Spring Budget: Wales

Wednesday 29th March 2023 Westminster Hall

[Mr Philip Hollobone in the Chair]

14:30

[Mr Philip Hollobone (in the Chair)]

Prynhawn da. I call Ruth Jones.

[Ruth Jones (Newport West) (Lab)]

I beg to move,

That this House has considered the Spring Budget and Wales.

Diolch yn fawr iawn, Mr Hollobone, and thank you for your introductory remarks in Welsh. I am sad to say that I will not be able to continue in that vein, but it is a pleasure to serve under your chairmanship, and I do so with the voices, views and concerns of the people of Newport West and the whole of Wales at the forefront of my mind.

This afternoon is an important opportunity for colleagues representing Wales to speak up and speak out about the failing economic policies of this Government. The recent Budget could and should have been a unique opportunity to unlock Britain’s promise and all the potential that we see in and around our communities. Instead, it was more decline and decay. It is clear to everyone—and, I suspect, to the Minister too—that this Government have decided to continue papering over the cracks after 13 years of Conservative economic failure, rather than giving us the change we need. Indeed, as I have said in the House, that papering over the cracks was exemplified by yet another handout for the richest 1%. There was no regard for the livelihoods and wellbeing of my constituents in Newport West, or the livelihoods of people across Wales, whether they call home Ceredigion or Conwy, Bangor or Bridgend. Wales is a nation of people who work hard, pay their taxes and simply need real change and real investment in their communities.

I noted from a report that the UK Treasury has recently taken back more than £155 million from the Welsh Government. The reason the Treasury gave for this smash and grab was that the Welsh Government had not spent it fast enough, which is an arbitrary change of tune from previous years. This callous approach is both unacceptable and unwise, and I echo the Welsh Government Finance Minister, Rebecca Evans MS, in calling on Westminster to give Wales our money back.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

I must respond to that point about the £155 million. Has the hon. Lady actually read the report that the Senedd Committee produced? It was pretty scathing about the performance of the Welsh Government in managing their money. She describes it as a “smash and grab” raid. The truth is that it was a failure on the part of Welsh Government Ministers to spend money given by UK Government to alleviate the effects of the pandemic at its peak.

[Ruth Jones]

I disagree with the right hon. Member. Obviously, the report can be read in several ways. The fact that the money was taken back in such an arbitrary way, and that what happened was different from what happened in previous years, means that the rules were changed this year to suit the Government. I am afraid we disagree on that.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

Does the hon. Member agree that there is a discrepancy here? If UK Departments do not spend all their money within the financial year, it goes back to central UK Government. Surely, under any rational devolution settlement, there should be the same arrangement for Wales, so that if money is not spent by certain Departments in Welsh Government, it remains in Wales.

[Ruth Jones]

The right hon. Member makes the point perfectly well; that rule would be fair. Opposition Members will pick this issue up in the coming days, along with the issue of the inadequacies of the spring Budget, because it is a new case of robbing Wales to pay Westminster, and it cannot go on. We have seen this before with High Speed 2, an England-only project that should, according to a Welsh Affairs Committee report of 2021, be classified as such. The acknowledgment of this simple truth, which I and cross-party Welsh MPs spelled out to the Government nearly two years ago, would give Wales the £5 billion it is owed. We are seeing the same thing play out again with the Northern Powerhouse Rail project; that is another £1 billion that could and should have gone to Wales. That money would have a real and substantial effect there, but it has been withheld. The Secretary of State for Wales may have entirely ducked responsibility for his Government’s role in this matter, but we will not let this go.

Growth was downgraded in this Tory Budget. That will surprise nobody in Wales who is battling with rising inflation, rising energy bills and rising food costs. That is why Labour will not allow Wales to keep bumping along this path of managed decline from Westminster. I mentioned my constituent Dawn Jones in the Budget debate in the Chamber last week, and I mention her again here. She is a pensioner living in Caerleon who has worked all her life and now cannot afford to put the heating on. She has not had it on all winter because of the expense, and every time she goes to buy anything in the supermarket, she finds it has increased in price. She wrote to my office and said: 

“I am really struggling now with all these increases and do not know how I am going to pay my way; I am worried to death!”

It seems like every other day my constituency office receives more cases of desperate people who have found themselves at the end of the options for help and support. It is heartbreaking, and to be quite frank, it makes me deeply angry with those who have made the political choice to put my constituents in that position.

[Wayne David (Caerphilly) (Lab)]

Is my hon. Friend aware of the Bevan Foundation report? Only last month, its in-depth analysis showed that it is the poorest people, the elderly, the disabled and people who are renting socially who are suffering most from the cost of living crisis.

[Ruth Jones]

Absolutely. My hon. Friend has made a perfect point; the Bevan Foundation in Wales is very clear and accurate in its reporting. I pay tribute to Victoria Winckler and the other staff there. That is why I welcome Labour’s mission to secure the highest sustained growth in the G7; that will be good for Wales, the Welsh economy and the people of Wales.

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend is making an excellent speech. On the point around growth, does she agree that a vibrant and competitive steel industry has to be at the heart of any growth strategy, and that the UK Government’s continued dithering and delay when it comes to stepping up and showing the Welsh steel industry the support that it requires is a massive issue? Does she also agree that UK Labour’s £3 billion clean steel fund is exactly what we need to ensure that we get our economy firing on all cylinders?

[Ruth Jones]

Absolutely. My hon. Friend makes a powerful point, because steel is integral to the industry and heart of Wales. In my constituency, in the last week we have had issues with a steel company, which I will be talking to my hon. Friend about shortly. We all want steel to thrive and grow in Wales.

Only with strong, inclusive growth, including in the steel industry, will Wales get the good jobs and productivity gains for which our people are crying out. It is not rocket science; in fact, it is pretty simple. Despite all the claims from the Chancellor, the Office for Budget Responsibility downgraded the UK’s long-term growth forecast; there are downgrades in each of the last three years of the forecast period. We will be the only country that will see negative growth. No other G20 economy, apart from Russia, is forecast to shrink this year. The OECD has confirmed that the UK will be the weakest economy in the G7 this year. What a ringing endorsement of 13 years of Tory Government! The blame for that lies squarely with the Tories, their Prime Ministers, and the current Chancellor—and the one before, obviously. They are the party of economic mismanagement.

It is worth noting that the average French family is now a 10th richer than their British counterparts, while the average German family is a fifth richer. After 13 years of Tory Government, and a failed spring Budget, our people are paying more, earning less and bearing the overwhelming brunt of this Conservative cost of living crisis. This Government have let down the people of Newport West, and of Wales. The spring Budget was a wasted opportunity for Wales; it delivered a tax cut for the richest and nothing for the many. It continued a Conservative agenda of delay and decline. As my constituent Dawn Jones wrote in her heart-rending correspondence:

“This should not be allowed to happen in this day and age, these conditions are not acceptable.”

The best way—the only way—to change course, to deliver for our people and to move forward is with a UK Labour Government, and the sooner the better.

[Mr Philip Hollobone (in the Chair)]

Diolch yn fawr. The debate can last until 4 o’clock. I am obliged to call the Front-Bench spokesmen just after half-past 3, but until then we are in Back-Bench time, and I am determined that everybody will get in. There is no need for a time limit if everybody is sensible.

15:09

[Virginia Crosbie (Ynys Môn) (Con)]

Prynhawn da. It is a pleasure to serve under your chairmanship, Mr Hollobone, in this important debate. I would like to say congratulations—llongyfarchiadau—and put on record my thanks to the UK Government for a Budget that is good news for my constituents on Anglesey, for Wales, and for the UK.

Before the Budget was announced, the Finance Minister in the Labour Government in Cardiff stated that:

“The Chancellor has the powers to…ease the challenges being experienced by households and businesses”,

and to

“support those most vulnerable—including practical actions to support people with energy costs, housing needs and welfare benefits.”

