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Low-income and Vulnerable Consumers

Volume 756: debated on Thursday 6 November 2014

Motion to Take Note

Moved by

That this House takes note of the cumulative effects of Government economic, public spending and regulatory policies on low income and vulnerable consumers.

My Lords, the central statistics for this debate are these. For households in the lowest two deciles of income, since the financial crisis in 2008 the cost of their basket of essential goods has gone up by 28%, but their average income has gone up by 9%. Those central statistics underline my theme for today. The world financial crisis hit everybody, but I will be contending that the actions, or inactions, of this Government over the past five years of office have made the situation significantly worse and have placed the burden of the austerity programme on the poorest in the land. Even as we enter into a phase of recovery, that continues to be the case. As a result, they have deepened and exacerbated the polarisation of our society, to the detriment of our more vulnerable families and households. That is quite a charge sheet.

Most of what I say will be about the costs to these households, but I shall first say a few words on the income side and the state of the labour market. Employment is now growing, which is very welcome, but the nature of that employment is often very precarious. There is a growth in part-time employment, some of which is desirable, but quite a lot of people would like to work full-time, or, at least, significantly more hours. There is a growing number of people on zero-hours contracts, which is highly precarious work. There is a growth of what we used to call bogus self-employment: forced self-employment. At the bottom end of this dysfunctional labour market there are some really nasty practices indeed. Next week we will be debating the Modern Slavery Bill. The reality is that, in certain agricultural sectors and in parts of catering and construction, we are seeing trafficking of workers, which is undermining the conditions of everybody.

Meanwhile, the Government are continuing their attacks on the protection that workers have in the labour market—on trade union organisation, the individual rights of workers and their access to tribunals and legal redress. That affects not just people at the bottom; it drags everybody down, in particular those who are just a little above them. Of course, the other source of income for these bottom two decile families is social security benefits. Those, too, have been largely frozen and, in some cases, cut. They have been the subject of huge and negative political propaganda. I read in the Times today that the Government are telling us that 25% of tax is spent on welfare, which conjures up views of the work-shy—when, in fact, the bulk of that goes on pensions and the increase is largely in payments to people at work whose wages are simply inadequate.

Both low-income households, dependent on low wages, and households dependent on benefit payments have seen the real value of their income squeezed and their protection reduced. Who are these people? If you read the Daily Mail or listen to some government Ministers, you would assume that they are all in multigenerational, unemployed households; they are work-shy teenagers; they are benefit tourists from eastern Europe and beyond; or they are illegal immigrants. However, the reality is that there are large numbers of pensioner households in that group, and the vast majority of the rest have at least one person in work. Often the reality is that the main earner in those households is a woman, who is often in and out of work and is subject to very variable income. That of course relates back to the earlier debate today.

Those are the consequences of our so-called “flexible” labour market, in particular for households where the main earner is a woman. When we talk about the decline in real incomes for these people, the usual way in which statisticians calculate it is to set the income against the general consumer prices index. But for those households, the key issue is the price of essential goods and services. If we take a longer period from before the financial crisis to the end of last year, the CPI in general has gone up by 36% but the cost of water has gone up by 51%, housing by 61%, food by 61%, public transport by 111% and electricity and gas by 161%. Inevitably, that puts cost pressures on all these low-income households. The concentration of that pressure on the poorest is not inevitable. Government action and Government inaction have helped to aggravate or, indeed, cause it. I shall take just a few examples.

The first is that of energy. It is true that the Government have started, neatly, to statistically redefine fuel poverty. Whatever one thinks of that redefinition, the numbers are still going up in almost every part of the country, whether on the old definition or the new one. Gas and electricity prices for our poorest households are going through the roof. There was an item on the news today about heating oil. Many of our rural poor depend on heating oil; they are very dependent on it in Northern Ireland. Yet the cost of that, despite the fall in world prices of oil, is still going up. As for fuel poverty programmes, there has been a deliberate action by this Government to cut what was in England the Warm Front programme, so there is no direct taxpayer-funded improvement in the energy efficiency of their homes.

