Living Standards — [David Mundell in the Chair]

BACKBENCH business – in Westminster Hall am 1:30 pm ar 1 Chwefror 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Stewart McDonald Stewart McDonald Scottish National Party, Glasgow South 1:30, 1 Chwefror 2024

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 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?

Photo of Alyn Smith Alyn Smith Shadow SNP Spokesperson (Europe), Shadow SNP Spokesperson (EU Accession)

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.

Photo of Stewart McDonald Stewart McDonald Scottish National Party, Glasgow South

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 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, 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.

Photo of Natalie Elphicke Natalie Elphicke Ceidwadwyr, Dover 1:47, 1 Chwefror 2024

It is a pleasure to serve under your chairmanship, Mr Mundell.

I am grateful to Stewart Malcolm McDonald for securing this debate. Indeed, I was pleased to support his application for it, because the issue of living standards is of great importance to my constituents in Dover and Deal, and to people across the country.

Over the last 15 years, a series of major events have had a direct impact on our economy and on living standards. It started with the credit crunch and the global financial crash. More recently, we have had the covid pandemic, which has had a significant and lasting impact on our country and its finances. Even more recently, the disgraceful invasion of Ukraine by Russia has had severe negative effects on global prices and created major challenges for both global and local economies.

These big events have led many commentators to liken the current economic situation to that in the 1970s, because of the inflationary element that the Government have been grappling with recently. However, each recession or economic crisis is unique. If any historical comparison is to be made, perhaps the challenges we face today echo more closely the political and economic period after the second world war than that of the 1970s. The extreme costs incurred and the public debt overhang created in battling covid, the shortages of materials and supplies caused by global supply chain disruptions, and the simultaneous energy and food price spikes need particular and considered responses.

Following the second world war, problems with food, energy and housing plagued the economy for years. The rationing of goods, materials and even housing lasted long after VE Day, and the political consequences for Labour and the Conservative party were brutal. It was not just Churchill who faced a possibly ungrateful public when he was booted out of office after winning the war; Labour’s Nye Bevan truly transformed the country in his approach to health and housing, only to see Labour unceremoniously dumped for not delivering quickly enough. The lessons of history are that the Government need to be muscular and act single-mindedly to deliver at pace for the people.

The seriousness of the current situation requires the Government to have a laser-like focus on overall household costs, yet the machinery of government does not allow that to happen, because in the division of the Departments, no single Department has overall sight of housing and household costs. The responsibility for and regulatory oversight of the key household utilities—gas, electricity, water, telephone, broadband, TV licensing or council tax, as well as mortgages and rent—that are responsible for so much pressure on individual households is split between multiple Government Departments, each with differing priorities. No one is responsible or accountable for total household costs, yet that is what every household, up and down the land, is thinking about—“How much do all my bills cost? How much do I have, to pay for them? How am I going to make ends meet?”

This matters because we do not just pay for the utilities we use; our living standards are directly affected by the bills, which include commitments such as the costs of net zero and of building new physical infrastructure to meet future population growth. All those costs need to be tightly managed, like any other tax or national spending commitment. In my view, all household regulation should be under one roof, overseen by Ministers who can look at total household costs and the impact of regulatory decisions.

There is a real opportunity for Government to refocus regulators on getting the best deal for householders, rather than the best deal for the people they regulate. That means breaking down the existing silos of Government and regulatory structures to create a new, household-centred approach to allow better decisions to be made about how much households can pay at any time and when extra investment can best be afforded. That is one important way in which we could start to address living standards for the nation.

Back in 2009, as the impact of the financial crisis hit, I wrote about the likely impact of that massive event on household costs and repossessions, and the range of interventions that were available to the Government of the day. Things looked grim and hundreds of thousands of repossessions were forecast, in line with previous housing crashes. There were interventions that I could recommend, and recommendations were taken forward that helped people stay in their homes and weather the crisis. Judicial and financial regulatory policies were changed accordingly.

