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Living Standards

Sitting in this debate on living standards has taken me back to the campaign trail in 2010, when I was explaining to my constituents—as I am sure many of us were—that the problems that we would be inheriting from the then Government were long-term problems, and unfortunately there were no short-term solutions to those problems. I represent a constituency where unemployment was above the national average even in the so-called boom period of the last Labour Government. Unemployment has gone up, and I am sure that both the Government's proposed changes highlighted in the motion will impact on many people in my constituency. What guides me and this coalition Government, and what enables us to look the British people in the eye, is that we are taking steps that will be better for our country's future generations. They are steps that will alleviate the burden on the next generation of children and on our grandchildren. We do not think that it is appropriate to pass on debts to cascade down the generations; we think it is right to cascade down opportunity, which is something that the last Government failed to do. There are two things that I would like my hon. Friend the Minister to comment on when she sums up. First, when it comes to the long-term solutions, I hope that she will maintain a commitment to ensure that work must pay. That is incredibly important—in reality, the cultural idea that it is easier to live off benefits arose under the last Government. As with the benefit cap and their work on tax thresholds, this Government have to demonstrate that they are committed to the notion that everyone, given the opportunity to work, will always be better off working than on benefits. The second thing that is important to living standards, but which we have not really touched on—my right hon. Friend the Member for Wokingham (Mr Redwood) mentioned it briefly—is the importance for this Government of keeping inflation low. We heard some Opposition Members say that inflation is continuing to rise, but we have not yet confronted the question of what will happen when this period of quantitative easing comes to an end. When that happens, there will be a corresponding rise in interest rates, which will put further pressure on living standards. I should say to my hon. Friend the Minister that in three or four years' time, it is unlikely that the private or public sector will be able to pay working people pay increases. We therefore have to ensure that when we unwind quantitative easing, we do it in a way that is not inflationary, or that at least minimises the inflationary impact. One way of doing that is to look at quantitative easing not as a way of providing short-term stimulus—many Government Members are sceptical about the Government's ability to stimulate the economy in the short term—but as a means of long-term infrastructure investment. We have that opportunity, but we can do that only if we take our understanding of our debt obligations to embrace not only the treaty debt but the debt obligations of our public pensions liabilities. Those are long-term liabilities, and there is an opportunity for the Government to use quantitative easing for investment, if they can match their investment in long-term assets with reductions in those long-term liabilities. The only other option for a short-term stimulus—to invest to improve living standards in the short term—would involve significant tax cuts, matched or exceeded by further cuts in public expenditure to pay for them. I doubt that the Opposition intended that to form part of the debate today, but it is one option that they could look into in the short term. My main messages to those on my Front Bench are that they should keep their focus on the fact that long-term problems require long-term solutions, and that they should ignore the representations from the Opposition.