There is also, probably more importantly, a failure of the regulator, Ofgem, and of the codes by which the regulator operates, to gear tariffs to help those who have relatively low use and are in relatively poor households. The ECO, which is supposed among other things to replace the Warm Front programme, actually does nothing of the kind. The warm homes discount is welcome and valuable, but it is a sticking plaster over inequitable overall tariffs. Some of the interventions by government over the head of the regulator have made matters much worse. The Prime Minister called for a simplification of tariffs, which we can all agree with, then called for four tariffs—but, in the process of drawing up those four tariffs for gas and electricity, Ofgem has ruled out and dropped a number of the pre-existing tariffs that were geared particularly towards pensioners and low-income families. The net effect of that is that the whole structure of tariffs, against the background of rapidly rising energy prices, is making the situation of the fuel poor worse. I declare an interest as the head of a charity that makes grants for research into fuel poverty.

Another area is transport. The working poor by and large require public transport to get to work or to seek work, but bus and train fares are soaring. For buses we need a whole new deal, as the Labour Party has set out recently. As for trains, we need to relook at regulation, and at whether fares, which can benefit those who can afford to book substantially ahead, for those who are in and out of work on different days of the week and do not know whether they will be working from one week to the next, are unregulated, in effect, in the present system, and do not meet their needs.

The other area is housing. Many in this House have heard me rant on about housing many times over the past few months, and I shall not repeat my continued analysis of this, but I will say a few words on it. I have always accepted that the Government did not inherit the greatest situation on housing; the crisis was already there. For nearly 30 years, we failed to build enough new housing. But this Government have made matters worse. They cut the affordable homes budget by 60%—that was almost their first action. The soaring prices in the overheated south-east and London are affecting all forms of tenure and all parts of the country to a greater or lesser extent. For the young—and by that I mean those under 40—on average or below incomes, house purchase is now out of the question. That of course puts huge pressure on the private rented market, where there is a soaring level in most of our urban areas, particularly in London, of private rented accommodation. The average private renter uses 50% of their income simply to pay rent and housing.

The Government have deliberately reduced the supply of social housing. Access to new tenures within social housing in most parts of the country is almost nil. For those who are in social housing, they have geared the level of social housing rents to reflect those within the private sector, or 80% of the private sector. So where rents are rising highest in the private sector, at a cost to private tenants, that is also being reflected in the social sector. The Government and Treasury rules prevent local authorities and, to a large extent, housing associations investing in new social housing. Worse than that, the Government are allowing developers to move in, in a number of areas where social housing does exist, both local authority and housing association owned, and to replace what was social housing with luxury flats. You do not have to go very far from this building to see exactly that in operation.

Meanwhile, the pressure on the private rented sector has brought a number of landlords into the situation who do not act in the best interests of their tenants or in the best interests of the reputation of the private rented market—yet the Government have refused even to register private sector landlords, let alone to engage in any degree of rent control or setting the minimum level of tenure of lease. So we have families with children who are being brought up in inadequate conditions, who are seriously affected by insecurity and who are being bullied and often evicted by landlords. Of course, mothers in this situation may themselves want to go out to work or extend their hours of work—but then there is a real problem with childcare. Net childcare costs in this country are the highest in all OECD countries with the sole exception of Switzerland. That is a deplorable state of affairs.

So what do those families then do? If they seek credit to tide them over this period, the mainstream banks do not want to know. They will not advance credit to these people, who are then forced into the hands of payday lenders, pawnbrokers, doorstep sellers and worse. Until very recently—until the last few weeks, almost—the Government had failed to respond to the campaign to do something about this.

Meanwhile, in the rest of the market, there are other rip-off situations. There are scams on insurance, food and buying second-hand cars. There is a failure by the Government to ensure proper enforcement of existing regulations. In particular, they have allowed the decimation of the trading standards role in local authorities. I declare another interest as vice-president of the Trading Standards Institute. The workforce in trading standards has been cut by 50% over the last six years. That puts greater pressure on voluntary organisations, Citizens Advice and local authority-funded schemes, but the grants to those schemes from local authorities have also been squeezed.

The Minister may well say that this is the local authorities making their own choices. However, the Government have cut local authority spending at three times the rate that they have cut central government spending. They have targeted the poorer local authorities, so that Hackney has had a bigger cut than Westminster and Somerset has had a bigger cut than Surrey. Those authorities have had to cut back on discretionary areas, which include all the back-up services and advice for consumers and other hard-hit households.

By a threefold knock-on, the services that were there to help people out of poverty have begun to disappear—and in many parts of the country they have disappeared. For example, there is only half a trading standards person in a large number of local authorities. The result has been greater indebtedness. We now have half of households in the lowest two deciles spending more than a quarter of their income simply paying the debt and the service on that debt. We have £4.8 billion-worth of debt from payday lenders. The pressure on these households leads to stress. As we said in the last but one debate, it leads to domestic violence, the breakdown of relationships, mental health problems and family break-up. There are now 2.4 million children living in families with huge debt problems. This is an appalling outcome. It is not inevitable. It occurs only if the Government allow it to occur. I believe it to be a disgrace that this Government have failed to take steps to mitigate the effects of these developments.

