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Incomes and Prices

Volume 825: debated on Monday 31 October 2022


Asked by

To ask His Majesty’s Government what steps, if any, they are taking to ensure that incomes keep up with prices.

My Lords, in March 2022, the Government set out their annual remit to the independent Low Pay Commission, asking it to make recommendations on the next uprating of the national living wage and minimum wage rates by the end of October. The Government will respond in due course, and the new rates will come into effect from April 2023. In addition, the Government announced the energy price guarantee and £37 billion-worth of support for the cost of living in this financial year.

My Lords, I thank the noble Viscount for his reply. The reality is that wages face a catastrophic situation this year. The annual rate of increase in wages, on average, is 7% or 8% less than the average rate of increase in prices. The consequence will be that many will face poverty, hunger and cold, and employers will lose demand for their goods and services. The OECD Employment Outlook 2022, published earlier this year, recommends the enlargement of collective bargaining as the answer to falling wages. Will the noble Viscount and his Government consider this option and join New Zealand and the state of California in adopting the enlargement of collective bargaining?

First, we are very aware that people across the UK remain very worried about the cost of living—I think the House is very aware of that. The noble Lord raises an interesting idea. Certainly, collective bargaining plays an important part in the representation of workforces in the UK. The noble Lord will know, however, that the Government have accepted the pay recommendations of the independent pay review bodies, which cover the NHS, teachers, police and the Armed Forces, for 2022-23.

My Lords, the TUC today reported that 1.8 million public sector workers are seriously considering quitting because of the very low, nominal pay rises that they have received, which were well below real inflation and low compared to the private sector. Do the Government accept that if even a small portion of those workers go through and quit, our public services are essentially up the creek without a paddle? What are the Government are doing to stem departures?

We are certainly very aware of these pressures. The uplifts to which I alluded in my earlier answer are the highest in nearly 20 years, reflecting the vital contributions that public sector workers make to our country and the cost of living pressures facing households. More than 2 million workers will benefit across the country. I should also say to the noble Baroness that most overall pay awards in the public sector are similar to those in the private sector.

My Lords, it is not an easy task to keep incomes up with prices. We have heard what the Government are doing, but I think this needs more of a helping hand from the Government.

My Lords, the Minister says that pay rises in the public sector are very much in line with those in the private sector. That is not readily accepted by Members on this side of the House. Will he produce his evidence for that and place it in the Library, so that we can see the basis on which the Government are working?

I most certainly will do that. It is certainly a fact, but there is a lot more that we are doing, of course, to help people pay their bills. There are many who are really struggling at the moment, so this is not the only answer. We have to create that balance between recognising the vital importance of public sector workers, while delivering value for the taxpayer and being careful not to drive prices even higher in the future by contributing to the wage-price spiral.

Has my noble friend noticed that global wholesale gas prices are now falling and that global oil prices, despite the efforts of OPEC in the other direction, are also falling? This implies that the main source of our inflation problem, energy prices, will ease considerably—with luck—before the first half of next year. Would it not be wise to delay as long as possible, if we can do so without breaking any established laws and customs, the fixing of the estimates for full inflation for next year while ensuring that those demanding that wages are not cut too much in real terms also wait to see what actually happens?

I certainly take note of what my noble friend has said although I cannot particularly comment on it, because this matter falls very much within the remit of the Bank of England. As an observer, I too have noticed that there has been some slipping of energy prices; I have also noticed that mortgage rates are slightly down. But there is a long way to go, as they are very high and people are struggling very much, so I must make that point again.

My Lords, does the Minister accept that an independent pay review body is not the same as collective bargaining? Does he also recognise that the poorest 10% of households pay 47.6% of their gross income in direct and indirect taxes, compared with 33.5% paid by the richest 10%? In what sense could that possibly be consistent with the Government’s alleged levelling-up agenda?

The noble Baroness of course has much experience, particularly in the teaching sector, but the pay review bodies, of which there are eight, are very representative. They consider the needs of all public sector bodies and are made up of a number of representative parties, including trade unions and academics, to make the necessary decisions, so I believe that they are independent. One can have a discussion as to whether they are the same as collective bargaining, but that is where we are.

My Lords, I understand that the latest figures show that the average public sector pay increase is running at 3%, while in the private sector it is running at 7%. Can the Minister explain the difference between those figures and the figures that he has?

Well, the figures vary, but if we look at the lowest-paid staff, particularly in the NHS, they are seeing a pay rise of 9.3%. It does vary enormously.

My Lords, the energy price guarantee will reduce some inflationary pressures over the winter period. However, does the Minister acknowledge that the scaling back of support from April 2023 could have a detrimental impact on inflation from that point? The Bank does not expect to meet the 2% target for some two years. Where does that leave working people, whose incomes will have to continue to be stretched further and further?

The noble Lord makes a good point because, as the House knows, we announced significant support worth over £37 billion for households this year, targeted at those who need it the most. However, we continue to keep the situation under review. The Chancellor has made it clear that, looking into next year, the Government will prioritise the needs of the most vulnerable and support those in need, while ensuring that we act in a fiscally responsible way.

My Lords, there seems to be consensus in the Government at last that the economy benefits when people have more money to spend or in their pockets. Government statistics show that the best way to improve pay is to join a trade union, such as my union, Unite, which has put £200 million into workers’ wallets through pay increases in the last year alone. It has won four in five out of more than 450 disputes. That is why, as my noble friend Lord Hendy said, the reintroduction of sectoral collective bargaining would make such a massive difference by growing wages, productivity, and the economy. Does the Minister agree?

I have said already that the unions play an important part through their role in representing workforces, and I stick by that, but it is not just that. There is the amount of support that we are giving over and above it. The noble Lord mentioned the energy price guarantee, but millions of the most vulnerable households will receive £1,200 of support this year through the £400 energy bills support scheme, the £150 council tax rebate and the one-off £650 cost of living payment. It is to do with how much they earn, but also how much we can stretch their pockets.

Earlier, the Minister referred to the inflationary pressures from wage rises. Why is he silent on the inflationary pressures caused by corporate profiteering, especially from energy companies, escalating executive pay and the billions being spent on share buybacks and dividends? Could he explain why he is being inconsistent?

The noble Lord will be aware that there is already a levy on energy companies. In terms of those earning at the higher level, I said in response to a question last week that I thought that raising the cap on bankers’ bonuses, for example, was a very good thing. It is very important that we attract the very best people from around the world as our investment bankers, who might bring in about £30 million just on one deal. It is better that it comes into the UK than to Frankfurt, Paris or New York.