Cost of Living — House of Lords, 2022-06-09
Topic: Macroeconomics
Brian Griffiths (Conservative, Centre-right): My Lords, I thank the noble Lord, Lord Eatwell, for securing this debate. I will concentrate not on the whole panorama of government policy in its economic and political context, which he has done wonderfully, but on the number one issue of the day and the first part of his three-part Motion: the cost of living and inflation. I will make three points The first is about the seriousness of this situation. The inflation we have was totally unexpected. As we know, many—in fact, most—families are struggling at present with the cost of living, and low-income families are moving into destitution. The two consolations I have are that, first, whenever I turn on the radio at breakfast, one always hears of certain charities and community organisations helping people in need and, secondly, that the Chancellor of the Exchequer has now introduced two amendments to policies to help alleviate this situation. However, I have one concern: people are in such a situation that they are being forced into debt, with credit card loans and "Buy now, pay later" apps, and even into payday loans Some years ago, I chaired a commission for the then shadow Chancellor Oliver Letwin on the problems of low-income families getting into debt and what could be done about them. It was a very salutary commission to chair. The results of a Citizens Advice survey reckon that over 40% of people are borrowing simply to meet repayment. Can the Minister say what the Treasury is doing to make sure that the companies that can lend money in this way are acting responsibly in the loans they are providing My second point is that social capital is, in my judgment, absolutely crucial. I agree with the noble Lord, Lord Eatwell, that it is important in terms of public investment, but "social capital" as an expression was invented by James Coleman who was—to the best of my memory—a sociologist. Social capital is important in any society because it is really the foundation of our culture. It is the glue that binds us together as a society and it depends, more than anything else, on trust and trustworthy institutions It is precisely trust and trustworthy institutions which inflation undermines. Inflation creates a culture of suspicion, distrust, blame and, ultimately, social conflict. A novel in 1977—when inflation was high—said that: "All over the country, people blamed other people for all the things that were going wrong – the trades unions, the present government, the miners, the car workers, the seamen, the Arabs, the Irish … idle good-for-nothing offspring, comprehensive education." That was a novel by Margaret Drabble, not the words of Margaret Thatcher. Our social capital is already being undermined by social media and inflation is simply adding to this. We have a blame culture: the local corner shop jacking up prices, Putin, the embargo on gas, China, a zero-Covid policy, supply shortages, companies with monopoly power, increasing prices, the rail unions, the Bank of England, the governor, the Monetary Policy Committee, shrinkflation from people reducing the amount of contents in a bag. And there are questions like why is Waitrose increasing prices more than Aldi or Lidl, or why are the prices at the petrol stations—BP and Shell—not coming down Inflation at present is really undermining the social glue that holds our society together. What therefore can be done about it? I think there are three things. First, getting inflation down should be the policy priority. Supporting the Bank of England in raising interest rates is painful but is, I believe, absolutely necessary. One would like to see the Bank increase rates in a way that there can be no recession, but I doubt if that is likely. However, we need to get inflation out of the system before we can have the kind of prosperity that the noble Lord, Lord Eatwell has demanded. Secondly, the Treasury must pursue fiscal prudence, not increasing spending by creating money. Thirdly, as this is done, the Government have a major responsibility to look after those people—the poorest in our society—who are bearing the brunt of what is happening at present.