My Lords, I do not know if the Minister goes to the World Economic Forum at Davos. In 2009, a speaker said:

“There is a disconnect between capitalism and people’s lives”.

That speaker was David Cameron, a year before he became Prime Minister. My noble friend’s debate today is a good opportunity to see whether the Government’s policies of the last four years have put this right. The disconnect to which the Prime Minister referred was rising social inequality and inequality of opportunity; and how the lives of some people, even those at work, were becoming more precarious and threadbare, while others benefited from economic progress, as my noble friend explained.

Have the Government’s policies made this better or worse for consumers? I will not burden your Lordships with more numbers, but various reports recently from well respected organisations tell us that, as the economy improves, so the number of people on low pay rises. Both in the public and private sector, for many pay has not even kept pace with inflation. The Populus survey reported in today’s Financial Times found that only one in seven feel the benefit of any recovery.

Part of this disconnect is that the Government encourage low pay by subsidising it through the welfare system. Why should the taxpayer subsidise firms that cannot pay their people enough to live on or cannot raise productivity so that consumers can earn more? As the Prime Minister said, there is a disconnect here.

When I first became interested in housing, 80% of the money went into construction and 20% into helping with rent. Under this Government, this has been reversed, as my noble friend described. In our current budget the opposite is true: 80% goes on rent and 20% on encouraging construction. Housing has become the low-pay subsidy for low productivity. By creating more and more low-paid consumers, not only are we making their lives more difficult, but the Government are creating difficulties for themselves—difficulties caused by the low tax revenue that they announced earlier this month.

The cumulative outcome for the consumer is the worst of both worlds: low productivity, which means low pay, and a housing shortage, which means high rents, with rises of up to 61%, as my noble friend Lord Whitty just told us. But at least business is starting to recognise this insanity, with 1,000 companies now paying the living wage.

The Government say that they are helping these consumers by taking low earners out of income tax, reducing the burden on hard-working families. However, before the income tax threshold is reached, national insurance becomes payable—the Minister knows this—so national insurance is the first burden on the low paid, and it is mainly the middle and upper-middle earners who benefit from raising the income tax threshold. Raising the national insurance threshold would have been of more benefit to the low paid, especially as national insurance rates rise with inflation. However, this Government consider it more politically expedient to do it the wrong way round, so it is the low paid who suffer.

The same mismanagement affects business. Let us take the annual investment allowance. The noble Baroness, Lady Noakes, knows all about this. During the last years of the previous Administration, it was set at £50,000. The new Government soon increased it to £100,000. In 2012, it was cut to £25,000, but the following year it was increased to £250,000. Last year’s Budget raised it to £500,000, and the current plan is that it will return to £25,000 in 2016. Yes, there is more confusion. At the same time, the annual investment allowance has become restricted to investment in plant and machinery, and the allowance for industrial buildings was scrapped altogether.

Does the Minister agree with the conclusion of the Institute for Fiscal Studies in its paper Tax Without Design, published two months ago, that the cumulative effect of all this creates costs and uncertainty and that it distorts behaviour? At this time of great business difficulty, it may be one reason why we are seeing a reluctance to invest—which of course is perhaps the major contributor to low pay.

Another area of cumulative failure is what I would call putting out one fire but not preventing the next. A good example is the Government’s policy towards private companies providing public services. It is obvious that the business model is wrong. Tenders are often won by large companies that overpromise on quality and bid low on price. This effectively rules out smaller providers, so there is little competition. Two of the major providers have been shown to be dishonest and other inquiries are under way. We know that when things go wrong there is little redress and revoking contracts can be very costly.

To the consumer of a public service, public service ethos is essential, especially in sensitive areas such as probation work. Indeed, some services have such social pressures that you cannot leave them to the market. Consumers want to know how these companies make their profits, who their suppliers are and where the dividends go, but most of this is hidden from them. What is obvious is that the Government’s ability to manage outsourcing is weak. They have failed to make this market work both to the benefit of the contractors and to the benefit of the consumers of the services. This weakness is also apparent in the railway franchise system.