Given the immediate challenges facing our country, it is just as important today that the Government respond to support householders and households, because the distribution of housing today is very different from in those earlier recessionary events. The majority of rented housing is now owned by private sector landlords—about 20% of all housing stock. That is neither equitable nor feasible for renters, who need to pay high rents to fully shield landlords from challenging times. Rent needs to be affordable; otherwise we end up with inter-generational unfairness, but that is where we are today: unfairness not just for so-called generation rent but for people under 40 who have been unable to get a home of their own and find themselves having to pay more. We need to take a fresh look at how to deal with that, and at how renting is managed within the welfare bill. Too many people find themselves in overpriced, sub-standard rented accommodation with a housing allowance that does not meet the cost of the rent, so they are expected to make up the difference.

The situation is exacerbated by what I call the invisible money and invisible tax position. I recently asked a group of people to say how much energy support the Government had given during the energy spike. There was a silence. Not a single person in the room could give a figure. The Office for Budget Responsibility says that the energy support policies in 2022-23 cost more than £50 billion—2% of GDP—and yet not a single person could say how much money the Government had given. That money is very different from the £300 direct payments under the cost of living programme, which went directly into people’s bank accounts. Invisible money contributes to the sense, but not the reality, that the Government are not helping, so I hope the Minister reflects on how the Government can better explain and make clear the money and support they are giving, and ensure it is done in such a way as to help people appreciate and understand what is happening.

It is the same for what I call invisible tax—the regulatory charges through utility companies. Again, they are not directly visible and do not form part of household assessment when the Government Budget is considered.

Living standards are crucial to all Members of Parliament and the Government of the day. It is right that we look at people’s ability to meet their daily costs, but we must have a firm eye on the fairness of where costs and obligations lie. I am grateful for the opportunity to speak in this debate, which is of great importance to us all. I hope the Minister will consider the ways in which the Government may better support the 22.6 million people on welfare—a third of the population. That should not just be through direct spending, or support of the type that households received during the pandemic, which protected lives and livelihoods. I recognise the Government’s commitment to upgrading infrastructure, but I should be grateful if the Minister would reflect on my comments.

Photo of Patricia Gibson Patricia Gibson Shadow SNP Spokesperson (Environment, Farming, Agriculture and Rural Affairs) 1:57, 1 Chwefror 2024

I am delighted to sum up for the SNP. I congratulate my hon. Friend Stewart Malcolm McDonald on securing the debate and opening it so comprehensively.

No issue is more pressing for our constituents at the moment than the cost of living crisis and its impact on living standards. The UK Government point to a range of factors to explain why, in the two years to March 2024, we have had the biggest fall in living standards since records began, as the Office for Budget Responsibility highlighted. Even as wages rise and inflation falls, there is yet more pain to come. Consumers with less to spend act as a drag on the economy. In addition, confidence in UK economic growth fell by 19% between June and July, according to the Hargreaves Lansdown investor confidence index.

The UK Government blame the covid pandemic and the war in Ukraine—to be honest, they would blame the bogeyman if they could—but they are strangely reluctant to even mention the word “Brexit”, although we all know the impact it has had on our productivity and our living standards. The Resolution Foundation says that the UK is falling behind our European counterparts on living standards due to low growth and high inequality, and our prosperity gap has been widening since 2009.

Everybody knows that there is a global element to the current difficulties, but let us not forget—as so many Ministers have done already, it seems—the disastrous Budget of the previous Prime Minister, which sent inflation soaring, interest rates rocketing and the pensions system to the very verge of collapse. That is what true economic incompetence looks like, and the Tories have never recovered fully from that particular disaster.

My constituents and people across the UK are truly suffering and the Government must accept responsibility for their own incompetence. About 2.65 million people have reported being unable to afford a healthy amount of food. The expense of groceries remains the most significant stream of household finances, as 96% reported a rise in food expenses over the past month. Young adults aged 25 to 34 years are almost three and a half times more likely to experience vulnerability compared with those aged 75 years and above.

The cost of essential household expenditure for homeowners has soared by more than £9,000 a year on average over the past two years, with higher mortgage rates the biggest contributing factor. There have been 14 mortgage rate rises over the past two years, with inflation peaking at 11.1% in October 2022. Food and energy prices have risen markedly since 2022, gas prices in particular, with the cost of energy doubling since 2021. The pain goes on and on. Many households use less fuel, such as gas or electricity, simply because they cannot afford to maintain the same level of usage, with about one in five adults reporting that they were occasionally, hardly ever or never able to keep comfortably warm in their home.