The Chancellor delivered. The energy price guarantee was kept at £2,500. There were new childcare plans to help working-age people get back into work, with 30 hours’ free childcare for children aged from nine months to four years—in England, at least; I understand there is still some doubt about what Wales will do with its share of the funding. I hope the Minister will enlighten us in his closing remarks. There is a new universal support scheme to help disabled people who want to work to do so, worth up to £4,000 per person.

Housing is a devolved matter. However, the Labour Government in Cardiff could have used some of their £155 million underspend, instead of always asking UK taxpayers for more and more money. I am delighted that the Chancellor delivered way more for Welsh people in the spring Budget than would have been delivered under the relatively low aspirations of Labour.

[Liz Saville Roberts]

The hon. Lady raised the matter of housing. It is worth considering the local housing allowance, the perimeters of which are set by the UK Government. Does she share my concern about a constituent of mine at Aberllenfenni, who faces an increase of £150 month in rent set by her landlord? No more can be paid in local housing allowance, because that is set at a lower level, at 25% of private rents. Does she agree that that should be raised by Westminster to 30%, to support people in private rental arrangements?

[Virginia Crosbie]

I thank the right hon. Member for her intervention. My concern is that Labour in Cardiff should be building more homes that people want, in locations where they want to live, including for young people starting off their life.

In addition to delivering the day-to-day support that people need with the cost of living crisis, caused by Russia’s illegal war against Ukraine, the UK Government have delivered hope, and a promise of long-term prosperity in Wales. We need to grasp that with both hands and work together for the benefit of the Welsh people. We have seen what working together in a constructive way means for Wales. It means a freeport on Anglesey, with 13,000 new jobs and £1 billion in economic investment.

The Budget is an example of how this Conservative Government are investing in Wales, and levelling up communities both north and south. Families across north Wales see that the UK Government, rather than the Labour one in Cardiff, are supporting the region with long-term investment and good-quality jobs. I was delighted that £20 million for the refurbishment of the Holyhead breakwater was announced in the Budget. That investment in a vital piece of infrastructure is important if we are to keep Holyhead from flooding, and are to attract new investment to the port—the second busiest roll-on, roll-off port in the UK. That follows the announcement of £17 million from the levelling-up fund to regenerate Holyhead town centre.

The funding will attract new investment and good-quality, long-term job opportunities for local people across the whole island. It will give Ynys Môn a new lease of life, and turbocharge the island’s economy. My island has one of the lowest levels of gross value added in the UK, with high levels of temporary and seasonal work. Every year, we lose young people, who move in search of decent employment elsewhere. My dad had to leave Wales to find work. These investments will ensure that other young people do not have to leave Wales. The UK Government are investing to protect our island’s communities and our Welsh language.

It is the nuclear energy announcements in the Budget that will have the greatest long-term impact on the people and economy of Ynys Môn, and across the whole of north Wales. That point was highlighted when the Chancellor mentioned Ynys Môn in his speech. Earlier this month, I wrote a letter to the Prime Minister, co-signed by 57 of my right hon. and hon. Friends, asking him to push ahead with Great British Nuclear, and to make new nuclear energy part of our green taxonomy. The steps the Chancellor took in the spring Budget underline the Government’s commitment to our long-term energy security and net zero. With energy independence and jobs in new nuclear, alongside renewable energy production, this country can become a more prosperous and balanced economy.

The Budget was overwhelmingly positive for nuclear in the UK: there was the launch of Great British Nuclear, and the labelling of nuclear as environmentally sustainable in the green taxonomy. It was also great to hear the Chancellor’s commitment to nuclear providing a quarter of Britain’s electricity. That means a massive ramp-up of new nuclear projects on a scale that we have not seen for a very long time. What does that mean for Wales? It means opportunity. GBN will make the delivery of new nuclear projects, including in Wales, much more efficient, enabling us to build vital new stations more quickly than ever before.

[Wayne David]

I welcome the announcement by the Government on Great British Nuclear, belated though it is, but does the hon. Lady think it is certain? If so, perhaps she would like to say on what date nuclear on Wylfa will be given the go-ahead.

[Virginia Crosbie]

The last time a nuclear power station was invested in and built was under a Conservative Government. As the hon. Member will know, we have a huge energy statement tomorrow in the Chamber; I would not want to pre-empt what the Minister will say.

GBN means jobs and investment in areas that are calling out for them, including my constituency of Ynys Môn. I want good jobs for hard-working people—jobs that support Welsh communities—and nuclear can deliver that. Wales can be a centre of energy innovation. In the Budget, we learned of plans for a small modular reactor competition. There is already a long list of companies looking to Wales to house these game-changing stations, which will help decarbonise not only the power grid, but energy-intensive users in the heavy industry sector. We need these projects to come to Wales, but of course we need to attract investment.

Giving nuclear the green label will drive crucial investment. Nuclear has the lowest life-cycle carbon intensity, lowest land use and the lowest impact on ecosystems of any electricity source, according to the United Nations Economic Commission for Europe. If that does not attract investment, I do not know what will. Wales has a world-class site in Wylfa and Trawsfynydd at its disposal. It is essential that we make the most of those sites; it would be a huge missed opportunity if we did not. Over the next decades, there will be a significant ramping up, with new nuclear projects across the UK, facilitated by Great British Nuclear. Wales can and should be part of these plans, and the Budget was a big step forward, but there is much to do.

This Budget has delivered for Wales; it is way more than the hand-to-mouth support that the Labour Government in Cardiff asked for. It has paved the way for long-term sustainable growth and employment in Wales, for levelling up parts of Wales that have seen little interest or investment from Cardiff in the past 20 years, and for an economic revolution in Ynys Môn.

[Beth Winter (Cynon Valley) (Lab)]

It is clear from the evidence provided by the Welsh Government that we receive substantially less funding via the levelling-up fund than we did as a member of the EU. The Minister for Economy quoted a figure of £1.1 billion less. What does the hon. Member have to say about that?

[Virginia Crosbie]

That is simply not the case. I will highlight the way that north Wales has been treated by Labour. In the past six months, it has been deprived of one of the two bridges connecting it to the mainland. It has seen abject failures in the devolved health service, and suffered over 700 job losses with the closure of 2 Sisters in Llangefni. While Labour MPs sit there and complain about our Budget, let us look at the actions their own Welsh Government, in co-operation with Plaid, have taken to support my already deprived community through these challenges. They have refused to compensate the businesses that suffered significant losses as a result of the closure of the Menai suspension bridge—a closure that, I hasten to add, resulted from failures in its maintenance programme. They stalled on funding a much-needed GP co-location in Holyhead, which would have helped people who have struggled for years with a health board that is in and out of special measures. With their £155 million underspend, they could have stumped up the funding for some of those 700 people who lost their job at 2 Sisters in Llangefni to travel to another plant and continue working for a few months. They chose not to.

The only reason why Labour MPs are unhappy is because they cannot face the fact that the UK Government are delivering on their promises to the Welsh people in a way that Labour has abjectly failed to. I commend the Budget and the difference it will make to people across Wales, particularly in my constituency of Ynys Môn. Diolch, Mr Llefarydd.

[Mr Philip Hollobone (in the Chair)]

I call Beth Winter.

14:48

[Beth Winter (Cynon Valley) (Lab)]

Diolch yn fawr, Mr Hollobone. I wonder if I am living in an alternate universe to the previous speaker, the hon. Member for Ynys Môn (Virginia Crosbie). This time last year, I undertook a research study on the cost of living in my constituency. I will share a copy with Conversative Members because the evidence about the levels of deprivation was stark, with people going without food and unable to pay their gas and electric bills. The responsibility for that lies squarely with the UK Government, and my contribution will evidence why I feel so strongly that that is the case. So I beg to differ with the hon. Member. I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing the debate.