The Government’s continued dogmatic refusal to correct the business model means that we are now facing a crisis of public confidence in these services. Refusal to encourage public sector bids and reluctance to accept locally administered solutions mean that these services are not as good as they should be—and it is the vulnerable and those on low income who suffer most from this. The real truth is that we are all victims of these avoidable and unnecessary difficulties, brought about by the Government. Are we going to see any change?

My Lords, it is a pleasure to follow the noble Lord, Lord Haskel, with whom I often debate. I often agree with him but I am going to be taking a rather different tack today: I disagree with much of what he has said. In particular, on the point he has just made about contracting out, although I agree that the Government have not been good contractors-out, I should remind the noble Lord that it was the party opposite which took the private finance initiative—the mega contracting-out—to the illogical extremes that have left such huge problems in parts of the National Health Service. That issue cannot be laid at the door of this Government.

I congratulate the noble Lord, Lord Whitty, on securing this debate. Of course, he portrayed a very gloomy picture of the effect of government policies on the poor and vulnerable. I am not going to pretend that life has been a bed of roses for those people in our society, but I am genuinely proud of this Government’s economic record over the last four and a half years and that is why I have chosen to speak in this debate. I am absolutely convinced that, if the party opposite had remained in power, life would have been very much worse for the whole of our country and, in particular, for the very groups that the noble Lord, Lord Whitty, is so concerned about. I am going to focus my contribution on economic and public expenditure although I will, at the end, touch a little on regulatory policies.

Policies pursued by this Government have to be put in their proper context. In 1997, the party opposite inherited a booming economy. In 2010, we were bequeathed an economy on its knees. The deficit was at its highest level in peacetime history; government debt was over 60% and still rising. Under Labour, we had slipped down the international league tables of competitiveness; we had uncompetitive personal and corporate tax systems; and unemployment had increased by 20%. I could go on. We had a huge job ahead of us to restore the economy to health. Without a healthy economy, we cannot achieve all the other aims that the noble Lord desires.

My right honourable friend the Chancellor wisely ignored noisy calls from the party opposite for higher taxes, higher spending and higher borrowing. The consequences for economic growth, interest rates, the deficit and the debt of heeding those calls do not bear thinking about. Instead, my right honourable friend the Chancellor has pursued moderate policies which have targeted fiscal rebalancing at a carefully considered pace. In so doing, he has created the environment in which the economy can start to grow again, because growth is a precondition for everything else.

In line with international experience, the Government have concentrated 80% of their fiscal rebalancing on cutting expenditure. The truth about our expenditure policies is that expenditure has not been cut in cash terms: nor is this planned. We have protected key budgets, such as health. We have met the rising costs of welfare budgets, which act as a shock absorber when times get tough. Inevitably, that means other budgets have had some quite severe pruning. Overall, the public sector has seen employment reductions and limited wage increases. However, these, too, were inevitable because employment costs are around half of current public expenditure. There were no realistic alternatives to get expenditure and the deficit under control.

Taxes have deliberately borne the smaller part of the plan to eliminate the deficit—and here my right honourable friend the Chancellor has crafted a careful combination of tax cuts and tax increases. All consumers have had to bear the increase in the VAT rate but very large numbers have benefited from our income tax changes. These were somewhat dismissed a moment ago, but 3 million people have been taken out of income tax altogether and 26 million people have seen lower tax bills as a result of those changes.

Another achievement has been to base tax policy on sound economic analysis rather than on political doctrine. Corporation tax rates have been cut, as has the 50% rate of income tax. Both were underpinned by rigorous analysis of the impact on tax yields, incentives and competitiveness. The Chancellor was right to make these cuts, and I hope that he will go further still.

The Labour Party has pledged to reintroduce the 50% rate which is the worst kind of gesture politics. According to Mr Alan Milburn, the amount it would raise would be “absolutely incidental”. I believe that it is worse than that—it would be a net negative for our economy. Our tax policies have been tough but they have been fair. Even though the top rate of tax has been cut, the top 1% of taxpayers are expected to pay over 27% of income tax this year. The Institute for Fiscal Studies has produced analysis showing that the top 20% of households paid 54% of all taxes last year and that, since 2010, the top 10% have borne the brunt of the tax changes.

It is true that all parts of the income distribution have shouldered some of the burden. The job of repairing the economy was too great to be borne only by those at the top end. It is also true that those at the bottom end of the income distribution—often those dependent on benefits—have done a little less well than those in the middle of the income distribution. But the alternative would have been that hard-working families on average incomes would have suffered more, and I hope that the Benches opposite would not have supported that.

