HC Deb 02 February 1995 vol 253 cc1203-4
4. Mr. Heppell

To ask the Chancellor of the Exchequer if he will make a statement on prospects for living standards in the coming year.

Mr. Kenneth Clarke

One possible measure of living standards is real GDP per head. On that basis, my Budget forecast implied a rise of about 3 per cent, over the coming year.

Mr. Heppell

If housing costs are taken into consideration, the real income of the poorest 10 per cent, of the population has fallen 17 per cent, since 1979, whereas the income of the richest 10 per cent, has increased by 62 per cent. What does the Chancellor propose to do about the growing gap between rich and poor, which is the largest gap since records began?

Mr. Clarke

The figures that the hon. Gentleman quoted are the most misused figures in public debate. Close analysis of figures on the so-called lower 10 per cent, shows that they are not the poorest in society and that they include many people who declare no income but who are high spenders. The comparison that the hon. Gentleman makes is, with the greatest respect, practically valueless.

Next year, as a result of strong and sustained growth and our powerful performance in export markets, we expect average personal disposable incomes per family to rise by about £5. Low-earning families will benefit in particular from what I announced on family credit, which is now being taken up. The welcome fall in unemployment, which is half a million below its peak already, will also benefit less well-off people. The figures quoted by the hon. Gentleman are misleading, and the present position is encouraging for people on all levels of income.

Mr. Patrick Thompson

Bearing in mind the fact mat since 1979 living standards under this Conservative Government have risen right across the board, will my right hon. and learned Friend have talks with my right hon. Friend the Secretary of State for Social Security on the possibility of itemising the compensation for VAT on fuel on the pension book, so that pensioners may fully understand the help that the Government have given?

Mr. Clarke

My hon. Friend is quite right. Living standards generally are almost half as high again as they were when the Government first came to power. His suggestion about itemising the compensation received inside the pension book is interesting and worth while, and my right hon. Friend may consider it.

It is certain that the amounts added to the retirement pension, over and above the ordinary uprating, will more or less compensate the average pensioner for the extra VAT on fuel, which, at the rate at which we have left it, will now be paid only by those of working age who are not receiving means-tested benefits in full.

Mr. Gordon Brown

Does not today's interest rate rise represent a double blow to living standards, making an already insecure Britain even more insecure: first, because every time we expand—even out of recession—we cannot sustain that growth, reflecting the underlying economic weaknesses which the Chancellor refuses to address; and, secondly, because with the cost for a typical home owner rising by £800 this year—a 25 per cent, rise—millions of people will see a fall in their living standards? Are not the Government guilty of a betrayal of their promises to every home owner in Britain, just as they are guilty of a betrayal of their promises to every taxpayer in Britain?

Mr. Clarke

Last year, we had 4 per cent, growth and the lowest inflation since the war, which had beneficial effects on the economy and greatly reduced unemployment by half a million. The key thing, delivery of which would be beyond the hon. Gentleman and his party, is to keep the recovery at a sustainable level, to keep inflation down and to keep our competitive position, which is enabling us to do so well in export markets. The hon. Gentleman shows that he has learnt nothing from the history of past Labour Governments, or indeed of any other Government. He would throw it all away, lose our present competitive position, take risks with inflation and put us back in difficulties again.