Spending Review and Autumn Statement: Wales

Debate between Christina Rees and Jonathan Edwards

Tuesday 15th December 2015 Westminster Hall

[Christina Rees (Neath) (Lab)]

I beg to move,

That this House has considered the effect of the Spending Review and Autumn Statement 2015 on Wales.

It is a pleasure to serve under your chairmanship, Mr Hollobone. Last month’s autumn statement was an opportunity for the Government to deliver a fair deal for Wales; to support Welsh families, to invest in skills and infrastructure and to give the Welsh Government the tools that they need to fund the vital public services that we all depend on. Unfortunately, however, the Chancellor of the Exchequer did none of that. Instead, he delivered yet more cuts to the Welsh budget and to the budgets of thousands of families across Wales.

Thanks to Labour’s campaign, the Chancellor was forced to abandon his plans to cut tax credits that would have hit 135,000 working families in Wales. However, we now know that those cuts have been delayed, not dropped altogether, and thousands of Welsh families will be hit just as hard through the Government’s cuts to universal credit. Families across the UK are expected to lose £1 billion this year and over £3 billion by the end of the Parliament because of the cuts to universal credit. The Institute for Fiscal Studies has predicted losses of £1,600 a year for 2.6 million working families and cuts of £2,500 a year for 1.2 million families who are out of work.

Although fewer than 6,000 Welsh people are currently on universal credit, the number will rise significantly over the next few years, as other benefits such as tax credits and jobseeker’s allowance are phased out. In my constituency, 656 people are currently on universal credit, but 14,250 people are claiming one of the main out-of-work benefits.

Working people in Wales will be worse off on universal credit, leaving those who are currently on tax credits with a perverse incentive not to take on a new job or extra hours for fear that it will change their circumstances and cause them to be moved on to universal credit. In Wales, 167,400 working families will feel the impact, 134,600 of whom are families with children.

In Neath, 6,200 families were on tax credits as of April this year; 5,300 of those were families with children, all of whom will be negatively affected by the changes and cuts to universal credit, should they take place. That neither meets the Government’s aim of making work pay, nor ensures that those on middle and low incomes are protected. Wales already has the highest level of child poverty of any of the nations of the UK. One in three children lives below the poverty line. Half of the people deemed to be living in poverty are actually working—an unfortunate truth that is often ignored when painting a picture of worklessness and a benefit-claiming culture of poverty and deprivation.

On the autumn statement, the Joseph Rowntree Foundation made it clear:

“There was little in this Statement to tackle the causes of poverty and it was a missed opportunity to support low income families. Without action”—

the foundation warns, our economic recovery will be

“built on rising poverty and insecurity.”

In Wales, we are particularly at risk, and the Chancellor’s plans are bad news for low and middle-income earners across the country. However, just as we successfully opposed his pernicious cuts to tax credits, we will continue to highlight the fact that the Chancellor’s plans will leave Welsh families worse off.

The autumn statement also saw yet another cut to the Welsh budget. Over the next five years, Wales will see a real-terms revenue cut of 4.5% and a cut to its overall budget of 3.6%. When Labour was in government in Westminster, we increased the Welsh budget from £7 billion in 1999 to £16 billion in 2010.

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

I congratulate the hon. Lady on securing this important debate. In my recollection, going into the last UK election, the Labour party said that it would broadly copy the fiscal policy put forward by the Conservative party. Will she tell us what the cut would have been to the Welsh budget under Labour?

[Christina Rees]

No, we did not actually say that—if the hon. Gentleman checks his facts, he will see that we did not.

As I was saying, by the time this Conservative Government leave office in 2020, we will have seen an 11% cut in the Welsh budget. For all the Government’s talk of economic recovery, they have delivered a mountain of cuts since 2010, and their decisions will do further harm to the Welsh economy over the next five years.

--- Later in debate ---

[Christina Rees]

We have to look at this issue. When spending in Wales is falling, that level is too low, so surely the best thing is to generate an economically viable situation in Wales so that spending increases.

[Jonathan Edwards]

Will the hon. Lady take a further intervention?

[Christina Rees]

Not at the moment—I have to make progress.

We are all well aware of the Chancellor’s habit of slashing funding from central Government then expecting local government and the devolved Administrations to make up the shortfall. That policy ensures that the poorest areas are hardest hit. If the Chancellor plans to use the devolution of income tax to Wales as a cover to cut Welsh funding further and to lower the Barnett floor, that will understandably be seen by the people of Wales as an unacceptable outcome.