Wales fired the UK industrial revolution through our coal and steelworks, and we are now leading the green industrial revolution through onshore and offshore wind. The United Kingdom’s wealth was built on Wales, but it now resides in London and southern England. There is a lot of research to evidence the fact that there is a disproportionate amount of money in the south-east of England.

Wales has been let down by Westminster—by Tory Governments—for many years, and this month’s Budget continues that theme. The reality is that under this Tory Government, households in Wales and in my Cynon Valley constituency are worse off, despite the Welsh Government’s significant efforts to put in place a range of measures to help households. We have seen the largest fall in living standards since the 1950s, wages are lower in real terms than they were 13 years ago—that is a fact—and public services, including local government services, continue to be cut in real terms.

Ahead of the Budget, the Welsh Government called for increased support for households in the cost of living crisis, including increased public spending to ensure public sector workers are paid a fair wage, increased funding for public services and investment to boost growth in the economy. Wales TUC called for a boost to pay across the economy, with decent pay rises and a path to a £15 an hour minimum wage, alongside a plan for strong public services, fair taxation and protection from hardship for workers.

After the Budget, the Welsh Government said:

“The Chancellor has chosen to hold back funding at a time when extra investment is desperately needed to ensure our hard-pressed public services can respond…and to ensure public sector workers are paid a fair wage.”

The Institute of Welsh Affairs said that the Budget

“puts money into the hands of well-off high earners”,

and that it “represents a political priority” that is completely “at odds with the needs” of the vast majority of people in the country.

The Bevan Foundation said that

“the fact that there is so little direct action on the cost-of-living crisis is a source of concern”,

and that the Chancellor’s focus is

“starting to drift from this very real problem.”

I was fortunate, about 18 months ago, to commission the Bevan Foundation to undertake a piece of research on our economy in the Cynon valley and come up with an action plan based on community wealth building to address the appalling levels of deprivation and inequality. We are on the path to implementing that at a grassroots level. I am really encouraged by the work that people in Cynon Valley are undertaking to provide an alternative future, but that is no thanks to the UK Government.

The reality is that Wales is constrained from offering more by the UK Tory Government, who routinely withhold fair, needs-based funding for Wales to meet the increasing pressures on our communities. After more than a decade of austerity and the pandemic, Wales’s economy and public services, including local government services, have been absolutely stripped to the bone.

Wales is yet again being starved of funds. We heard news this week that, as my hon. Friend the Member for Newport West said, the UK Government have taken £155 million from the Welsh reserve fund, despite the Welsh Government making proposals that would see the money retained, which has been agreed many times before—there was a precedent. It is—I will use the term—theft from the people of Wales, and it demonstrates the Tories’ complete contempt for our country.

[Stephen Crabb]

The hon. Lady talks about local government services, but how would she respond to the point that local authorities across Wales—all of them, and especially some of the Labour councils not far from her constituency—are sitting on billions, or at least hundreds of millions, of pounds of reserves, seemingly with very little intention of dipping into them to invest in the kinds of priorities that they need to at this time? They might say, “Well, we’re waiting for a rainy day,” but it is pouring outside, for all the reasons the hon. Lady set out. Why will they not spend that money?

[Beth Winter]

I beg to differ. If we look at local governments, there are very few with any significant reserves. For example, my local authority has experienced cuts in excess of £90 million since the start of austerity, and it has tapped into reserves significantly to meet the shortfall. I think the figure was about £30 million in the last year, although do not quote me on that. That is already happening, and local authorities do not have the reserves to which the right hon. Gentleman referred.

In terms of EU structural funds, Wales faces a £1.1 billion shortfall in funding—so much for “not a penny less, not a power lost”. I am interested to hear the Minister’s explanation for the significant shortfall in funding post EU.

On the levelling-up fund and the shared prosperity fund, the Tories’ record is one of failure, and the announcements in the Budget do very little to reverse more than a decade of austerity. One year on from the levelling-up White Paper, most places have lost out in the scramble for levelling-up funding. Millions have been wasted in the application process. Bids have been eaten up by inflation. My constituency has not received a penny, nor have other valley constituencies such as Blaenau Gwent or Torfaen. The UK Government’s shared prosperity fund was to replace EU structural funds, but funds have been cut, and the Welsh Government have been completely cut out of that process.

[Liz Saville Roberts]

I am sure that the hon. Lady shares my concerns and those of Welsh universities, which face a risk to 1,000 jobs and 60 research projects because European structural funds are coming to a close. I am sure she will join me in asking the Minister whether the Government intend to come up with a £71 million bridging fund to enable Welsh universities to survive the period in which they are waiting for funding.

[Beth Winter]

I am just coming on to the university sector, where I worked for 10 years as a researcher and a trade union representative. Indeed, universities in Wales have been at the forefront of green growth and research in Wales and internationally, but with EU structural funding coming to an end, they face the loss of more than 1,000 skilled jobs, as the right hon. Lady said.

Swansea University, where I worked for many years, has been delivering on 50 projects awarded total grants of £150 million from EU structural funds. We have only to look at some of those projects—ASTUTE 2020 and SPECIFIC 2—to get a sense of that cutting-edge research. I was involved in lots of those projects; outstanding work is being undertaken. Universities have written to the Welsh Affairs Committee to say that there is little emphasis on research and innovation within the shared prosperity fund, and wider reforms of the funds are needed.

However, there was absolutely nothing in the Budget to deal with the failings of so-called levelling up and the shared prosperity fund. As the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) said, I am interested to hear the Minister’s response on how the Government will address the shortfall, with all those jobs at risk from the end of this month, as I understand it. Over 1,000 jobs could be lost in Wales.

Moving on to the legacy of the coal mines, the UK Government continue to benefit unduly from their share of the national mineworkers’ pension scheme. They should be paying that money to former mineworkers and their families, many of whom live in Cynon Valley. It is a continued failure of this Government that they have not funded the £600 million legacy costs of making the coal tips safe in Wales. As I said, we created the wealth in the south Wales valley. People sacrificed their lives in many instances. We deserve our fair share of that wealth back.

The UK Government’s record on housing is one of failure. The Bevan Foundation, which has been cited, has undertaken comprehensive research. Evidence shows that there is a shortage of properties to rent, and the local housing allowance rates set by the Tories do not cover real-world market rents. The data found that 75% of Welsh local authorities did not have a single property available at LHA rates, and just 1.2% of rental market properties advertised across Wales were available at LHA rates. The Bevan Foundation has called for rates to be uplifted, and for the collection of better, more comprehensive data from the private rental sector, yet the Budget again said nothing. I want to hear the Minister’s response to the issues with the LHA in Wales, which is a reserved matter.

On transport, the UK Government have continued the lie of designating not only HS2, but now Northern Powerhouse Rail as England and Wales projects, which should result in a total of £6 billion for the Welsh economy.

The Budget shows how urgently we need a change of Government in the UK. We need a completely different economic approach to deliver a new funding settlement for public services, and fully funded, inflation-proof pay rises for workers. We need the wealthiest in society finally to pay their fair share of tax. While the Tories will not do it, Wales requires fair, needs-based funding to be able to do what we want to do, which is to address the levels of inequality that are completely unacceptable and completely avoidable. The UK Government need to stop riding roughshod over the devolution settlement. The Budget showed why we need a UK Labour Government, who will work hand in hand with the Welsh Government to deliver and level up, lifting incomes and living standards and building an economy for future generations. Diolch yn fawr.

[Mr Philip Hollobone (in the Chair)]

I call Jonathan Edwards.

15:01

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

Diolch, Mr Hollobone; it is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Newport West (Ruth Jones) on securing this debate and on her opening remarks.

During my time as a Member of Parliament, I have often found that the key document to read following any Budget is the Office for Budget Responsibility report that accompanies it. This often provides a more sober analysis of the state of the economy, as opposed to the offerings from Ministers at the Dispatch Box. The OBR analysis indicates a future of a stagnating economy, which should worry us all. Economic growth by the end of the forecast period in 2028 is projected to be a pathetic 1.75%.