Nearly two thirds, or 64%, of those of working age who live in poverty live in working households. More than 5 million people live in homes with energy debt, with more than 3 million people disconnected from their energy last year because they simply could not afford to top up their meter. There seems to be no end to this because, alongside all that, food-bank reliance is at record levels, with many of the food banks in our communities simply unable to keep up with demand. At this juncture, I pay tribute to the work of the Ardrossan food bank in my constituency, which does excellent work.

The Joseph Rowntree Foundation report, “UK Poverty 2024”, was clear that six successive UK Prime Ministers have overseen deepening poverty over the past 20 years. It also noted that the Scottish child payment is making a difference in Scotland. We know that the current UK Government will not implement a similar measure in England, but we also know that no incoming Labour Government will implement it, either. However, it is heartening to know that those parties are committed to ensuring no cap on bankers bonuses, but that there will be one on child benefit. That suggests that those parties are completely relaxed about increasing inequality in our society, with an apparent acceptance of the inevitability of poverty.

The reality is that amid all that pain, with the limited powers that the Scottish Government have—their powers are very limited—they are doing all they can to support people during this unprecedented decline in living standards, with a focus on a more progressive and equal society—the Scottish child payment; the baby box; the rent freeze; free school meals being rolled out for all primary 1 to primary 5 pupils, and to be extended to all primary school pupils on a universal basis; free bus travel for under-22s; five family payments from April 2024, which dwarf the payments made in England; the winter heating payment; the council tax reduction scheme, worth £800 per year for over 450,000 households; and the carer’s allowance supplement, delivering £255 million to over 148,000 Scottish carers. But, if I may quote George Foulkes, we are “doing it deliberately”.

The SNP will always use its powers to support households through the damage inflicted by the mismanagement of this UK Government, with its £318 million a day spent on paying debt interest, after burning £4.2 million-worth of personal protective equipment and wasting £66,000 million on High Speed 2, which is just a rail link from London to Birmingham, for which all UK taxpayers will pay. The UK Government are not doing this deliberately; they are just dogged by their own inability to govern, and govern well.

An incoming UK Labour Government seems pretty likely at the moment, but as Labour U-turns on all that it was ever supposed to stand for, we know that it will remain committed to austerity, which it introduced in its previous term in office, leaving bankers’ bonuses uncapped as millions struggled to make ends meet. We all remember the admission from the current shadow Chancellor, Rachel Reeves, that Labour is

“not the party of people on benefits”— a sorry story indeed.

We look to the example of small, independent European nations, which show what can be done with a more equal, prosperous country with wellbeing at its heart. Scotland is rich in natural resources and we can build a nation, freed from the shackles, the dead hand, of Westminster, which is governed by a consensus from both the main parties that poverty and inequality are acceptable and inevitable. They are not.

With all the powers of an independent nation, Scotland can make meaningful improvements, by making different choices and having different priorities. That is the way that we will tackle the scandal of the record decline in living standards that is decimating our communities.

Photo of Michael Shanks Michael Shanks Shadow Minister (Scotland) 2:06, 1 Chwefror 2024

It is a pleasure to participate in this debate under your chairmanship, Mr Mundell, and to speak in a debate brought by my neighbour, Stewart Malcolm McDonald. I congratulate him on securing it. He and I endured many electoral scrapes before we got to this place, but this is the first opportunity we have had to participate in a debate at the same time. It is a pleasure.

This is a timely debate because, as we have already heard, over the past few weeks the Government seem to be trying to give the impression that everything is okay —that there is “nothing to see here” and we are back to normal; the cost of living crisis does not exist, and everybody, all across the country, is getting on just fine.

The hon. Member for Glasgow South made the important point that the cost of living crisis affects individuals, but also the very fabric of our society. I will come back to that point later on. From my own constituency casework and from meetings with community groups and others—I know it will be the same for all of us —I know that the cost of living crisis is far from over. In fact, people are struggling now more than ever. It is important that we keep talking about living standards and that we push the Government, in the weeks that they have left in office, to do more. This Parliament is on record as being the first in modern history during which living standards in the country will contract. Household income growth is down by more than 3% in this Parliament. Britain is worse off.

Mrs Elphicke made some reflections on history, which was an interesting perspective to bring. At one point, I thought the praising of Bevan might have led to another faction in the Conservative party—the Bevanites—but it was an important point. I will take away particularly the idea of a unified Department to look at these issues. She made the point very well. Just a few weeks ago, I raised the issue of prepayment meters in the main Chamber. It is a classic example of a straightforward issue, but the various bodies that deal with it are divided and sit at different parts of the system. Bringing them together would be very helpful.