It is a fallacy to think that we can help the poor simply by taxing the rich. If the rich take their assets, their income and their businesses elsewhere, everyone loses out. If the tax system fails to incentivise effort and innovation, we all suffer. Churchill was right to say that we cannot make the poor richer by making the rich poorer. We have to be realistic about where we are. Despite the tough action to date, on current plans the deficit will not be eliminated until 2017-18. Much remains to be done after the next election to restore our economy to full health. Until we get to that position we cannot start to build in a lot of discretionary, additional policies if they cost money.

The most important thing that any Government can do is to ensure that the economy has the right conditions for growth and wealth creation. With economic growth, jobs will be created and people will share in the wealth that is created. There are no short cuts to this. The economy in the first three years of this Government was fragile but we now have the fastest growing economy in the G7. We only have to look over the Channel to France, Italy and Spain to see what happens when tough economic decisions are avoided.

Since 2010, there have been 1.8 million more people in jobs, and three-quarters of those are full-time jobs. That is 1.8 million more people earning money for their families and also contributing to the growth of the economy. Getting more people into work is good for taking children out of poverty. Children in non-working households have something like an 80% chance of living in poverty. If one parent goes into a full-time job, that falls to around 30%. If the second parent also has a part-time job, it falls to below 10%. That is why we celebrate the fact that since 2010 there are 671,000 fewer households with no one of working age in employment.

I have concentrated my remarks on the Government’s economic and public expenditure policies. I will now say a few things about regulatory policies. The most important thing for an economy is when competition flourishes in the context of a global environment without trade barriers. Competition in open markets is the best route to consumer benefit. Competition does not always work, for structural or other market reasons; and so the second most important thing is to have effective regulators and competition authorities. In large measure that is what we have in the UK. I listened carefully to the noble Lord, Lord Whitty, as he catalogued the things that did not work well, but I struggle to see what credible policies could have been followed by the Government without completely strangling markets.

I will refer to energy prices. I agree that they have not necessarily been working for consumers, but there are three things that I want to say about that. First, the right thing is to refer those markets to the Competition and Markets Authority, and that is happening. Secondly, the wrong approach would have been to impose a price freeze on the energy companies. As any student of prices and incomes policies will tell you, that is not a long-term solution. Thirdly—this is where I criticise the current and previous Governments—energy prices that hit businesses and consumers currently include a significant impact from the green subsidies that are imposed on the energy industry by government policy and the crazy targets in the Climate Change Act. At the top of my list for removing burdens on the economy, from the largest industrial consumer to the smallest vulnerable consumer, would be the repeal of that Act.

I do not want to end on a downbeat note about the Government’s policies. This Government know that the best way to help the low paid and the vulnerable in our society is to create a prosperous economy. That is what the past four years have been about. I very much hope that next May the electorate will give us another five years to conclude the job.

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.

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.

My Lords, I am grateful to the noble Lord, Lord Whitty, for securing this debate, which I enter in no partisan spirit but hope to contribute some reflections from local experience in Norwich of those on low incomes in our city.

It was more than five years ago that I was first approached to become patron of the Norwich food bank, a relatively early one to be established. Its work informs a good deal of what I want to say. The necessity for it was identified before the previous general election as a result of the recession. Suddenly, people who thought themselves reasonably secure were worried. Those who were already insecure became highly vulnerable. That was all very noticeable within our church communities on the housing estates in Norwich, especially in the areas of greatest social deprivation.

Norfolk is often seen as relatively comfortable, but the reality for many is that it is not. I know that the need for a food bank in Norwich was recognised before the existence of the coalition Government and their policies. Indeed, the first food bank in this country was set up in 1999. Those who run food banks and those who give to them represent all shades of political opinion. They do what they do out of human compassion and not to make a political point, but I recognise that political decisions have a major impact on their work. The use of food banks continues to grow rapidly and needs explanation.

According to the Government’s figures, 30,000 people in greater Norwich are living on the edge of poverty. In the Campaign to End Child Poverty report published last year, Norwich is the authority with the highest percentage of children in poverty in the east of England. It is in the worst 5% of all authorities in the UK for child poverty. Norwich is also one of the areas in the country with the highest percentage of employees earning less than £7 an hour. That is why Living Wage Week is being so vigorously pursued in Norwich. Norwich City Council is a living wage employer, much to the council’s credit, and I am glad to say that so too is the diocese of Norwich, through its board of finance. Where families have no financial security, a sudden crisis caused by bereavement, illness or redundancy can leave them unable to feed themselves. Such situations rapidly worsen; relationships break down; houses are repossessed; rent cannot be paid; and the cost of all that for society as a whole is not merely financial.