The autumn statement was also largely silent on the vital infrastructure projects that Wales needs. Despite its strategic importance to the Swansea bay city region, of which my constituency is a part, there was not a single mention of the Swansea bay tidal lagoon in the Chancellor’s statement. Along with the 22% cuts that the Chancellor announced to the Department of Energy and Climate Change, perhaps that silence signals the Government’s lack of commitment to green energy.

In light of the landmark agreement reached in Paris last weekend, we know that projects such as the tidal lagoon are essential if this country is to meet its international obligations to combat climate change. Unfortunately, although important progress was made in Paris, I understand that the pledges will not achieve the aim of limiting global average temperature rise to below 2 °C, so further action is urgently needed.

--- Later in debate ---

[Christina Rees]

I do not quite understand what that intervention means. We are not causing the uncertainty; the Government are.

The Swansea bay tidal project is also of critical importance because of the potential jobs and investment that it will bring across south Wales, as well as the apprenticeships promised to institutions such as the Neath Port Talbot College group. It is estimated that up to 1,900 jobs could be created during the lagoon’s construction phase, with many more jobs being created in the supply chains. Local businesses are eagerly anticipating the investment that the project will bring, so it would be a travesty if the UK Government failed to deliver this opportunity. Will the Minister confirm that the Government remain committed to the project and to agreeing a strike price for the tidal lagoon?

Another project that is of vital importance to the whole of south Wales is the electrification of the Great Western line from London to Swansea. Again, the Chancellor paid lip service to the scheme during the autumn statement, but he did not give any further details and now we know why. Since the autumn statement, it has emerged that electrification of the line between Cardiff and Swansea, which was due by 2018, will not be completed until between 2019 and 2024. That is an unacceptable delay and one that has the potential to damage the economies of south-west Wales, which will still be waiting for electrification years after electrification to Cardiff is complete.

[Jonathan Edwards]

Will the hon. Member take another intervention on that point?

[Christina Rees]

I will try it.

[Jonathan Edwards]

I am extremely grateful to the hon. Member; she is being extremely generous in giving way again. I agree with everything she has said about the electrification to Swansea; we have been seriously let down on that particular issue by the UK Government since the election.

The comprehensive spending review came with the statement of funding policy document, which refers to High Speed 2. In that document, Wales gets a 0% rating, which has a drastic effect on the overall comparability percentage when the Barnett formula is applied. Can the hon. Member explain why the Labour Government in Cardiff are accepting the line of the Tory Government here in London that Wales will not lose out on many millions of pounds in the future because of that decision?

[Christina Rees]

That was such a long intervention that I cannot remember now what the beginning was. We also have north Wales to consider and surely—

[Jonathan Edwards]

The south Wales economy is getting blasted.

Sorry, Mr Hollobone.

[Christina Rees]

The news about HS2 comes just weeks after the Public Accounts Committee concluded that the £1.5 billion rise in the cost of electrification to Cardiff was “staggering and unacceptable”. It is now down to the Government to get a grip of the project, to ensure that the upgraded line is delivered quickly and with the maximum value for money for the taxpayer. With that in mind, can the Minister please tell us when he expects the electrification to Swansea to be complete?

The Chancellor was also noticeably lukewarm about proposals to develop city regions in Swansea and Cardiff, which are landmark developments with the capacity to transform transport and economic opportunity across 10 local authorities. The Welsh Government have committed £580 million to the project and the local councils have pledged £120 million, but the autumn statement just confirmed that the Government were committed “in principle” to the proposals. Can the Minister please confirm whether the UK Government will match the funding pledged by the Welsh Government?

Finally, the Chancellor confirmed that highly skilled Welsh workers in Wrexham, Swansea and Porthmadog will lose their jobs with the closure of more tax offices across Wales. We have already suffered through the closure of offices in Carmarthen, Merthyr, Pembroke Dock and Colwyn Bay in 2013, which, for example, forced workers from Colwyn Bay to travel to Wrexham to work. Are those employees now expected to travel to Cardiff to work?

The effects of the autumn statement will soon be felt by families across Wales, many of whom have suffered because of the last five years of cuts. The spending review should have been about delivering a sustainable settlement to boost the Welsh economy. Instead, the Chancellor avoided the big infrastructure challenges facing Wales and delivered another cut to the budget of the Welsh Government, and his cuts to universal credit mean that thousands of Welsh families will begin losing out from next year. What is more, we learned that the Government are removing the requirement of a referendum on devolving tax powers to Wales. I regret that the autumn statement did not have the interests of Wales at its heart, and people in Wales will suffer as a consequence.