Asked by
To ask Her Majesty’s Government when and at what level they
expect inflation, as measured by the consumer price index, to
peak in the United Kingdom.
(Con)
The independent Office for Budget Responsibility set out the
official inflation forecast in its March economic and fiscal
outlook. It expected CPI inflation to peak at 8.7% in the fourth
quarter of this year, before falling back towards the 2% target.
We understand how rising costs are impacting the costs of living.
The Government are providing support worth over £22 billion this
year to help families with these pressures.
(Lab) [V]
My Lords, we know that there is worse to come, but do we not need
decision and action now? The cost of living crisis is with us
now, hitting the poorest the hardest, with one in five households
already in fuel poverty and 2 million adults who cannot afford to
eat every day. Does the noble Baroness understand that bromides
do not warm or feed anyone? Procrastination is inexcusable and it
is insufferable that action is delayed because of bickering
between No. 10 and No. 11. Will the Government immediately
increase benefits in line with actual inflation?
(Con)
The Government are putting in place support now. It is worth
remembering that the household support fund is open, it is ready,
it is there for people to access. It is also worth remembering
that national insurance thresholds will increase in July, putting
more money back into the pockets of the lowest-income households.
It is also worth remembering that the rebate on people’s energy
bills, worth £200, is yet to come—it will come in October. We are
keeping the situation under review, we are standing ready to do
more, but more action is already committed to by the Government
that will flow through to people’s pockets over the coming weeks
and months.
(CB)
My Lords, in my role as president of the CBI, I remember asking
the Chancellor in February 2021 whether he was worried about
inflation. Since then, we have had galloping inflation, and
businesses and consumers are suffering hugely as the noble Lord,
Lord Howarth, said. Are the Government concerned that we are now
entering stagflation, and should not they be doing all they can
to incentivise investment for growth, for example, by reducing
the highest tax burden in 71 years, by bringing back a temporary
cut in VAT of 12.5% and by having a permanent 100% tax reduction
on capital investment by business?
(Con)
My Lords, I absolutely agree with the noble Lord on supporting
investment and putting our efforts towards growing the economy.
He will know that we have cut business rates by 50% for eligible
retail, hospitality and leisure businesses this year. We have
increased the employment allowance from £4,000 to £5,000, cutting
the cost of employment for 495,000 small businesses, and we have
increased the annual investment allowance to £1 million. I know
that there is more to do, but I agree with the sentiment in terms
of increasing investment in our economy.
(LD)
Do the Government recognise that those on low incomes are
experiencing inflation much closer to 13% rather than CPI? Will
they step away from the practice of masking the true damage by
constantly using the CPI number and therefore recognise the
urgency, for example, of increasing universal credit by at least
£25, as has been recommended by civil society groups?
(Con)
My Lords, the Government recognise that inflation can have a
differential impact. The ONS suspended its publication of
inflation by income level during the pandemic due to trouble
accessing the data. That has now been reinstated. The Government
also recognise that differential impact in the support they
provide to people; for example, extending the warm homes
discount, increasing the work allowance on universal credit, and,
as I said before, having the household support fund in place.
The Lord
My Lords, I have seen at first hand from touring every part of
the three counties in the Diocese of Oxford the rise in the
take-up of food banks in recent weeks. I pay tribute to all those
who work and volunteer in them. I have heard heartbreaking
stories of those who need to use them. The Government’s response
to the Covid pandemic was remarkable in its creativity and
urgency, helping the poorest. Will we see now a windfall tax?
Will we see more targeted support for the poorest in the
communities as an urgent matter?
(Con)
My Lords, we do not believe that windfall taxes are simple or
easy, but we are also pragmatic, and we want to see energy
companies which have made extraordinary profits at a time of
elevated prices investing those profits back into British jobs
and growth. If that does not happen, no option is off the table.
When it comes to further help for families across the country
that are facing real difficulty, the Government are looking very
carefully and stand ready to do more.
(Con)
My Lords, is it not time to go to the roots of this terrible
energy price and inflation problem? Those roots are largely
international; at this moment, there is ample gas around the
world and ample oil capacity to offset Russian exports and bring
prices very sharply down. Should we not make it a diplomatic and
foreign policy priority to bring pressure on those who could
increase capacity quickly to do so, and to do so in the interest
of the consumer, prices and indeed the entire European
situation—and the Ukraine situation as well?
(Con)
My noble friend makes a good point. Of course, the Government
have published their energy security strategy, which looks at the
number of those issues. The point about international
co-operation can also be very well applied to food security and
food exports; I know that the Prime Minister and the Foreign
Secretary have had conversations with their counterparts in
recent weeks to look at what more we can do to ensure food
exports, for example from Ukraine.
(Lab)
My Lords, with regard to the differential impact of inflation,
the Resolution Foundation and the Institute for Fiscal Studies
calculate a 10% inflation rate for the bottom 10th of the
population, many of whom, in and out of work, rely on social
security, which has gone up by only 3.1%. The discretionary
household support fund is no answer. Does not the differential
impact of inflation strengthen the case made by noble Lords
across the House and across the political spectrum for a further
increase in benefits as soon as possible?
(Con)
My Lords, I acknowledge the point about the differential impact
of inflation. That has not always been the case, but according to
the IFS’s report it was driven largely by the increase to the
energy price cap and rising energy prices. That is where we have
focused our support, through the warm homes discount and the £150
council tax rebate that is coming through to people now. In
addition, as I said, there is forthcoming support, with a further
£200 off people’s energy bills in October.
(LD)
My Lords, the Minister’s change of narrative on an energy
windfall tax is intriguing, but would she agree that the
Government have already received a windfall from increased
receipts from VAT and from petroleum duty? Given that much
money—perhaps the Minister can tell your Lordships’ House how
much extra money has been received—there is a pot available to
help the least able. Will she agree that this money should be
used now to help the poorest people in this country?
(Con)
My Lords, with regard to a windfall tax, my comments only echoed
those of the Chancellor and those of the Prime Minister. On the
additional revenue that has come in through VAT receipts and
other areas, the noble Lord is right, and we have used additional
finance to provide extra support to people that is worth over £22
billion. That includes new help that will flow through to
people’s pockets—not yet, but in the future. For example, once
the uprating in the thresholds for national insurance is in place
in July, people will have more money in their pay packets as a
result.
(Lab)
My Lords, I have great sympathy with the Minister; we are all
asking her to be the Chancellor and she is not. She might do a
better job, but she is not yet the Chancellor. I will ask her a
question to which she can make a commitment. There is a consensus
in this House that action is needed now. Can she personally make
sure that that consensus is conveyed to the Chancellor?
(Con)
I can absolutely assure the noble Lord and all noble Lords that I
will convey the opinion of this House on this matter to the
Chancellor.
(Con)
My Lords,
“Inflation is always and everywhere a monetary phenomenon”,
as Milton Friedman pointed out. We printed a lot of money during
the lockdown without producing any real-world goods. If this was
really about the war in Ukraine, how come Japan and Switzerland
have inflation of less than 3%? Will my noble friend the Minister
urge the Bank of England to reduce the ultimate cause of the
problem, which is printing lots of money so that people could
stay at home producing fewer things? We will not restore fiscal
sanity without sound money.
(Con)
I am afraid that I am going to have to disappoint my noble
friend. We cherish the operational independence of the Bank of
England, and that applies to QE as well as to interest
rate-setting.