Let us remember that the projections are for UK economic growth. Over many decades, the Welsh economy —as a result of the sectoral and geographical priorities of UK economic policy—has lagged the UK average, meaning that economic performance in Wales will in all likelihood be even more anaemic. The old problems of low business investment and low productivity haunt economic policy. The hard Brexit policy of the British Government makes the situation worse. The OBR is clear that nothing that the British Government have done has changed its forecasts that productivity will be 4% lower in the long run than if the UK had remained in the EU’s economic frameworks.

Weak economic growth has inevitable consequences for living standards. The OBR analysis estimates that real household disposable income is expected to fall by 2.6% in 2023, following a fall of 2.5% last year. That is the largest two-year fall in real living standards since records began in the 1950s, as we have heard. Economic stagnation and falling living standards—that is where the UK economy is heading following the Budget. Those are the hallmarks of a failing economy, and they should set off alarm bells among not only Ministers, but the official Opposition, who I suspect will inherit that legacy shortly.

Of the UK Government’s five priorities announced at the beginning of the year, three were economic: reducing inflation, reducing Government debt and getting the economy back into growth. The pledge on inflation was particularly cynical for two reasons: first, inflation was always likely to normalise due to global factors, so the pledge could be achieved without any sort of Government intervention; and secondly and more importantly, the reduction of inflation over the remainder of the year—notwithstanding the worrying acceleration last month to a rate of 10.4%—is being spun as if the cost of living crisis were over, as if somehow prices were falling. Of course, that is not the case.

The increases in prices over recent years are now baked in. Without people’s incomes increasing to compensate, it will mean that the squeeze on living standards will become embedded, with its effects felt more acutely in those areas of the UK—like Wales—where incomes are lower than the UK average. The Institute for Fiscal Studies estimates that the real inflation rate for the poorest-income 10th of households was an eye-watering 14%, proving that the disproportionate impact of inflation depends on a household’s income situation.

As I have more time than I was expecting, I will caveat what I said about inflation falling during the next year. We are acutely aware of events in the financial sector at the moment, with the turmoil in the banking sector. I had never heard of Silicon Valley Bank before two weeks ago, but it appears that issues with that bank in the US are affecting other banks across the world. We know what happens when the financial sector is under duress. What do central banks do? They ease monetary policy and, if we ease monetary policy at this time, what would that mean for inflation? I have never wanted to be a central banker, and I fear that unless the situation in the financial sector stabilises, they may find themselves with a very difficult choice: do they preserve the financial sector, or do they squeeze the living standards of ordinary people?

Given that I have more time than I thought, I should perhaps mention the Edinburgh reforms, which were really pushed by the British Government before Christmas. They should set off massive alarm bells for us all, considering what is happening at the moment. The British Government’s approach is to minimise the regulation of the banking sector at a time of banking turmoil. In 2008, it was not the bankers that paid for the financial sector’s business model going wrong; it was ordinary people who have faced over a decade of squeezed incomes and reduced public services. History often repeats itself as farce; I hope that I am wrong.

On all the UK Government’s priorities—the three that I mentioned on the economy, and the other two on NHS pressures and small-boat crossings of the English channel—they would benefit from closer collaboration with the European Union and its economic frameworks. Although I understand the politics of the situation for Labour as we approach the general election next year, I sincerely hope that, when it is in power, it will take a far more rational approach to European relations for all our sakes.

Most of the post Budget commentary has focused on the announcement about abolishing the cap on the lifetime allowance on pension contributions. In several debates over the years, I have called for flexibility for NHS consultants to help ease NHS pressures, but what I had in mind was a specific carve-out, as is already available to judges. I am uncomfortable with the universal nature of this policy, as it is clearly a tax cut for the wealthiest in society. At the same time, the Chancellor has introduced tougher sanctions for those on universal credit. Why is it always carrots for the rich and sticks for the poorest?

I turn to the investment zones announced in the Budget. The OBR analysis indicates that their impact would be negligible. However, it would be useful if the Minister, in winding up, outlined how the policy will work in Wales, and specifically whether an equitable amount of funding will be made for any investment zones in our country.

Meanwhile, as the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) mentioned, we know that 60 Welsh university projects, which support 1,000 research jobs, face immediate threat next month when the European structural funds come to an end. The Budget would have been an ideal opportunity to announce the bridge funding needed to preserve those jobs and projects. It is disappointing that the warnings of several Welsh representatives have gone unheeded.

The Welsh Government’s overall budget in 2023-24 will be £900 million less in real terms than it was expected to be in 2021. The Welsh Government have also rightly criticised the Budget for awarding only £1 million extra in capital funding for 2024-25. We all know that capital funding is vital if we are to tackle low productivity and business investment.

If the UK Government are to address the sluggishness of the economy, which will last for the remainder of this decade as projected, I propose three main priorities. First, forget the Brexit fantasies and rejoin the European economic frameworks. Secondly, channel investment into geographic areas with low productivity, as that would have a far greater impact on overall UK productivity levels, as opposed to prioritising investment in London and the south-east. Lastly, follow the United States, where President Biden has thrown a trillion-dollar kitchen sink at improving US transport links and public utilities, such as broadband and telecommunications, and investing in renewables, electric vehicles and research into the technologies of the future. Diolch yn fawr iawn.

15:09

[Ben Lake (Ceredigion) (PC)]

Diolch, Mr Hollobone; it is an honour to serve under your chairmanship. I congratulate the hon. Member for Newport West (Ruth Jones) on securing this important debate. It is a pleasure to follow my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards). I fear that I need not reiterate many of his points in my own speech because he made them so eloquently and effectively.

Before I address the substance of the spring Budget, it would be remiss of me not to comment on the report published earlier this week by the Senedd’s Public Accounts and Public Administration Committee, which found that due to a budget underspend in 2021-22, the Welsh Government breached the limits of the Welsh reserve. Other Members have commented on that this afternoon. I would just add, echoing the point made by my right hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts), that it cannot be right—it is certainly inconsistent and illogical—that any underspend in a UK Government Department returns to the UK Government, but the same does not apply to any underspend in Welsh Government Departments.

I turn to the issues facing the spring Budget. High on the agenda was the rising cost of living. Much has been made of the measures included in the Budget that aimed to support households and businesses with energy costs. We have heard comments to that effect this afternoon. The Chancellor was right to identify that as a key concern, but given that energy bills are still expected to increase by some 17% next year, the Budget did not go far enough. To help families see out the spring, the Government could and should have considered extending the energy bills support scheme.

I do not dismiss the extension of the energy price guarantee, which will be a great service to a lot of people across Wales, but the measure does not offer the 74% of my constituents living in off-grid homes support with their fuel costs. There should be further support for off-grid households; I would welcome a further round of the alternative fuel payment, for example. It is difficult to deny the inconsistency in the level of support offered to off-grid households compared with those connected to the mains gas grid, and I am sure the Government would want to address that.

Meanwhile, small businesses have been left without any additional support with energy costs. We know of the increased percentage of business insolvencies last year in England and Wales. I fear that we will see a further escalation in insolvencies this year, unless the UK Government expand the energy bills discount scheme or at least require energy companies to allow small businesses to renegotiate their contracts early in order to reflect falling prices.

I mentioned that 74% of properties in my constituency of Ceredigion are not connected to the mains gas grid. Much has been made of the plight of households and rightly so, but for off-grid businesses, the situation is quite acute. They have been offered only a one-off payment of £150. We do not need to be experts in business to know that that falls woefully short of reflecting the increase in energy prices that these off-grid businesses have experienced over the past 18 months to two years.

