a prolonged period of fiscal irresponsibility. “On its knees”, I think, were the words of my noble friend Lady Noakes. It left us with an inexorably rising deficit and cost 750,000 people their jobs. That was bad for everyone especially those on low incomes. To pick up the wording of the Motion, the “cumulative effects” have given us an awful legacy.
The key to being able to help low-income and vulnerable consumers is to deliver economic growth. The dire need to get the economy back in shape has been extremely challenging. The public sector has had to become slimmer, better organised and more efficient and many parts of it have responded very effectively to that challenge. Despite the challenges, the Government have reduced the fiscal deficit, while ensuring that the poorest and most vulnerable households are protected. The Government are the first to publish cumulative distribution analysis of their tax, welfare and public spending measures. This analysis shows that the richest 20% of households make the largest contribution to reducing the deficit, both in cash terms and as a percentage of their income. I am afraid it is extremely difficult to do the sort of analysis asked for by the noble Baroness, Lady Lister, on individual groups, such as the disabled.
More fundamentally, as Adam Smith pointed out, the best long-term protection for people as consumers, including the poorest, comes from the establishment of genuine competition among providers. We have encouraged this, thereby improving the economy and encouraging innovation. We have not sought to dictate prices—a policy some unwise politicians have recently suggested. This would be foolish and the effects catastrophic, especially on the poorest.
The noble Lord, Lord Haskel, mentioned that only one in seven has felt the benefit of the recovery. I would say that the economy is in a good place and quote the Office for Budget Responsibility forecast that real household disposable income will rise in every year to the end of the forecast period 2018-19. This is the best measure of living standards, as it includes employment levels and income.
Employment is one of the key areas that help people to look after themselves. The Government have done a great deal for job creation. More than 30 million people are now in work—a record high. A greater proportion of women are in work than ever before. Since 2010, an additional 2.1 million private sector jobs have been created. Creating jobs and helping people to find sustainable employment is the best route out of poverty.
In view of what the noble Baroness, Lady Lister, said, I am pleased to say that 768,000 more women are employed since the last election. Employment gives individuals financial security and self-confidence, which in turn strengthens families and helps children in those families, as my noble friend Lady Noakes said, and ripples through communities. Our labour market reforms are designed to reconnect the unemployed with the labour market. They have proved successful. Youth unemployment fell a record 253,000 on the year. Long-term unemployment fell 194,000—the largest annual fall since 1998. The percentage of workless households is also lower than it was under the previous Government. Unemployment in the past year has fallen at the fastest rate ever recorded.
We have also been improving education and skills, which, in time, will have a good effect on productivity. Apprenticeships have been a central plank of my department’s drive to open up new routes into work and to give people the skills and experience that they need to thrive. The Government are investing in real jobs for young people. By overhauling apprenticeships and vocational education, we are giving young people access to the tools they need to build a better future and we are giving employers the skilled workforce that they need to compete. We are on track to have 2 million apprenticeship starts this Parliament, and we have introduced national insurance breaks for employers hiring people under the age of 21. This is at the heart of our drive to equip people of all ages with the skills that employers need.
We are also helping people to start their own businesses, although many do this without any help. For our aspiring entrepreneurs, the start-up loans programme provides loans and ongoing business mentoring support. More than 2 million new businesses have been created since May 2010—more businesses, more jobs and more growth.
I commend my noble friend Lady Noakes for her interesting analysis of the situation on tax. I believe, as she does, that everyone loses out if taxes do not encourage wealth and innovation. The Government are committed to a fair tax and benefit system, where everyone contributes to reducing the deficit and those with the most make the largest contribution. We will make the UK much more competitive internationally by cutting corporation tax from 28% to 20% next year. For the individual, we will increase the tax-free personal allowance, which will rise to £10,500 by April 2015, taking 3 million people on the lowest incomes out of paying tax altogether. I am glad to say that 56% of these are women.
The noble Lord, Lord Haskel, talked about national insurance, mentioning that it is paid by the lower paid. Of course, our reforms to the personal allowance are more progressive than the Opposition’s proposals on the 10p tax rate, which the IFS said have no plausible economic justification.
I now turn to inflation. We inherited a difficult situation but we have kept inflation low, which is vital to consumers of every age. It was 1.2% in September—the ninth successive month that it has been below the target. The latest data on inflation from the ONS show that the annual rate of food price inflation was minus 1.5% in September. That is the lowest it has been since June 2002. It helps poor families struggling in the way that the right reverend Prelate the Bishop of Norwich described. It is also great news for all consumers.
The success that I have described mainly comes from running the economy responsibly, but we have also taken some specific steps which have helped with inflation—for example, the abolition of the fuel duty escalator and freezing council tax for four years, as well as many other measures.
We are committed to improving living standards, particularly for the low paid, whenever we are able to do so. The living wage was mentioned by the noble Baroness, Lady Crawley. She knows that we support businesses that voluntarily choose to pay the living wage when it is affordable and does not cost jobs. We have supported the national minimum wage, and this year we were very pleased to accept the Low Pay Commission’s recommendation of an increase above inflation. From October 2014, more than 1 million low-paid workers received up to £355 extra in their pay packets. The Government have been addressing the cost of living. They have cut tax for 26 million people, thereby reducing the income tax paid by a typical taxpayer by £705.
The noble Lord, Lord Whitty, mentioned fuel poverty. The fuel poverty gap fell from £1.07 billion in real terms in 2011 to just over £1 billion in 2012. Of course, fuel is a key expenditure for many. As a result of our measures, average pump prices are 13p per litre lower than under Labour’s fuel duty plan, helping motorists but also helping those delivering goods to our factories and shops, and prices are still coming down.