I sometimes think that our political discourse regards human beings only as economic units. That is a gross disservice to human dignity. Eighty local care agencies refer people to the Norwich food bank; no one can simply turn up. Last year, more than 9,000 people, 6,000 adults and more than 3,000 children—bearing out the point of the noble Baroness, Lady Crawley, about children—received three days’ worth of food. That number is expected to have grown to at least 11,000 and probably 12,000 this year.

Dr Kingsley Purdam from Manchester University, the lead author of the report, Hungry? Food Insecurity, Social Stigma and Embarrassment in the UK, which was published last month, recently wrote:

“In political and media debates foodbank users have been variously described as being: ‘opportunists’, ‘not able to cook or budget’ and ‘living like animals’”.

When we stigmatise the poor, the unemployed and the vulnerable, we have succumbed to blaming them for their position. However, although some people stigmatise welfare claimants, many others show enormous human and social solidarity by volunteering to help them. A great deal of this has been spontaneous, but rapid growth of food banks is leading to a normalisation of food aid in our country. Are we content to see that in the United Kingdom? Will the volunteer support on which food banks rely hold up in the years to come, especially if the demands get ever greater? Though it is not true in our area, I know of food banks that are finding the need for ever more food to meet rising levels of demand very challenging. What would be the cost of the dislocation if this voluntary system broke down?

Around 30% of all visits to food banks are caused by benefit delays. The inefficiencies in our system contribute to the problem on a very large scale. For a family which lives day to day in its budgeting, a gap of several weeks’ income, which is reported so often as to be commonplace, can lead to a rapid deterioration in the quality and amount of food that that family eats. Dr Purdam’s recent research quotes the National Institute for Health and Care Excellence, which has identified better nutrition as one of the key cost-saving initiatives for the NHS. Poor nutrition and malnutrition is costing us dear. A defence of the NHS budget is heard across the political spectrum, yet that budget may be increasing not least because of policies on welfare which simply displace problems from one government department and budget to another, aggravate them and make them more expensive for the taxpayer in the long run.

These policy debates must never lose sight of the people who have never heard of Hansard, let alone read it. A couple of examples from the research quoted earlier will suffice. A 40 year-old man said of his visit to a food bank:

“I was nervous coming here. I thought I’d done something wrong. When you’re having to ask for food your ego takes a battering”.

Or think of the woman who said:

“I was willing to turn to prostitution if I did not get help from the food bank”.

I take pride in the compassion and generosity of so many people in this country who established such a widespread food aid network. I am glad that Christians in our churches are so responsive to need and that people of all faiths and none have joined the cause, but I am also depressed that this is necessary at all in what is still one of the richest countries in the world, with what we are told is a growing economy. Perhaps the Cinderella subject, which deserves much more attention, is nutrition itself. NICE is clear that better nutrition would save many millions, even billions, from the NHS budget if we took it seriously. I look forward to the Minister’s reply.

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.

My Lords, I welcome this debate, and I am grateful to my noble friend Lord Whitty for initiating it. I will start with a quotation from a recent book, Austerity Bites, by the journalist Mary O’Hara:

“If there was one word to capture the mood during the months that I travelled the country, it was ‘fear’. I talked to people afraid of cuts that had yet to be fully felt, of losing their home, of disability benefits being snatched away, of being unable to take care of their children or sick or elderly relatives, of essential local services being eliminated—and of their mental health deteriorating. The more the shockwaves of austerity were absorbed, the more initial fears about what might happen mutated into a daily dread about how to survive”.

That daily dread is not being felt by the privileged, who have enjoyed big pay rises and bonuses during this time of austerity, and many of whom have also enjoyed tax cuts.

I will focus my remarks on the effects of social security cuts in particular, which, to add insult to injury, have all too often been justified in terms that vilify the benefits system and those who have to rely on it. In addition to the specific cuts that I will talk about, the real value of a number of benefits received by people of working age is being steadily eroded, as my noble friend Lord Whitty explained. This has been justified by Ministers in the name of fairness as between those in and out of work, even though overall the cuts affect more people in work than out of it—the so-called hard-working families. The Chancellor has signalled a further £12 billion in cuts should the Conservatives form the next Government.