Let us remember that these off-grid businesses are local post offices, village shops, swimming pools, and rural factories in Ceredigion—key pillars of rural society and economy, and the lack of meaningful support has placed them at a competitive disadvantage to those companies connected to the mains gas grid. When we consider that most off-grid businesses are located in rural areas, that failure surely flies in the face of the UK Government’s professed levelling-up agenda.

Of course, part of the long-term solution to bringing down energy bills for both households and businesses is to improve the energy efficiency of our buildings. I have previously called for the £6 billion committed to energy efficiency in the autumn statement last year to be brought forward in the term of this Parliament, but it is critical that the current energy company obligation schemes—the ECO schemes—are delivered properly.

E.ON Energy estimates that as of December 2022, only 11% of the ECO4 scheme obligation had been delivered, compared with an expected delivery rate of some 19%. By comparison, at the same point during the ECO3 scheme, it estimated that 29% of the obligation had been delivered.

The company has suggested that inflation is partly to blame for this underperformance, having escalated costs beyond the funding assumptions originally set for the installations. But it is also important to note that the scoring limitations of the scheme have set the bar far too high for the minimum improvements required for a property to be eligible for support under the scheme. The result is that many eligible households fail to secure an installer willing to undertake work on their properties. This is something the Government need to review with some urgency.

I now want to take a step back from the immediate issues facing households and society more broadly, and look at the longer-term problems. I echo many of the points that the hon. Member for Carmarthen East and Dinefwr made in his very eloquent speech. I agree that this Budget wasted an opportunity to tackle some of these longer-term productivity issues that have hampered prosperity in Wales for decades. I am concerned that businesses in Wales, particularly in rural areas, risk being left behind due to poor digital connectivity. For example, gigabit connectivity in Wales stands at some 50% compared to the UK average of 68%, and—as always—the problem is far more acute in rural areas, with only 27% of Ceredigion connected to gigabit internet.

We cannot allow rural areas to miss out on productivity-boosting technologies, whether that means simple broadband connectivity or the integration of new AI technologies. I therefore urge the UK Government to release the funding allocated to Project Gigabit without delay and in accordance with recommendations set out in the report of the Select Committee on Digital, Culture, Media and Sport. In addition, the Government should consider accelerating the timescales for the roll-out of gigabit broadband in very hard-to-reach areas, which often lack both fast broadband and a 4G signal. Sadly, many are located in my constituency of Ceredigion, and I know that the Minister is deeply aware of the impact of such notspots on the people living there.

The National Infrastructure Commission for Wales estimated that it would cost about £1.3 billion to connect every property in Wales with fibre-to-the-home technology, yet the Government have only released £1.2 billion of Project Gigabit funding so far for the entire UK. There is a real opportunity to boost productivity in all parts of the United Kingdom, if only the Government were willing to bring forward some of the funding that they have already allocated for this purpose. If fibre-to-the-home technology is too challenging in the short term, let us instead see greater effort made to expand projects designed to target very hard-to-reach areas, such as the rural small cell projects or work on gigabit-capable, fixed wireless access technology.

There must also be a way to reform the self-defeating systems that currently see fibre taken to the curtilage of some rural properties only for residents to be forced to pay exorbitant excess construction charges if they want that connection extended to their actual home—in other words, if they actually want it to work. In rural areas, where the curtilage of a property may lie some distance from the house, this is proving a real barrier to improved connectivity.

Another key area that should be prioritised if we are to boost the Welsh economy is, of course, renewable energy. Others are far more informed than I am on this topic and could make contributions, so I will just say that we have considerable generation potential along the Welsh coastline in both marine renewables and offshore wind, and an opportunity to seize a first-mover advantage in technologies such as offshore floating wind and become a world leader in the manufacture of components, and in the export of skills and expertise into a growing global market.

[Liz Saville Roberts]

There is a risk that we keep repeating ourselves, but there is a reason for us to do so. In Scotland, the Crown Estate 12 miles out to sea is devolved to Scotland, so that policy can be made in relation to it and the profits that arise from the Crown Estate remain in Scotland. Why, if it is good enough for Scotland, is it not good enough for Wales?

[Ben Lake]

I am grateful to my right hon. Friend for posing that question. It is indeed a question that keeps me up at night. Why is it good enough for Scotland but not good enough for Wales? Perhaps the Minister will address that point when he winds up.

The Welsh Affairs Committee recently published a report setting out that offshore floating wind technology could represent the single biggest investment opportunity in Wales for decades, and recommended that the UK Government take the necessary steps to ensure that its potential is realised. I very much hope that they do.

Wales desperately needs an economic strategy capable of providing adequate funding for its public services, reducing poverty, improving incomes and ensuring that we realise our potential contribution to the global effort of tackling climate change—a strategy that, I am afraid to say, the spring Budget did not deliver.

15:19

[Christina Rees (Neath) (Ind)]

It is an honour to serve with you in the Chair, Mr Hollobone, and I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing this important debate.

To help people survive the cost of living crisis in Wales, the UK Government must reform local housing allowance and universal credit. Local housing allowance was introduced in 2008, and it is the amount of housing benefit or the housing element of universal credit available to those who are renting from private landlords. The amount of support provided is based on the area in which the individual lives and the number of bedrooms they require. There are a number of determining factors, including allowing a tenant to rent in the cheapest third—the 30th percentile—of properties within a market area, which depends on the location of the property. Wales is divided into 23 broad rental market areas.

Despite the good intentions behind the local housing allowance when it was introduced in 2008, the scheme has been the subject of criticism and controversy in the last decade. In many areas, it does not cover the full cost of renting a property, leaving individuals and families in a precarious financial situation. The issue has been exacerbated by the UK Government freezing local housing allowance rates since 2020 at 2018-19 private rental rates.

Research by the Bevan Foundation found that in my Neath constituency, 51 properties were advertised for rent in February 2023, but not one property was fully covered by the local housing allowance rate. Furthermore, the gap between market rents and the rate in my constituency is £95 for a one-bedroom property, over £110 for a two-bedroom property, nearly £150 for a three-bedroom property and over £250 for a four-bedroom property. That means many people in Neath face the prospect of homelessness, and some are being forced to choose between paying their rent and putting food on the table. This is an unacceptable situation that the UK Government need to address urgently.

The Welsh Government have already taken steps to address this issue, with the introduction of the Welsh housing quality standard and the Housing (Wales) Act 2014. Low-income tenants may face more barriers when looking for properties in the private rental sector, and many may find them difficult or impossible to overcome—for example, deposits of more than one month’s rent, guarantors, credit checks, minimum income checks and professional-only tenants.

The Bevan Foundation found that only 32 properties in Wales were at or below the local housing allowance rate. Twenty-three properties had one or more of the barriers that I just mentioned, so only nine properties fully covered by the local housing allowance did not ask for one or more of the additional qualifications. Seven were in Cardiff, one was in Ceredigion, and one was in Rhondda Cynon Taf, but there was none in Neath. The Chancellor could have used his spring Budget to uplift local housing allowance rates to the contemporary 30th percentile and keep it at that rate, providing housing security, which would improve mental and physical health among those struggling to pay their rent in Wales and the UK, but he did not.

The Joseph Rowntree Foundation recently launched its research on an essentials guarantee, which would reform universal credit to ensure that people can afford the essentials during hard times. It tested public opinion and worked out the cost of basic non-housing essentials in Britain today—food and non-alcoholic drink, electricity and gas, water, clothes and shoes, communications, travel and sundries such as cleaning materials—to be £120 a week for a single person aged over 25, which is £35 a week more than universal credit, and £200 for a couple aged over 25, which is £66 more than universal credit. Those figures are for April 2023, and the gaps for under-25s are bigger. It is clear why so many people have to go to food banks.

