The following Statement was made in the House of Commons on Tuesday 20 June.
“With permission, Mr Speaker, I will make a Statement on the progress of delivery of cost of living support.
The Government understand the pressures that households face in the current climate. We are all familiar with the global factors that are the root causes of costs being higher, including President Putin’s illegal war in Ukraine and the aftermath of the pandemic. We are committed to delivering on our priority to halve inflation, which will help ease those pressures for everyone and raise living standards.
Alongside that important work, we continue to implement our wide-ranging and significant package of cost of living measures to support the most vulnerable during 2023 and 2024. We have increased benefits and state pensions by 10.1% and increased the benefit cap by the same amount so that more people are helped by the uprating. For low-paid workers, we have increased the national living wage by 9.7% to £10.42 an hour. That represents an increase of more than £1,600 in the gross annual earnings of a full-time worker on the national living wage. That increase, and the increases we made to the national minimum wage in April, have given a pay rise to about 2.9 million workers.
To help parents, we are undertaking a significant expansion of childcare, including a rise, later this month, of nearly 50% in the maximum amount of childcare payments for people on universal credit. For the most vulnerable, the £842 million extension of our household support fund into 2023-24 means that councils across England can continue to help families with the cost of groceries, bills and other essentials. Taking into account the extra money that we have provided through Barnett funding for Scotland, Wales and Northern Ireland, who can decide how they allocate that money, we have committed an extra £1 billion. That is on top of what we have provided since October 2021 and brings total funding to £2.5 billion.
With energy bills being one of families’ biggest worries, the energy price guarantee will also remain in place as a safety net until the end of March 2024, should energy prices increase significantly during that period. Since that energy bills support began in October 2022, the Government have covered about half of a typical household energy bill this past winter, and by the end of June will have saved a typical household around £1,500. We are also building on and extending the one-off cash payments we provided during 2022-23 that saw us make more than 30 million cost of living payments, including a £150 disability cost of living payment to 6 million people, up to £650 for more than 8 million households on means-tested benefits, and an additional £300 on top of the winter fuel payment for more than 8 million pensioner households. Those payments put hundreds of pounds directly, and at pace, into the pockets of millions of people.
However, we recognise that cost of living pressures continue, particularly for the most vulnerable households. That is why we continue to provide targeted support to help those most impacted by rising prices throughout this financial year, including more support for people on means-tested benefits such as universal credit, with up to three cost of living payments totalling up to £900. The Government have already delivered the first £301 payment to 8.3 million households—support worth £2.5 billion. The two further payments of £300 and £299 will be made in the autumn and the spring, and pensioner households will get an additional £300 on top of their annual winter fuel payment this winter, as they did last year.
I am pleased to be able to confirm to the House that from today, to help with the additional costs that disabled people face, more than 6 million people across the UK on eligible extra-costs disability benefits will start to receive a £150 disability cost of living payment. Those cash payments, which we estimate will be worth around £1 billion, will be automatically transferred into people’s bank accounts, with those eligible for the support not needing to take any action. By the end of Monday 26 June, we plan to have made 99% of payments to those already eligible—that is millions of payments being made in just seven days. Most remaining already eligible people will receive their payment by 4 July. We estimate that nearly 60% of individuals who receive an extra-costs disability benefit will also receive the means-tested benefit cost of living payment, and more than 85% will receive either of, or both, the means-tested pensioner payments.
This Government will always protect the most vulnerable, but we are also helping to improve living standards for everyone by getting more people into, and progressing in, better-paid jobs. That is the surest and most sustainable way to raise incomes and grow the economy. The number of people in employment has increased to a record high, but by removing the barriers that stop people from working, we are reducing the number of people who are economically inactive—those who are neither working nor actively looking for work. It is encouraging that last week’s labour market statistics show a further fall in inactivity of 140,000, or 0.4%, on the quarter.