Many people worry about the cost of local services. Action in the Budget enabled local authorities to freeze council tax, should they choose, for the fourth year running. Thanks to government support, council tax bills could, therefore, have fallen by up to 11% in real terms by 2015. The noble Baroness, Lady Crawley, and the noble Lord, Lord Whitty, mentioned the difficulties faced by families with children. However, this is an area in which the Government have taken decisive action. We have introduced free school meals for all infant school pupils and will introduce tax-free childcare which will save families up to £2,000 per child. We have also introduced family-friendly employment policies and approaches across government. Nearly all the items that the noble Lord, Lord Hunt, read to us from the Conservative manifesto have been tackled.
Baroness Neville-Rolfe
Yes, indeed. Sure Start still exists and I have always been a big supporter of it.
The noble Lord, Lord Whitty, mentioned transport. For travellers, and those who have to commute to work, we are capping rail fare increases and reducing the scope for above average increases. Regulated fares include, in cities, season tickets, day singles and returns. We have invested in transport in a way that the previous Government were not always able to do. Things like Crossrail are making a major difference to London. The previous Government started Crossrail and we hope to finish it. It is a great project with benefits far exceeding the cost.
All commentators agree that housing is an important factor in vulnerability. However, I do not agree with the analysis offered by the noble Lord, Lord Whitty. For those in rental accommodation, the Government have announced that, from April 2015, annual rent increases in the social housing sector will be limited to CPI plus 1%, for 10 years. This new policy is intended to help ensure that rents remain affordable, and existing tenants are protected from large rent increases, while ensuring that landlords have the income they need to invest in the maintenance and improvement of existing homes and services, and in the provision of more new, affordable homes. The noble Lord, Lord Whitty, suggested a national register of landlords. We do not support a national register of landlords. It would be a financial burden on all landlords and cost £330 million, at current prices, over 10 years. These costs would be passed on to tenants through higher rents, while it is not clear that a register would be effective. We are also supporting new, affordable homes. This is another area in which all sides of the House are very interested. We are investing £4.5 billion of capital funding and the number of affordable home starts has increased in recent times.
Pensioners must have a decent life and a secure income in retirement. That is why we have protected them; for example, by using a triple lock for uprating. The basic state pension is increased each year by the highest of the growth in average earnings or price increases, as measured by CPI, or 2.5%. As a result, someone on a full basic state pension can expect to receive £440 more a year in 2014-15 than if it had been uprated by earnings since the start of this Parliament. The percentage of pensioners in relative poverty is close to the lowest ever recorded. We have also protected many key benefits for older people: free eye tests; free NHS prescriptions; free bus passes; free television licences for those aged over 75; and winter fuel payments.
I turn to welfare. The Government have continued to provide strong welfare support. Social security spending was £209 billion in 2013-14, which is 31% of total managed expenditure. However, to protect the long-term sustainability of the public finances, it is vital that the Government bring this welfare spend down. We are proud to have grasped the nettle. The Government have introduced universal credit to make work pay and simplify the benefits system. This is a major reform that is being rolled out carefully. Our priority will remain safe and secure delivery testing and learning.
The right reverend Prelate mentioned inefficiencies in benefit payments. That is why we are addressing this through the introduction of universal credit, which I believe will make a very big and important difference for those in and out of work. It ensures that work pays, and more work pays, with a transition to and from work no longer putting household income at risk in the way it did in the past.
I have already mentioned the cap on rental increases in the social rented sector. We need to make the best use of the housing stock and use what we have fairly and properly. Through housing benefit, taxpayers would have been paying £500 million a year for 1.5 million spare bedrooms, while there are 250,000 households in overcrowded social housing in England alone. I make that comment to the noble Baroness, Lady Lister, who talked about that issue with some passion. A very important thing is going on there. We are also absolutely committed to supporting people to make the transition, especially for those who are vulnerable. That is why last year funding for discretionary housing payments was trebled and why pensioners, of course, are entirely exempt—back to my point about pensioners.
The noble Lord, Lord Whitty, and the right reverend Prelate talked about child poverty. The Government are committed to our goal of ending child poverty in the UK by 2020. That strategy reflects the reality of child poverty in the UK today, with worklessness and education absolutely key root causes. Doing things about those issues is essential to eliminating poverty.
The noble Lord, Lord Whitty, also talked about gas and heating oil. I believe that the best way to keep bills down is to help people to save energy in sure, fair tariffs that encourage competition. We are also reforming the retail market, making it simpler to understand, and ensuring that everyone is on the cheapest tariff that their supplier offers for their preferences. I will write to my noble friend Lady Noakes on the points she made about green energy as it is a bit late in the day to start a discussion on that.
I believe that the new Consumer Rights Bill makes many really important changes. It is a 10-year Bill and will bring most benefit to the most vulnerable. It also introduces important reforms on lettings, which will bring about a new transparency, which the noble Baroness, Lady Hayter, mentioned. It will enable more redress for consumers when they have suffered loss.
We have also protected the funding for Citizens Advice, and we have been big supporters of National Consumer Week, rightly mentioned by the noble Baroness, Lady Crawley, for the great work that was done on doorstep crime.
In concluding, I thank all those who do such great work across the economy to help with consumer law, preventing rip-offs and cracking down on rogues. We in the Government are on the side of the low-paid and the most vulnerable, helping them to climb the economic ladder. Labour trapped people in a broken benefits system. We needed our skills systems and colleges to get out of the great recession. Too many people are still poor and in trouble, but thanks to this coalition Government the economy is on the mend and we are better placed to help the vulnerable and improve the livelihood of those on low incomes.