I mentioned before the cumulative impact of the cost of living. That is important, because we see levels of poverty and destitution reaching horrifying levels. People who were teetering on the brink of poverty have been plunged into it, and into destitution. Inflation may be coming down, but the aftershocks are still being felt. Wages have not kept pace with costs. Debt is rising across many households. The ability to make the pay packet stretch just a little further every month is becoming more and more difficult, if not impossible.

We saw this week that even George Freeman has had to confront mortgage challenges. A salary of £118,000, some four times the average salary of a worker in my constituency, still did not allow him to continue in his ministerial job, although I suspect there will not be a huge outpouring of grief in that case.

More than 1 million households are expected this year to come to the end of cheaper mortgage deals, leading to an average increase in annual housing costs of about £1,800, according to the Resolution Foundation. Yesterday the leader of the Labour party, my right hon. and learned Friend Keir Starmer, raised the case of an Iceland worker and was met with derision from many Members on the Government Benches. Dozens of similar cases have been raised with me over the past few months. Constituents who were stretched to afford their mortgage in the first place now find themselves in greater debt, with income no longer matching the mortgage payments that they could only just afford before.

Citizens Advice has done some research and found that, previously, mortgage holders on average had about £61 left after paying for essentials, but now, after the mortgage changes, they find themselves more than £100 at least in debt every month—there is a cumulative impact—and in some cases it is four, five or six times that amount.

Of course, part of the problem is the still rising cost of food. Although inflation overall may have come down, food inflation continues to be a huge problem for families. The overall price of food rose last year by 26%, which is a staggering figure. Of course, we also have the slightly more subtle version of inflation through companies simply reducing the product that they are selling, which puts even more pressure on families.

Energy bills have soared, with people struggling to heat their homes. As we have heard from other Members, a quarter of adults last year said that they were occasionally, hardly ever or never able to keep themselves comfortably warm, which is a basic that any of us should be able to expect. It was the case that 34% of adults said that they cut back on their heating, and 16% of adults said that they were worried that their food would run out and they could not afford more. That is a staggering statistic.

Many of us may have visited the Trussell Trust’s event in Parliament yesterday. I spoke to a number of people who raised examples of families who were in work, in well paid, permanent jobs, but were still struggling to make ends meet. We know that more and more people in the economy are not in such work and so they are in an even worse position. Working-age adults are far more likely to turn to food banks, and almost half of households experiencing food insecurity are dealing with disability—an issue to which I want to return. This is a picture of a country with so many people teetering on the brink of poverty and now living such a precarious life that even work is not lifting them out of poverty.

A number of Members have raised the intergenerational nature of poverty—the challenge of a generation growing up now without any of the expectations that a previous generation had. Before I was elected to this place, I was a high school teacher and saw many of those young adults. They were very well qualified, intelligent and capable, but they were leaving school and going off to university or work with none of the expectations about being able to get a permanent job and afford a home. That just does not exist for many of them now. The fact that so many of them have resigned themselves to that fact is in itself depressing.

In the midst of all this, we have a Government—I am hoping that the Minister will correct me—who seem to suggest that everything is fine and there is nothing to see here. The fact is that the economy is not working for working people across this country. We have now had 14 years of a Conservative Government, and people are certainly no better off than they were before. People have higher taxes and higher mortgage payments, and prices are still rising at the shops. There have been 25 tax rises in this Parliament alone, with households paying on average £4,000 more in tax each year. The Conservatives have become the party of high tax because they are the party of low growth.

The same is true in Scotland: we see tax rises in Scotland to cover for fiscal mismanagement and a £1.5 billion black hole, but also for a lack of growth, which I attribute to both Scotland’s Governments. We need to get some basic economic competence back so that we can boost wages, bring down bills and make working people in all parts of our country better off.

Photo of Michael Shanks Michael Shanks Shadow Minister (Scotland)

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

Photo of Stewart McDonald Stewart McDonald Scottish National Party, Glasgow South

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?

Photo of Michael Shanks Michael Shanks Shadow Minister (Scotland)

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.

