My Lords, this is a most timely debate and one that will find a resonance across most parts of our country. I congratulate the most reverend Primate the Archbishop of Canterbury on raising the matter and on the typically skilful and reflective way in which he introduced the subject.It matters not what period of history we choose to examine, nor even whether we restrict our vision to the human species: the family plays a fundamental role in the life of all social beings. Nature defines that we are much stronger when we are attached and included in strengthened social ties and institutions; we are stronger both individually and collectively. That is why we should value families extremely highly across all sections of our communities.
Economic inequality is a cause of great soreness and distress in society. A study produced by the Centre for Social Justice last year identified poverty as being driven in part by financial exclusion and debt. We have witnessed a substantial increase in the level of debt across our population. In 1997, the average financial liability, excluding mortgages, was £2,690. In 2006, that figure stood at £5,940. We all recognise that debt tends to affect those with the least the hardest. Those who are among the relatively worse off in our society are the most vulnerable to fluctuations in interest rates.
Banks and financial institutions have aggravated the problem by making borrowings on loans, mortgages and credit cards far too easy. People have been encouraged to borrow more than they can afford. The present financial crisis should be a lesson for those institutions: they must learn to lend money in more responsible ways from now on. We need better co-ordination of government policy, especially in addressing regulation of bad businesses. The Bank of England and the FSA need to be more vigilant in taking the most suitable action where there is an indication of moral hazard. That is necessary to protect prospective borrowers and their families.
Total household financial liabilities have increased every year since 1997, from about £586 billion to £1,370 billion in 2006. Expressed as a proportion of households’ gross disposable income, that has increased from 105 per cent in 1997 to 164 per cent in 2006. At the end of January this year, total debt in this country stood at £1,412 billion. That figure is alarming. Levels of personal debt in this country are estimated to increase by approximately £1 million every five minutes. A recent report found that children of families that have broken down suffer from mental problems and depression. One factor in family breakdown is financial difficulty.
We have seen a tremendous increase in the number of home repossessions in recent years. In 2004, 8,200 properties were taken into possession. In 2007, some 27,100 properties were repossessed, according to the Council of Mortgage Lenders. These figures make a mockery of the Government’s claims to have helped more people on to the property ladder. The effect of repossession on a family can be catastrophic. When the volume is this high, the effect on wider communities is also quite frightening. The situation will get worse with the credit crunch, which is affecting the country as well as having an adverse effect globally. I hope that the Minister can give the House answers to these problems today. What assessment have the Government made of the likely implications for individuals and families of banks’ greater caution in lending money to one another as a consequence of a credit crunch that we have all witnessed?
This country’s inflation, too, is causing great damage to families. Although the Prime Minister claims that inflation is running at about 2.5 per cent, it is now recognised that the cost of living is increasing at a far greater rate. A recent study found that the price of butter has increased by 37 per cent, bread by 28 per cent, flour by 22 per cent, a pint of milk by 17 per cent, cheese by 17 per cent, potatoes by 11 per cent, gas and fuel by 10 per cent, and petrol by 8 per cent. The most recent Budget has been estimated to cost the average family around £110 a year more, and we have seen council tax double since 1997.
There have been further increases in the price of food, according to figures quoted in the Times on 23 April. We also know that over the past few weeks the price of a barrel of oil has increased to about $115. The problems of scarcity and the high price of food not only affects people in the United Kingdom but is a global problem that requires appropriate action, not only by national governments but by all countries in the world. The engagement of international institutions is required to help to avoid a major catastrophe. Given the rising cost of living and families finding it harder to make ends meet, it is a shame that the Chancellor of the Exchequer has seen it necessary to aggravate the problem by raising taxes in the Budget. Tax rises appear to have been focused on those least able to afford the increases.
In the limited time available to me, I do not want to get caught up in debating the pros and cons of the 10p tax rate, but increasing taxes, particularly those that hit the most vulnerable the hardest, during a time of impending economic hardship is bad news, socially as well as economically. In view of the pressure applied by parliamentarians, the Government appear to have made concessions to low-paid workers without children and pensioners under the age of 65. The details of these concessions are rather vague at present; it is not clear whether they will entirely redress the problems that affect everyone who will suffer as a result of the abolition of the 10p rate of tax. It appears that we will have to wait until the Pre-Budget Report in the autumn to find out the details of these plans.
Tackling financial exclusion and economic inequality is a social responsibility. There is a role for others beyond the Government to address these problems. There is a role for civil society, charities, religious bodies, financial institutions and businesses to take joint responsibility and to work together to find and implement solutions. We need to look at the recently published Thoresen review of generic advice and the possibility of implementing its recommendations. Furthermore, people need to be guided on financial matters and we could begin perhaps by giving appropriate guidance in secondary schools. I want to take this opportunity to pay tribute to the work of citizens advice bureaux for their hard work in providing advice to those in difficulties.
Finally, I shall make a few observations about childcare. The first steps in a child’s development are crucial. All parents will recognise the importance of getting the correct balance. I congratulate the think tank Policy Exchange on its report on this issue earlier this week. Research consistently shows that parents prefer informal childcare during the earlier stages of development, which is best for children and, thereby, for the communities concerned. The report proposes the provision of funding to support families rather than institutions, as is favoured under the current system. The report offers a serious contribution to this most important debate on how best we can support the needs of our communities, strengthen our families and address the inequalities that we all dislike. We should give consideration to the recommendations in the report.
If these proposals do not prove to be affordable, we still have to devise a system that moves away from the “state knows best” principle which drives government policy at the moment. Parents can be trusted to know their families and to do what is best for them, and we would all be much stronger if that were allowed to happen. I hope that the Minister will have something positive to offer in answering this debate.