We are tackling inflation to help to manage the cost of living for all households and providing extra targeted support for those that need it. The disability cost of living payments, landing in millions of bank accounts from today as part of our wider support package, underline our commitment to supporting disabled people. That is reflected in how we are stepping up our employment support for disabled people and people with health conditions; ensuring people can access the right support at the right time and have a better overall experience when applying for and receiving health and disability benefits; and transforming the health and disability benefits system so that it focuses on what people can do, rather than on what they cannot. It is also reflected in the fact that we expect to spend over £78 billion in 2023-24 on benefits to support disabled people and those with health conditions, which is 3.1% of GDP.
With the Government’s significant package of cost of living support, worth over £94 billion in 2022-23 and 2023-24, we are ensuring that those most in need are protected from the worst impacts of rising prices, putting more pounds in people’s pockets and providing some peace of mind to the most vulnerable in society.”
My Lords, I read the Written Ministerial Statement on cost of living support with interest. It runs to well over 1,000 words. I regret that most of them are devoted to repeating things that have been announced and implemented in previous months and, in some cases, years. Just 157 words describe anything new, or rather the implementation of something that was announced last autumn, namely that from this week payments of an additional £150 to disabled people to help with the rising cost of living will start to be made.
While any help is welcome for those who are struggling, we must be clear-sighted about the scale and source of the problem that people are facing. This leads us to two questions. How bad is the cost of living problem? Are the Government doing the right things to help people in it? The Government know that the cost of living is a problem. In the Statement, they acknowledge that inflation and interest rates are very high but say that it is a global problem caused by Covid and the war in Ukraine—which is interesting. CPI inflation in the UK is now 8.7%. In Germany, inflation is 6.3%. In France, it is 6%. In the USA, it is 2.7%. Yet all those countries had Covid, and all are affected by the war in Ukraine. In brackets, we should note that this is the week when UK Government debt rose above 100% of GDP for the first time since 1961.
The UK now has stubbornly high inflation, which is not associated with economic growth. Its effect is that the cost of essentials is skyrocketing. Food price inflation was still at 18.4% in the year to May. That is an eye-watering pressure on family budgets, and there is no sign that it will fall sharply any time soon. This is a challenge for most families. How much harder is it for disabled households, who must spend more on almost every aspect of everyday life—food, medicines, clothing, energy and travel? We have all heard reports of disabled people cutting back on spending on food and other basics, simply so that they can afford transport or to run essential equipment. Has the Minister seen the analysis done by Scope? It estimates that, on average, disabled households—households with at least one disabled adult or child—now need an additional £1,122 a month to have the same standard of living as non-disabled households. Do the Government agree with that analysis? If not, what assessment has the Minister’s department done of the extra amount that disabled people need, and what was the basis for choosing that figure of £150 as a one-off payment?
My Lords, I thank the Government for the Statement and thank the noble Baroness, Lady Sherlock, for covering so much ground that I too would like to cover to some degree.
The Statement is the Government patting themselves on the back, but what is the reality? I too will concentrate to some degree on people with disabilities. Research has found that people with disabilities had an available amount to spend that was 44% lower than that of other working-age adults, exposing them hugely to the rising cost of essentials. The research said that there was a chasm between the underlying disposable incomes of people with a disability, which it fixed at £19,397 per annum, and the non-disabled population’s disposable income per annum, which it fixed at £27,792. This was according to the analysis of official figures and a YouGov survey of just under 8,000 working-age adults, more than 2,000 of whom reported a long-term illness or disability.
The announcement of the £150 cost-of-living payment for people on disability benefits, which the noble Baroness, Lady Sherlock, referred to, is, quite honestly, a slap in the face for many. The payment is conspicuously lower than those made for pensioners or people on the lowest incomes. Can the Minister explain why disabled people deserve less help than other disadvantaged groups, especially as they will feel the effects of this crisis particularly acutely?
The noble Baroness spoke about Scope’s Disability Price Tag report, which states:
“On average, disabled households … need an additional £975 a month to have the same standard of living as non-disabled households.”