The Joseph Rowntree Foundation, with Trussell Trust support, proposes that the UK Government should introduce an essentials guarantee, which would embed in our social security system the widely supported principle that, at a minimum, universal credit should protect people from going without essentials. Its research shows that 90% of households on universal credit are going without essentials, and that universal credit is now at its lowest level as a proportion of average earnings. Over 66% of the public believe it is too low, and almost 50% of households have their universal credit reduced by benefit deductions and caps.

Inadequate social security is the main driver of food bank need, with the Trussell Trust giving out 1.3 million parcels between April and September 2022. The essentials guarantee, which would be developed in line with public attitude insights and focus groups, would enshrine in legislation an independent process to regularly determine the essentials guarantee level based on the cost of essentials—such as food, utilities and vital household goods, but excluding rent and council tax—for the adult in a household. Universal credit’s standard allowance must at least meet that level, and deductions such as debt payments to the UK Government, or as a result of the benefit cap, should never pull support below it.

The cost of implementing the essentials guarantee would be an additional £22 billion a year in 2023-24, assuming there is a full roll-out of universal credit. The devastating effect of people going without essentials has a profound effect on our society and economy, and there would be savings to public services as a result of improved incomes.

The Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms), has stated that social security benefits are reviewed every year but are not updated. In real terms, the current level is the lowest in 40 years. Furthermore, low benefits are a problem for the economy because people take the first job they are offered, irrespective of whether it matches their skills, so economic productivity is a problem. The benefits levels are not linked to anything logical; they are arbitrary figures, which are actually set at the deep poverty level, not at the poverty level. Universal credit needs reforming because it is not preventing widespread poverty, but the Chancellor did not use his spring Budget to do so.

[Wayne David]

Not only is poverty bad in itself, but it also creates enormous pressure on the health service, because there is a direct correlation between low income and poor health.

[Christina Rees]

I completely agree with the hon. Gentleman, who has made his point succinctly. I was about to say that the Chancellor could have at least restored the £20-a-week uplift that recipients of universal credit received during the covid pandemic. That would have been a good start.

The Minister will know how important rail investment is in Wales. On several occasions, I have raised the issue of Barnett consequentials coming to Wales as a result of HS2, as is happening in Scotland and Northern Ireland. The same has happened with Northern Powerhouse Rail being classified as an England and Wales project, so Wales does not get a consequential. The cross-party Welsh Affairs Committee, which has already been mentioned, has recommended that HS2 be reclassified as an England-only project so that Wales can receive the £5 billion it is entitled to. There is precedent for this: when Crossrail was classified as an England-only project, Wales received a consequential.

Wales has around 10% of the UK rail network, which includes some sections going into England, such as the Marches line and the Severn tunnel, but it has historically received 1% to 2% of rail enhancement investment. Right hon. and hon. Members can see why the people of Wales feel unfairly treated when it comes to investment in their rail network.

The Minister will be aware of the global centre of rail excellence being developed in my Neath constituency, which will become the UK’s first net zero rail-testing facility. It will be a shared campus for rail innovation, research and development, testing and verification for main-line passenger and freight railways, developing next-generation solutions for the rail sector. The UK Government have pledged £30 million for the global centre of rail excellence, of which £20 million has been received for the construction phase. Will the Minister confirm when the remaining £10 million will be paid, so that the centre can be completed?

In summary, the Budget delivered nothing beyond the bare minimum for Wales, and was specifically lacking in support for local housing allowance and universal credit reform, and the investment in rail that we are entitled to.

15:30

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing the debate, and the passionate way she opened it.

We can all agree that, when the Chancellor of the Exchequer presented his Budget, it was an opportunity to address the worsening impacts of the cost of living crisis, and to drive economic growth in Wales and across the United Kingdom. The Budget is also a statement of priorities, but it was clear from the lack of extra funding for our public services, as well as the bare minimum of additional support for people and businesses who need help now, that the UK Government do not have a grip on the bigger picture and are content to tinker around the edges.

The Chancellor announced that Wales would receive an additional £178 million over the next two years, as a result of spending decisions made in England, but the settlement in 2023-24 is still up to £900 million lower in real terms than expected at the time of the 2021 spending review. This was meant to be a Budget for growth but, while the London School of Economics Growth Commission, the OECD and others have highlighted the vital importance of additional public investment in the infrastructure to improve productivity and growth, the Budget contained a derisory £1 million extra in capital funding in 2024-25 for Wales.

We have had a wide-ranging debate. My hon. Friend the Member for Newport West rightly highlighted the UK Treasury’s callous clawback, which I will return to later. She also talked about the downgrading of growth, and highlighted the case of her constituent Dawn Jones. I am sure many others across Wales will relate to the concerns raised by her constituents and their experience in dealing with the Tory cost of living crisis.

My hon. Friend the Member for Caerphilly (Wayne David) raised the excellent report of the Bevan Foundation, and the evidence that the most vulnerable are affected by this Government’s policies. My hon. Friend the Member for Aberavon (Stephen Kinnock) highlighted the importance of the steel industry, its being the heart of economic growth. The hon. Member for Ynys Môn (Virginia Crosbie) picked highlights; in response to an intervention by the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) about the level of local housing allowance being far too low to meet housing needs across Wales, the hon. Member continued to talk about the Budget being overwhelmingly positive. That is definitely a matter of opinion, and not one shared by many of my constituents or others.

My hon. Friend the Member for Cynon Valley (Beth Winter) talked about the reality check of work on the cost of living crisis that was carried out last year, and about the need for fair wages for our public sector workers. In an intervention, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) talked about the use of local authority reserves. As an ex-local councillor of 20 years, I think people often do not differentiate between free reserves and committed reserves. The vast majority of reserves held by most local authorities tend to be committed reserves, rather than reserves that they can use freely. Many do use free reserves to plug the gap, and there is more of that at the moment.

My hon. Friend the Member for Cynon Valley also mentioned that the Welsh Government were cut out of the process around the shared prosperity fund, something that many colleagues have called out and said should be rectified. It is not right that the Welsh Government are cut out of discussions of such a significant investment in Welsh communities.

[Wayne David]

Does my hon. Friend share my concern that local authorities believe there is, unfortunately, a distinct possibility that they will be unable to spend the moneys that have been allocated, and we will see yet another clawback by the Government up here?

[Gerald Jones]

I absolutely agree. The arrangements with local government about the timescales for the funding have been woeful. Given everything that local authorities have to contend with at the moment, it is unfair to expect them to meet the unrealistic timescales set.

My hon. Friend the Member for Cynon Valley also talked, like other Members, about the local housing allowance rates. I will return to that later. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) talked about the OBR analysis of the woeful spring Budget, and the impact of rising inflation. He raised concerns about the universal tax cut through the pension allowance benefiting the wealthiest 1%, and about plans for investment zones.

The hon. Member for Ceredigion (Ben Lake) highlighted the energy companies and the call for early renegotiation of contracts, which could significantly help many people across the country who are dealing with rising energy costs. He raised specific concerns about off-grid customers and the need for an economic strategy.

My hon. Friend the Member for Neath (Christina Rees) joined other Members in raising concerns about the local housing allowance rates in her constituency. All the evidence suggests that, across Wales, the rate is woefully inadequate. Change has been called for many times, and the Government would do well to listen to the concerns raised by the Bevan Foundation and address the issue. My hon. Friend also highlighted her concerns about universal credit and the rising use of food banks.

Earlier this month, the Senedd passed the Welsh Government’s budget for 2023-24, which provides significant investment for the NHS, social care and schools. The Welsh Government will, of course, consider how best to use the small amount of additional funding announced by the Chancellor to meet the needs and priorities of Welsh people.

Ahead of the Budget, the Chancellor was asked to provide support for households, to increase funding for public services and to invest to grow the economy. While it is positive that he listened to the many calls to maintain the energy price guarantee at £2,500 from April, it is disappointing that he refused to take the other practical actions that were called for—measures that could have made a real difference to those most exposed to the cost of living crisis.

