John McDonnell MP
I tabled new clause 1 because, from now on, I do not think that the House should discuss any legislation that has financial consequences without it understanding or at least having information about the effect on poverty and low pay. I would have liked that information for this Bill, although I can understand why we do not have it today. However, in future, the Government should lay a report before the House that explains the expected impact on low pay and poverty of any piece of legislation and assesses the effectiveness of its provisions.
The nature of this debate so far has demonstrated a lack of appreciation or understanding—and certainly a lack of agreement—about the objective realities of what is happening. Many have quoted the comments of the Institute for Fiscal Studies and the Resolution Foundation, but some of this is about hard facts, so let me put on record again the situation that we face. At the moment, 4.3 million children and 2 million pensioners in the UK live in poverty. Overall, 14 million people live in poverty, and that was before the cost of living crisis hit us. A report from a UN rapporteur described people living not just in severe poverty, but in “destitution”. According to analysis today from the Resolution Foundation, 1.3 million more people will be living in poverty.
One reason I am asking for such a report is so that we can ask simple questions of the Treasury. What forecast have Her Majesty’s Treasury and the Department for Work and Pensions, or the OBR, made of how many children, pensioners and people in the UK will be in poverty by the end of 2022-23?
Yesterday the shadow Chancellor asked the Chancellor how many pensioners and children would be pushed into poverty by the failure to uprate benefits and pensions in line with inflation, and the Chancellor failed to give any answer. It would be useful to have an answer today. Child poverty is already up by more than 500,000 since 2010, and it is interesting to note that most of those children—more than 60%—live in households in which one adult works. That, too, calls into question the levels of pay in this country.
The Joseph Rowntree Foundation estimates that the uprating of just 3.1% will drag more than 400,000 more people into poverty, and as we have pointed out time and again during the debate, inflation is forecast to rise over the year to between 7% and 10%. Has the Treasury analysis come up with the same figure as the foundation, or a different one? If the figure is different, we would like to know why, and on what basis.
The other issue raised in the new clause is low pay. A total of 4.8 million workers earn less than the UK real living wage of £9.90 an hour, or £11.05 in London. The rise in the minimum wage this year—a 6% rise to £9.50 —still falls short of the Living Wage Foundation’s real living wage, and, given that forecast of an inflation rate between 7% and 10%, it is a real-terms pay cut. According to the Office for Budget Responsibility:
“Real incomes have been stagnant since the start of 2019 and this is now expected to continue over the next few years”.
The OBR went on to say that we were about to see the largest fall in incomes on record:
“With inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2 per cent in 2022-23—their largest financial year fall on record”.
A presentation of analysis by the Institute for Fiscal Studies took place this morning. According to the IFS, public sector pay has fallen by 3% in real terms in the last year, and is 2% lower in real terms than it was 12 years ago. The Department for Education’s average pay offer to teachers is 4%, and the fact that inflation is so much higher has obviously hit their wage levels. There is a group among the workforce who are being hit particularly hard by the Government’s changed arrangements relating to loans for tuition fees that they incurred while they were studying, and who will again be impacted severely by what is almost, in effect, an additional income tax.
Paul Johnson of the Institute for Fiscal Studies expressed incredulity—as have many of us—that the Government had done nothing for those on benefits or for pensioners. He pointed out that, according to the OBR, we are seeing the biggest fall in incomes since 1956, and that the inflation rate experienced by poorer households is even higher than the average. He said that it was “hard to understand” the Government’s “lack of action” on benefits. That lack of understanding of the Government’s approach is the reason for my new clause. I think that in future when we are debating issues such as this—Government measures involving public finances, benefits and wage levels—we will at least need to have a detailed report before us which explains the consequences of measures relating to low pay and poverty.
In the new clause, I have also asked the Government to assess alternative measures that they could take, and to provide an analysis of why those measures were not
taken or why they might be brought to bear in the future if not immediately. All I am pleading for is a rational debate based on the widest possible information being provided to this House when we consider measures like this, so that we know whether the decisions we are taking will improve or undermine the standing of our constituents when it comes to low pay and poverty.
My anxiety at the moment is that the lack of that information is leading us to take decisions that will not resolve the issues of poverty and low pay and will in fact ensure a deterioration in the living conditions of many of our constituents. This is a simple measure, and I think it should now be standard Government practice to bring forward this sort of report, especially when we are in a cost of living crisis and so many of our constituents are already suffering and in many instances facing intolerable hardships.