The extra payment of £150 does not cover even a week of additional costs. Does the Minister recognise these figures, and what will he do to narrow the gap?
My Lords, I thank the noble Baroness, Lady Sherlock, and the noble Lord, Lord Palmer, for their comments and questions. I will start by addressing a point the noble Baroness made. We wanted to use this opportunity to explain the help we have already given and are continuing to give to those who are definitely suffering as a result of the problems in the economy at the moment; “problems” is an understatement, and I am the first to say that. We wanted to make it clear that it is not just about the £150, which was the gist of the Statement; the Government are providing total support of more than £94 billion during 2022-23 and 2023-24 to help households and individuals with the rising cost of living.
Cost-of-living payments are only one part of the overall support. We want to get that message across if we have not done so already. It includes support for energy costs, which was alluded to by the noble Lord, Lord Palmer, and the extension of the household support fund in England, which helps with rents, which again were raised by the noble Lord. In 2023-24 we increased benefits, state pensions and the benefit cap by 10.1% and made further increases to the national living wage.
I want to say quite a bit more because one of the issues to raise, which is obviously very topical at the moment, is mortgages and inflation. I reassure the House that tomorrow, the Chancellor will meet with principal mortgage lenders to ensure that they are living up to their responsibilities to their customers, and to ask what help they can give to people who are struggling—I do realise that they are struggling—to pay more expensive mortgages and what flexibilities may be possible for families in arrears. Of course, I am aware of the announcement today.
We have a clear target to halve inflation this year and to support the Bank of England as it returns it to the 2% target. I remind the House that the IMF forecasts that inflation will reduce substantially to around 5% by the end of the year, which would be a large fall from the highs we saw last year. I remind the House that in March, the OBR forecast that inflation would be 2.9% by the end of the year, and that the last Bank of England forecast, which was in May, was for inflation to go down to 5.1% by the end of the year. However, we are not complacent. This is a serious time, as everyone has been saying. We remain focused on our very important ambition, which is to drive inflation down while providing a cost-of-living package worth about £3,300 per household on average over this year and last. The IMF has already noted the “decisive and responsible steps” that we have taken, and we will continue to take such steps to deliver on this priority.
My Lords, unlike others, I find much to welcome in the Statement, not least the increase in the maximum payments of 50% to those on universal credit for childcare, which will help them find work. However, is my noble friend confident that the childcare market will be able to respond to the increased demand that is likely to result from this increased beneficence from the department?
My noble friend makes a good point about childcare, and the House will be aware of the announcements that were made recently. We are determined to support as many families as possible with access to high-quality affordable childcare, which is why the Spring Budget announced these significant new investments to expand free early education entitlements from 2024-25, together with uplifts in 2023-24 and 2024-25 for the existing entitlement offers.
On his specific question about demand versus supply, that is a very good point. We are confident that supply will meet demand, but we are also aware—certainly I am aware of some anecdotal evidence—that demand is going up, and we want to be sure that demand meets supply. Although I do not have any figures, I reassure my noble friend that we are aware of this particular matter.
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We are now seeing the effects of this inflation crisis firmly working their way into interest rates. IFS analysis said that just the latest shifts in mortgage markets will push up mortgage payments by an average of £280 a month. That is over 8% of disposable income. It said for almost 1.5 million people, half of them under the age of 40, will find their mortgage payments jumping by at least 20% of their disposable income. How are people supposed to manage this? They are simply too squeezed already.
Disabled people and their families will be facing a housing crisis as well as a cost of living crisis in general. Labour has set out a plan to tackle mortgagers’ problems and stop people losing their homes. It includes ensuring that all borrowers can lengthen their mortgage term or switch to interest-only mortgage payments for a period. It also requires lenders to wait for at least six months before initiating repossession proceedings. Labour would also bring in additional protections for renters What plans do the Government have to help people manage this crisis?