Photo of Patricia Gibson Patricia Gibson Shadow SNP Spokesperson (Environment, Farming, Agriculture and Rural Affairs)

Does the hon. Member accept the independent evidence of the OBR that shows that—I have the evidence and can share it with the hon. Member, if he wishes—the majority of people in Scotland pay less tax, including council tax, than they would if they lived in England? His remarks about tax make me wonder whether he no longer supports what was on his leaflets during the by-election: that council tax should be frozen.

Photo of Michael Shanks Michael Shanks Shadow Minister (Scotland)

I am grateful to the hon. Member for North Ayrshire and Arran for her dedication in checking my leaflets and retaining that information; I think that is what we call “cut-through” in the political world. I accept the interesting point that she makes. She has questioned the Government on that point on a number of occasions. I think that there is an issue when somebody on £28,500 is paying more tax—those are not wealthy people. In the midst of what we have all been talking about in this debate, that is an increase in the cost of living.

On the subject of the council tax—I feel like I am relitigating a by-election that I thought was behind me for now—I opposed the proposal of a 25% increase, which was in the consultation carried out by the Scottish Government. There is a world of difference between opposing a 25% increase and announcing a council tax freeze, which will hammer communities all across Scotland. Of course, the hon. Member may be very aware of my leaflets, but I am not sure that any of her party were aware that the First Minister was going to announce that policy before he announced it, which shows just how little thought went into it.

I will get back to Labour’s new deal for working people, which is what I thought the interventions were going to be about. We have made it very clear that, in the first 100 days of a Labour Government, we want to introduce the strongest commitment to improving the lives of workers in a generation: raising wages, improving working conditions, bringing stability back to employment and enshrining workers’ rights from day one. That would undo the damage of much of the anti-worker legislation we have seen over the past 14 years.

We have also set out how we will bring down energy bills by building cheaper and cleaner power across the country, through the creation of GB Energy, a publicly owned clean energy generation company headquartered in Scotland—something that I am sure my colleagues from Scotland will warmly welcome. We will also look to reform things like work capability processes—I have raised that on a number of occasions in this Parliament—so that people entitled to benefits are not locked out of them by bureaucracy that simply does not work.

I return to the comments that the hon. Members for Glasgow South, for North Ayrshire and Arran and for Dover made about the intergenerational question, which is incredibly important. I spoke about being a teacher. Before that, I worked for a charity that worked with young people involved in gangs and offending. The route out of that involvement was often through giving people something to aspire to: a sense of hope that their future would be better than the poverty and destitution that they found themselves in. It seems to me that we are increasingly turning our backs on a generation of young people who have done nothing to cause any of the crises that they face, but who are going to pay the price of them for a long time to come.

I will briefly address the issue of disability. I draw attention to my entry in the Register of Members’ Financial Interests, as I am a trustee of two disability charities. Disabled people face higher costs of living across the board. Scope found that disability-related costs represent the equivalent of 63% of a disabled person’s income. Just by having a disability, you are already at a financial disadvantage, and the cost of living crisis has exacerbated that hugely.

I want to mention a woman who I met just before Christmas. She was forced out of her home because she could not afford to heat it any more. She had spent the past three months in the living room. She had a hospital bed where she ate her meals, had her personal care and spent most of the day because it was the only room in her home that she could heat properly. The downside was that the rest of her house became damp and infected with mould because she could not turn the heating on. She had been failed by the benefits system, cuts to her care package and rising energy and food bills. She also lost the opportunity to continue in her employment programme, which was what gave her opportunities in life.

There are countless such examples. I am sure that every one of us could recount an example from our constituents. We should be ashamed that in 2024, in a country as rich as ours, people have such a standard of living.

I want to close by saying what the hon. Member for Glasgow South started by saying: the fall in living standards is a huge crisis facing our country. It affects mental and physical health, education, family wellbeing, housing, employment—a whole range of issues. It is not going away. It has not declined. It is not getting better. It will stalk families for years to come, possibly for a generation. Debt is piling up to eye-watering levels and with it comes the impact on families. The Government have failed in basic economic tests, and working people, as always, pay the price.

I thank the hon. Member for Glasgow South for securing this important debate. I look forward to hearing what the Minister will do in the few weeks that the Government have left to change the situation for families across the country.