The reality of the Chancellor’s Budget is that it represents sticking-plaster politics, with no growth for the many. The OBR has confirmed that the hit to living standards and working people’s pay over the past two years is the largest since comparable records began. In fact, the only permanent tax cut in the Budget, as we have heard, was the £1 billion cut for the richest 1% of earners, via changes to pension allowances. The Resolution Foundation found that a high earner with a £2 million pension pot will get a tax cut of almost £250,000. How utterly unfair, yet it is probably not a surprise, coming from this Government.

Compared with the forecast in 2021, the OBR now thinks the average interest rates on outstanding mortgages will be twice as high. The Tory mortgage penalty has hit £1,950 for a typical household remortgage, thanks to the Tories crashing our economy with their kamikaze Budget last September.

The OBR revealed that the Government have left £10.4 billion on the table last year and this through holes in the windfall tax. Labour announced a form of windfall tax on oil and gas producers in January 2022. The Government announced an ineffective windfall tax in May 2022. Just think what that £10.4 billion left on the table could have made to the lives of people in Wales, and across the UK, supporting them against rising energy costs and other cost pressures. Is it not the case that Tory MPs looked at the state of the nation after 13 years of Tory Governments, and at the cost of living crisis that families are facing, and chose not to vote with Labour against the pension changes, but to benefit those with the biggest pension pots?

The Welsh Labour Government have put in place a range of measures to help people through the Tory cost of living crisis. The Welsh Government fuel support scheme extends to 400,000 homes, with eligible households receiving a £200 payment to help them pay their energy bills. The council tax reduction scheme helps more than 270,000 households in Wales with their council tax bills; around 220,000 households pay nothing at all. More than 300 warm hubs have been set up across Wales thanks to Welsh Government funding.

The hon. Member for Ynys Môn mentioned the Holyhead breakwater. The Holyhead port is one of most important economic drivers in north Wales. The £20 million funding for the breakwater in the Budget follows Welsh Government calls and underlines the importance of the port. The announcement is welcome but long overdue, and the proposal is viable only because of Welsh Government commitments.

Hon. Members also raised freeports. Wales has a better deal on freeports thanks to the Welsh Labour Government, given that the Tory Government proposals were for freeports in Wales with no extra funding, and there was a threat to impose a freeport from the centre without involving the Welsh Government. Through grown-up politics, hard work and negotiation, the Welsh Labour Government convinced the UK Government to deliver a better deal for Wales, which means that UK Ministers will provide at least £26 million of non-repayable starter funding for any freeport established in Wales. The Tories tried to rip off Wales and ride roughshod over the devolution settlement, but Labour in Wales stood up for Welsh communities and businesses. Welsh Tories in Cardiff and Westminster did not fight for them.

I raised the callous clawback from the Welsh Government with the Minister yesterday, and my hon. Friend the Member for Newport West, the right hon. Member for Dwyfor Meirionnydd and the hon. Member for Ceredigion spoke about it today. I hope the Minister shares our concerns. The Welsh Finance Minister has made it clear that the actions of the UK Treasury were wholly unacceptable, as the Welsh Government stayed within their overall budget. The UK Government refused to switch between the revenue and capital budgets—a process that, as the Minister knows, has been agreed many times before. It is all the more questionable given that Welsh Government underspends during the exceptional financial year 2020-21 were significantly below those of UK Departments. The Treasury’s arbitrary application of its guidance in this instance remains deeply regrettable, and has left Wales deprived of £155 million.

As of last month, only £392 million of the levelling-up fund—just 8% of the total—had been spent since November 2020. Many of the projects that have been promised to local communities are a long way from being delivered. Labour believes in the importance of bringing power closer to communities. The Government’s replacement for EU structural funds has been a disaster that has left the poorest communities in Wales empty handed due to unfair formulas, and the distribution of funds is in the hands of Departments that are not even trusted by the Treasury.

Labour is committed to working in partnership with the Welsh Government to set the policy agenda for the use of structural funds. When we were part of the EU, Wales was in receipt of EU structural funds that contributed to a number of programmes, in particular on regional development and employment. The shared prosperity fund was announced in 2017, partly to replace the EU structural funds, but, as we have heard, the governance was changed to cut out the Welsh Government from that process. The effect of that decision is that the Tories have failed to provide an equivalent replacement regime to EU structural funds. They have centralised decision making, cut funds and allocated the remaining resources inefficiently.

As a number of Members said, universities in Wales have been at the forefront of innovative ideas that could change the way we live, thanks to £370 million of EU structural funds that have been invested in university-led projects in Wales. The structural funding from the EU is suddenly coming to an end, so Wales is at a cliff edge. Welsh universities face the loss of 1,000 skilled jobs from 60 projects focused on generating green growth. Hopefully, the Minister will enlighten us about what the Government intend to do to prevent that.

Labour is committed to bringing power closer to communities, and therefore believes that we should work in partnership with the Welsh Government to deliver structural funds in the future. A UK Labour Government would restore Wales’s role as decision maker and budget holder for the relevant structural funds. We would work with Wales to set the UK policy agenda and the use of structural funds, allocate money and agree a robust evaluation process.

The 2023-24 Welsh Government budget has been one of the toughest since devolution because of the significant financial pressures caused by the UK Government’s mismanagement of the UK economy, made worse by the kamikaze mini-Budget last September. The UK Government hold many levers relating to energy costs, and there must be greater support for businesses—particularly energy-intensive industries—and charities. Sadly, the Chancellor’s spring Budget misses the big picture, lacks ambition and fails to demonstrate how he intends to grow the economy.

The Welsh Government settlement in 2023-24 is, as I have said, still £900 million lower in real terms than expected at the time of the 2021 spending review. This was meant to be a Budget for growth, but the derisory £1 million in capital funding for Wales shows that the UK Government really have no interest in building their way out of the current financial crisis. For the Welsh Government to deliver further on behalf of the people of Wales we need a strong partnership between the Welsh Government and a UK Labour Government, working together to deliver on the priorities of the people of Wales and ensuring that Wales has a strong part to play in a strong United Kingdom. To that end, the general election cannot come soon enough.

15:45

[The Parliamentary Under-Secretary of State for Wales (Dr James Davies)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Newport West (Ruth Jones) on securing this important debate, which has triggered many views from opposing directions. I am grateful to all those who have contributed, including my hon. Friend the Member for Ynys Môn (Virginia Crosbie), the hon. Members for Cynon Valley (Beth Winter), for Carmarthen East and Dinefwr (Jonathan Edwards), for Ceredigion (Ben Lake) and for Neath (Christina Rees), and of course the Opposition spokesperson, the hon. Member for Merthyr Tydfil and Rhymney (Gerald Jones).

I am pleased to have this opportunity to discuss the recent spring Budget and my right hon. Friend the Chancellor’s plan for long-term, sustainable, healthy growth in Wales and across the United Kingdom. I will come to the questions raised by hon. Members in due course.

I was incredibly pleased to see my right hon. Friends the Prime Minister and the Secretary of State for Wales on Ynys Môn last week announcing not just one but two new freeports for Wales. The jobs and investment that will come as a result of that announcement will help deliver on our commitments to level up Wales and grow the economy. The fact that we have been able to deliver two freeports for Wales jointly with the Welsh Government is a testament to what can be achieved when the two Governments work together. We saw friendly competitors from Ynys Môn and Preseli Pembrokeshire sitting next to each other earlier, and both of them had a critical role to play in that development, so many thanks to them.

Earlier this month, my right hon. Friend the Chancellor set out a Budget that ensures that the benefits of economic growth are felt everywhere, including in Wales. It promotes the conditions for enterprise to succeed and encourages the inactive back into employment. At the autumn statement in 2022, the Government took the difficult decisions on tax and spending needed to restore economic stability, support public services and lay the foundation for long-term growth. At the spring Budget two weeks ago, the Government built on that foundation with a plan to deliver on three of the Prime Minister’s five key priorities: to get debt falling, halve inflation and grow the economy.