Research published this week by the Joseph Rowntree Foundation demonstrates how the real cut in living standards for consumers affected is greater because of the impact of differential inflation rates in recent years. This means that, in the words of researchers at the Institute for Fiscal Studies:

“Recent inflationary trends have disproportionately affected those in poverty”.

In other words, their living standards have been cut by even more than the cut in benefits implies. A companion JRF report points out that it is harder for low-income consumers to shop around or switch suppliers, partly because they often lack access to what it calls “enabling goods”, such as internet access, which advantage better-off consumers.

The best known of the benefit cuts is what the noble Lord, Lord Best, was the first to dub the “bedroom tax”. The UN Special Investigator on Housing has warned that it could constitute a violation of the human right to adequate housing. The justification—to free up larger accommodation in the social rented sector—is looking rather threadbare, with only 4.5% of affected tenants having downsized within the first six months, according to the Government’s own review. But, they say, this is a good start. I dread to think what a bad start would look like. The review also revealed that nearly three in five had cut back on what they deemed to be household essentials in order to meet the shortfall.

According to the New Policy Institute, about two-thirds of those hit by the bedroom tax have also had their council tax benefit cut following so-called localisation, with a 10% cut in funding imposed on those of working age and their families. The institute estimates that this year 2.34 million low-income families will pay on average £149 a year more in council tax than under the old council tax benefit scheme. Advice agencies are already reporting that council tax arrears have become their largest debt inquiry category.

In case these cuts were not sufficient to reduce the living standards of people on benefit, those deemed to be receiving too much money are now subject to a benefit cap. This means that in many cases families are paying the price for a long-term policy—pursued, I acknowledge, by successive Governments—of encouraging higher rents and subsidising them through housing benefit. Research by the Centre for Economic and Social Inclusion has shown that the cap is causing “uncertainty, distress and hardship” as families cut back on essentials, run up debts or fall back on discretionary or charitable support. Finding work has just not been a feasible solution for many of them. The main losers are children, particularly in larger families, which means there is a disproportionate impact on some minority ethnic groups; according to initial government monitoring, 80% of those affected are women, including some carers.

Growing numbers of people claiming jobseeker’s allowance and employment and support allowance are also being affected by an increasingly punitive benefits sanctions regime. The annual number of sanctions has almost doubled under the coalition. Food banks have identified sanctions as one of the main reasons for people needing their services. Worse still, there have been reports of people who have been sanctioned stealing food in order to survive.

Children have been among those worst hit by the benefit cuts, as already stated by my noble friend Lady Crawley. An impact assessment of tax benefit changes and cuts in public services carried out for the Office of the Children’s Commissioner found that families with children have been disproportionately hit, particularly those on lower incomes. As a result, child poverty is expected to increase significantly over the next few years. This analysis led to the conclusion that the best interests of children are not being treated as a primary consideration in line with the UN Convention on the Rights of the Child.

The growing pressures on low-income families have also been linked by the president of the Association of Directors of Children’s Services to a big increase in child referrals to local authorities. Similarly, in their foreword to the State of the Nation 2014 report for the Social Mobility and Child Poverty Commission, Alan Milburn and the noble Baroness, Lady Shephard, warned that:

“The impact of welfare cuts and entrenched low pay will bite between now and 2020. Poverty is set to rise, not fall. We”—


“share the view of those experts who predict that 2020 will mark not the eradication of child poverty but the end of the first decade in recent history in which absolute child poverty increased”.

We heard in the earlier debate today that women, too, have been among the main losers from cuts in benefits and services because they rely on them more heavily. As the main day-to-day managers of poverty, they suffer in particular as consumers, and their job will be made that much harder with the payment of universal credit monthly. According to a House of Commons Library analysis, women have borne nearly four-fifths of the impact of tax benefit changes. The Fawcett Society has warned that overall the impact of cuts spells,

“a tipping point for women's equality”,

leading to,

“a society in which women’s voice and choices are diminished, where women’s access to employment, justice and safety are undermined and where women become more, rather than less, dependent on the state or their families for support”.

They and their families are also becoming more reliant on charity in order to get by, as seen most starkly in the huge rise in the numbers turning to food banks, which was discussed movingly by the right reverend Prelate the Bishop of Norwich.

Let us stop and think what this reliance on food banks means. Let us think how we would feel if we had to rely on food banks. Professor Elizabeth Dowler, who co-authored the review of food aid for Defra, observed:

“Not having enough food is … an issue of private shame. … And it is an issue of private suffering. If you are not getting enough food, or the right kind of food, you absorb the misery yourself. The cost is embodied by you. It is your body that becomes unhealthy”.