Photo of David Mundell David Mundell Ceidwadwyr, Dumfriesshire, Clydesdale and Tweeddale

I call the Minister. My only request is that we leave a few minutes for Mr McDonald to conclude the debate. It must end at 3 o’clock, so there is ample time for the Minister to respond.

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury 2:21, 1 Chwefror 2024

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 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, 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 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.

Photo of Stewart McDonald Stewart McDonald Scottish National Party, Glasgow South

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?

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

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.

Photo of Natalie Elphicke Natalie Elphicke Ceidwadwyr, Dover

I am grateful to the Minister for addressing that issue directly, but does he acknowledge that the timeframes for the investment and spending settlements are not within the control of the Treasury, but within the control of the regulatory frameworks that are in place? The ability for either DLUHC or, indeed, the Treasury to bring them all together in a meaningful way is currently limited. It was in that spirit that I hoped he would reflect on the impact of all these things on households, and on how they build up for the individual household purse.

Photo of Bim Afolami Bim Afolami The Economic Secretary to the Treasury

I thank my hon. Friend for that remark. I am very happy to think about and consider more deeply how we make sure that—whether it is a regulatory impact, is at national policy level or is legislation made in this House—we focus on achieving the right outcomes for the right people at the right time. I can give her that commitment today.

All households in Scotland, Wales, Northern Ireland and England were provided with support, but the poorest households gained the most. The average level of support was most generous in the devolved nations, compared with the UK average. Alongside that, we have announced a comprehensive levelling-up strategy that not only addresses the immediate challenges but lays the groundwork for sustained prosperity. As part of that, we are continuing to support local growth through funds such as the £2.6 billion UK shared prosperity fund and the £3.2 billion towns fund. The shared prosperity fund empowers local leaders who know their areas best to take the action that best meets the needs of their local labour markets. In addition, the refocused investment zones programme will catalyse high-potential knowledge-intensive growth clusters across the UK in our key future sectors, bringing investment into areas that have traditionally underperformed economically.

The three watchwords of the hon. Member for Glasgow South were prosperity, fairness and resilience. He expressed uncharacteristic pessimism about the idea that they would be addressed by this Government or in the coming weeks and months of this Parliament, but I want to make the case for why we are doing that. On prosperity, I mentioned full expensing, tax cuts in national insurance and various other measures that support all regions of the UK. They are designed to build long-term prosperity in our economy. They deal with our economic weaknesses and build on our strengths.

On fairness, I think I have comprehensively set out today the support that is being given to the most vulnerable —indeed, to a majority of households. That is done in order to be fair.

I should not stray out of scope and go into other policy areas, but the fundamentals for resilience are having a robust, sustainable economic growth strategy that, over time, increases the growth rate of our economy. Upon that foundation everything else is based.

In conclusion, these measures are a clear demonstration of the Government’s unwavering commitment to promote living standards and support households up and down the country. We firmly believe that the key to a prosperous future lies in creating opportunities for everybody. The boost to the national living wage and the historic reduction in national insurance are powerful tools in driving employment and improving living standards. By putting more money into the pockets of hard-working people, we are not just bolstering their financial wellbeing but fuelling economic growth.

As always, we need to balance support for households with fiscal sustainability. As I have said, the economic position remains challenging. Inflation has more than halved, but it remains too high: it is not at our 2% target. We are not complacent about that, which is why the Government remain steadfast in our support for the Bank of England as it acts to reduce inflation.

Our long-term objectives are crystal clear—increasing prosperity, improving the long-term growth rate of our country, improving our resilience, levelling up every corner of this country and fostering sustained economic growth. It is through these robust economic policies that we lift communities, create opportunities and enhance the quality of life of all our citizens.

Our commitment to growth is not about numbers in a spreadsheet. It is not for the short term; it is for the long-term, tangible improvements in living standards that result from a thriving economy. We continue to keep all options under review as we take tough decisions to drive down debt and inflation and increase our prosperity. These complex issues affect all our constituents, wherever we call home. I thank all Members for their constructive contributions.

Photo of Stewart McDonald Stewart McDonald Scottish National Party, Glasgow South 2:44, 1 Chwefror 2024

I will be brief—that is normally followed by a long speech. I am grateful to the hon. Members who came here today, to Mrs Elphicke for her co-sponsorship, and to my hon. Friend 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—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.

Sitting suspended.