The cost of living crisis has not gone away. Work by the Joseph Rowntree Foundation has shown that the high levels of hardship have barely moved over the last 12 months. They are in danger of being baked in and becoming a new normal. What else can the Minister tell us—and crucially, the people of this country—to put our minds at rest? I look forward to his reply.
With the increase in energy prices, almost half of people with disabilities cannot afford to keep their homes warm. But do not think that non-disabled people are managing: they, too, are not. Support is listed in the Statement—we of course welcome support, whatever it is—for those on universal credit and the like: they have received £301 and will get £300 and £299, to be paid in the autumn and the spring. How do the Government see these beneficences being spent? Are there details of what people will not be able to afford out of this £301, £300 and £299?
The basic fault with the Statement is that it says that the package will support the most vulnerable during 2023-24. Sadly, “the most vulnerable” now applies, in some situations, to individuals and families in work. Has the Minister any light at the end of the tunnel for those with rate increases who were not able to repay their mortgages, and those renting who are facing massive rent increases? Do the Government have any figures on the increased use of food banks, and on the demographic of the current users of these facilities? Do they have current statistics on the number of families with less than £100 in savings? Many people in this House do not realise how many people in this country have less than £100 in savings and are thus vulnerable in the present climate.
It is hard to think of any solutions at this stage, but the noble Baroness gave some indications of Labour proposals. The Liberal Democrats call for an emergency mortgage protection fund to protect families falling into arrears or facing repossession as a result of soaring interest rates, paid for by reversing the Government’s tax cuts for banks. The top fund will be targeted at homeowners on the lowest incomes and those seeing the sharpest rise in mortgage rates. It would be a temporary scheme to tackle the current problem of soaring mortgage rates. It could be introduced for one year to begin with, and the Government would have to review the need for it the following year. There is an absolute need: people are struggling with their mortgage payments and will be thrown out of their homes, whether they own or rent them.
In its simplicity, this Statement is welcome, but it does not go anywhere near far enough.
The noble Baroness, Lady Sherlock, asked about other countries. I have already made the point that we are on track to halve inflation and continue to support the Bank in delivering the 2% target. We believe that inflation is on a downward trajectory, although I understand that it is stubborn. Even though the reduction is quite small, it is in part thanks to our action to hold down energy bills and freeze alcohol and fuel duty, which is having a direct impact on driving down inflation.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Palmer, asked about Scope. I am very aware of the report. They have been many studies estimating the cost of disability, including this latest Scope report and previous ones from Scope and other organisations. The common feature of these reports is that their findings vary due to the definitions of disability and methodology being used. Our view is that there is no objective way of deciding what an adequate level of benefits should be, as everyone has different requirements. Beneficiaries are free to spend their benefits as they see fit, and in the light of their individual commitments, needs and preferences.
The noble Baroness, Lady Sherlock, focused on the disabled and support for them, and she made some very important points. I hope she knows that we will be spending around £78.6 billion in 2023-24 on benefits to support disabled people and people with health conditions, which is around 3.1% of GDP. The Government are providing a further disability cost-of-living payment of £150, which is part of the gist of the Statement. The majority of these payments will be made to eligible claimants this week. Indeed, many have been made already.
The noble Lord, Lord Palmer, focused on fuel poverty. I make the point, which he would expect me to make, that advanced economies around the world share the challenge of high inflation arising from the energy shock, and the UK has been affected by those global factors. The energy price guarantee, as he will know, was extended at the same level for an additional three months, to the end of June 2023, and it will remain in place as a safety net until the end of March 2024. There are some signs that energy costs are reducing, but again, we are not complacent.
The noble Lord, Lord Palmer, asked a focused question about the use of food banks. He will know that we have some recent data from the latest Family Resources Survey. The Government are using that data to better inform them about the use of food banks. We are well aware that food banks are being used as never before—we are very aware of that.
The noble Lord, Lord Palmer, makes a very good point about repossessions. At the moment, although we are not complacent, repossessions remain at a lower rate than before the pandemic. We are not complacent because of course we see the pressures around.