A letter to the British Medical Journal about a year ago warned that growing food insecurity could turn into a “public health emergency”. Private shame made public becomes even harder to bear.

A similar tale is told by a more recent Joseph Rowntree study of social housing tenants, which found:

“Cutbacks in support make people on low incomes, in work and out, more vulnerable to debt, at risk of eviction and short of essentials, so they rely on food banks and other emergency support”.

Unfortunately the abolition of the discretionary social fund and the transfer—not ring-fenced—to local authorities of the budget that used to pay for crisis loans and community care grants has reduced the emergency support available, with particular implications for survivors of domestic violence.

Another group disproportionately affected is disabled people. Just Fair has warned that the combined effect of a number of changes on disabled people is,

“very likely to compromise their enjoyment of the right to independent living”.

Disability activists have led demands for a cumulative impact assessment of the cuts’ effects. The Government say that that is too difficult to do—but while of course it would be difficult, a report for the Equality and Human Rights Commission has shown that it is “feasible and practicable”, and its initial results confirm the disproportionate impact on low-income disabled people, as well as on women and children. I would very much welcome the Minister’s response to that question of a cumulative impact assessment that is being called for increasingly widely.

No doubt the Government’s response will be that such cuts were necessary in the face of the deficit—caused mainly, I note, by the financial crash. This is not the place to argue the rights and wrongs of deficit reduction, but it is the place to point out that by choosing to fund what I believe is about three-quarters of it through spending cuts and only a quarter through tax rises, the Government have ensured that those with the narrowest, not the widest shoulders bear most of the pain.

The policy of progressively raising personal tax allowances while at the same time cutting the real value of child benefit is no answer, despite the arguments of the noble Baroness, Lady Noakes. It is of no help to those in or out of work whose incomes are too low to pay tax, of whom over three-fifths are women, according to the Women’s Budget Group. Moreover, as universal credit is introduced, even low-income taxpayers will receive only part of the gain enjoyed by others, because the rest will be clawed back through reductions in the credit. For a Government so keen on targeting, this is a wasteful and regressive use of resources—or, as the Joseph Rowntree Foundation put it,

“an incredibly expensive and inefficient way of helping low-income working households”.

The evidence of the harmful cumulative impact of cuts is mounting. People of working age on low incomes, particularly women and disabled people—in and out of work—are suffering. Children are suffering. Is this the kind of society in which we want to live?

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.

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.

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.

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.

My Lords, I thank the Minister and everybody who has participated in the debate. I do not have time to re-endorse all the interventions from the right reverend Prelate and my colleagues here that underlined my point.

I cannot agree with the Minister or with the noble Baroness, Lady Noakes. The tale that the noble Baroness tells would not be recognisable to the kinds of household that we have been talking about today. It is all very well blaming the previous Government, but that is a debating point within this House. I could debate it had I time. What this Government are doing now to ensure that matters do not get worse is the key issue.

I do not accept much of what the Minister has said. On the point of fuel poverty she said that the numbers are going down. However, DECC’s latest report says that numbers are due to increase by 2.3 million and that the fuel poverty gap—the difference between what people can afford and what they must pay—is growing to £480 per annum. Those are DECC figures. It is the reality of life for a lot of low-income families.

I am bit disappointed by the Government’s response. I do not expect them to get away from blaming the previous Labour Government, but they do need a more substantial defence of their position. As I understand it, it relies largely on the trickle-down effect on the one hand and some demonising of the poor on the other. As the right reverend Prelate said, we are blaming the poor for their own condition. That is not a policy. It is socially disruptive, politically dishonest and economically fairly illiterate. I am sorry to hear it repeated in the Chamber today.

In National Consumer Week, I recall one of my noble predecessors as chair of the National Consumer Council, Michael Young, and almost the first publication for that organisation, more than 40 years ago, called Why the Poor Pay More. They still do, 40 years on. In an entirely different context, Michael Young said that these things are not acts of God or forces of nature, but decisions. The Government took their priority decisions, as the noble Baroness, Lady Noakes, rightly said. They took them in a way that meant that the burden of the austerity programme fell on the narrowest and not the broadest shoulders. Historically, that will be seen as a very serious mistake. I hope that the Government recognise that and recognise Michael Young’s words, just referred to, which related to the 1945 Labour manifesto. I hope that our new manifesto will be in equally ringing terms and begin to reverse the policy we have heard outlined today.

Motion agreed.