I want first to highlight the funding that the Budget included for multiple projects that will specifically benefit Wales. We are supporting the restoration of the grade II* listed Holyhead breakwater with £20 million of funding for the Welsh Government to ensure the long-term viability of that vital transport hub and, through it, trade links with Ireland.

My right hon. Friend the Chancellor set out that the Government will provide up to £20 billion over the next two decades to support the development of carbon capture, utilisation and storage. That is not something we have heard about today, but the HyNet cluster in north-east Wales and north-west England is already benefiting from our existing £1 billion commitment through the cluster sequencing programme. Decarbonising heavy industry is vital to driving economic growth and creating high-quality, sustainable jobs across the region, while helping us meet our climate commitments. The increased £20 billion ambition will further expand CCUS across industry, which will be vital for economic growth across Wales.

The Government are launching Great British Nuclear to address constraints in the nuclear market and support new nuclear builds as the Government work towards net zero.

[Liz Saville Roberts]

It has already been mentioned that an SMR at the Trawsfynydd site, as well as at Wylfa, is very much in the anticipation. The Minister will be aware that there are proposals for a national medical isotope centre at Trawsfynydd, known as Project ARTHUR. What discussions have there been with the Welsh Government about bringing that forward? There are concerns that there will be a shortage as reactors across Europe and the world cease to produce. When it comes to the medical security of the United Kingdom, there is real potential here.

[Dr Davies]

The right hon. Lady is right to raise that point. If I may, I will write to her with the latest position on that, but she may find that there will be announcements in the relatively near future on Great British Nuclear and its plans, which might assist in that regard. We know that Wales has the best British sites for new nuclear, including Trawsfynydd in her constituency and Wylfa Newydd. I look forward to working with GBN to champion a revived nuclear future for north Wales.

Investment zones were mentioned. Wales, too, will benefit from the Government delivering 12 investment zones across the UK, including at least one in Wales. The programme will provide each successful area with up to £80 million over five years to grow a cluster in one of our key future sectors, bringing investment into areas that have traditionally underperformed economically.

The UK Government are working with the devolved Administrations to develop an investment zone programme for each of Wales, Scotland and Northern Ireland. In addition, the UK Government and devolved Administrations will work together to explore potential options for delivery of new levelling-up partnerships in Wales, Scotland and Northern Ireland, such as those announced for England by the Chancellor in the Budget.

The Budget set out a number of measures that will create the right conditions for enterprise in Wales in all sectors, based on competitive taxes, access to capital and smarter regulation. We will support growth in Wales by attracting the most productive companies to set up, invest and grow in Wales and in the rest of the UK. We expect about 220,000 businesses in Wales to benefit from a range of administrative changes to simplify the tax system, allowing Welsh small and medium-sized enterprises to spend more time on their business and less on meeting their tax obligations.

During the debate, there were a multitude of questions on all sorts of issues. I will do my best to address as many of those as possible. I should declare first that I am a member of the British Medical Association, although I do not expect to benefit from the pension changes myself. Last week, I met the chair of the BMA, Philip Banfield, whom I know from his time as a consultant at Glan Clwyd Hospital. Glan Clwyd, like many in Wales, is struggling, as the Healthcare Inspectorate Wales report has detailed yet again today, so anything that can help to retain senior doctors’ hours and their presence in departments is certainly to be welcomed.

[Wayne David]

Is it not the case that the people who will benefit from the new arrangements are not just doctors, but many other wealthy people?

[Dr Davies]

Inevitably, those at the pinnacle or conclusions of their careers often earn a lot more, but they also have a great deal to offer the economy and society in general. It is difficult to be too black and white about those who are of benefit and those whom we need to retain in the workforce. As the hon. Gentleman knows, in some respects the Budget centred on trying to ensure that the workforce are there for the economy that we need.

My hon. Friend the Member for Ynys Môn referred to childcare. I hope that the Welsh Government will replicate our offer to parents of 30 hours’ free childcare for children between the ages of nine months and four years, and that they will not, as the First Minister appeared to suggest the other day, be different for the sake of it.

The shared prosperity fund has been raised. This is a complicated matter, but the Welsh Government have alleged that Wales is being short-changed. However, I argue that they are making flawed and hypothetical assumptions, and it is my understanding that Welsh Government officials in the Finance Committee in Cardiff Bay have broadly accepted that. It is important to compare like with like. The SPF is intended to replace the European regional development fund and the European social fund, while the remaining funds, covering agriculture and fisheries, are accessed through other means. Different time periods can be looked at as well—it is not just about when the funding is received, but about when it is spent. The funds do ramp up and down in the UK Government’s intentions, as they did with the EU. The Institute for Fiscal Studies has validated the UK Government’s approach. I also emphasise the fact that the local growth funds, including the levelling-up fund and the community ownership fund, are in addition to the shared prosperity fund, so actually Wales has a record level of investment coming from the UK Government.

[Gerald Jones]

The Minister mentioned the shared prosperity fund, which is significant investment that could transform communities across Wales. He also highlighted the positive joint working of the Welsh and UK Governments on freeports. Why does he think that the UK Government have frozen out the Welsh Government in the case of the shared prosperity fund, when there is an example of good working together? Why can that not apply across the board?

[Dr Davies]

My understanding is that the Welsh Government have been feeding into the general approach on shared prosperity fund allocation. In my local area, there is a Welsh Government representative on the body that advises on the funding. There are a range of contributors, as there should be. Proper devolution is the key point, in that local authorities are taking a leading role.

Hon. Members are right to raise the issue of universities, because of course universities in Wales have been dependent on European structural funds. My understanding is that Universities Wales has consistently expressed concerns that the Welsh Government do not invest an equal amount in Welsh universities compared with England. It has also highlighted that the lower level of core funding places Welsh universities at a disadvantage compared with their counterparts in England when competing for UK-wide research and development funding opportunities. To be constructive, I emphasise that the Secretary of State for Wales has asked universities to provide details of the economic value of programmes that were previously funded by the EU structural funds. He and I are very interested in trying to assist on that.

[Beth Winter]

Can the Minister categorically assure us that the £71 million bridging fund that is urgently needed to plug the gap will be provided in time to save the more than 1,000 jobs at imminent risk in the higher education sector in Wales?

[Dr Davies]

The hon. Member will know that devolution is in place and that the Welsh Government have a role to play here. I assure her that this is an issue that I and the Secretary of State take very seriously, and we are working with universities to assist them.

Time is marching on, and I must make some progress. To support employment in Wales and across the UK, the UK Government are helping parents on universal credit who are moving into work or looking to increase their working hours by making sure they have support for childcare up front. We are also increasing support for those parents on UC by increasing the childcare maximum entitlement to more than £950 for one child and more than £1,630 for two children.

I had hoped to go on and talk further about the comprehensive cost of living support in place for large numbers of people—everyone, in fact—as well as the assistance with the cost of energy. I do not have time to do that, but I am always happy to liaise directly with right hon. and hon. Members on their specific questions.

I thank the hon. Member for Newport West once again for bringing forward this important debate. It is useful to have a discussion of all the matters raised. I look forward to doing my bit to help support the people of Wales as we continue through this difficult period.

15:57

[Ruth Jones]

I thank everybody who has taken part in the debate this afternoon. I thank the Minister and the shadow Minister, my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones), and everyone who has intervened and made speeches. It has been good to have an informed and, by and large, good-humoured debate. We are all passionate about Wales. We all want Wales to get on, and we want to make sure that we do that in the best way possible. The issues will not be going away. I assure the Minister that we will come back again and again on the issues that we have raised today. I thank everybody for taking part.

Question put and agreed to.

Resolved,

That this House has considered the Spring Budget and Wales.