Spring Budget 2024: Welsh Economy

Debate between Alex Davies-Jones and Nia Griffith

Wednesday 17th April 2024 Westminster Hall

[Dame Nia Griffith (Llanelli) (Lab)]

I am afraid the Conservative spring Budget was a real smoke-and-mirrors affair, and people in the Llanelli constituency are not taken in by it. The Prime Minister, and indeed the Minister, may boast that they have cut the rate of national insurance, but people in Llanelli know that we do not get something for nothing. They feel worse off, and that is because they are worse off. We have had the biggest fall in living standards in our history, with the UK economy remaining stagnant. The latest Office for National Statistics figures show that GDP per person has fallen in each of the last seven quarters—the longest period of stagnation since the 1950s.

People in Llanelli and across the UK are worse off under the Conservative Government, and they are now bearing the highest tax burden in 70 years. For every 5p the Conservative Government have given back in tax, they have in fact taken away 10p. People have pointed out to me that they have been hit by the freezing of the tax threshold. As their incomes have increased over the past few years—although never by enough, of course, to keep up with the rampant inflation that this Conservative Government have presided over—people have found that they are reaching the tax threshold for the first time or that more of their income is now subject to tax.

The freezing of the basic threshold has brought 3.7 million more people across the UK into paying tax, and more taxpayers are being squeezed by having to pay the higher rate of tax as more of their income is in that bracket, often because of a pay rise that has not even kept pace with inflation. So there is a double whammy of more tax and less purchasing power.

We have seen another sneaky trick: the devolution of the increasing cost of the burden of public services to the Welsh Government and local councils. As we know, a large proportion of what councils spend on local services comes from central Government—UK Government—taxation, to which we all of course contribute, whether it is allocated directly to councils in England or via the Welsh Government to councils in Wales. As the Conservative Government have squeezed and squeezed the Welsh budget, with the latest Welsh Government settlement some £3 billion less than if it had grown with GDP since 2010, the Welsh Government have had to pass on swingeing Conservative cuts to Welsh councils. Local councils in Wales are faced with the difficult balancing act of having to either cut services or raise council tax, at a time when councils, just like households, face huge inflation in their costs.

[Alex Davies-Jones (Pontypridd) (Lab)]

My hon. Friend is making a really powerful point about the cost burdens being imposed on local councils. My own local council of Rhondda Cynon Taf faces some of these burdens, and we have the extra burden of having to fund the remedial work to improve coal-tip safety in Wales—a legacy that predates devolution. We have had hundreds of years of mining in Wales, and that work should be the responsibility of the UK Government, but they are failing to take responsibility for the costs, which should not be borne by my constituents when it was the UK that benefited from the coalmining industry of south Wales.

[Dame Nia Griffith]

Indeed—my hon. Friend is absolutely right to bring up that point. It is something that we have been raising, and I hope the Minister, who has some former mines in her own constituency, will take that message back to her colleagues.

As I was saying, councils are having to make very difficult decisions; in fact, they have to both cut services and raise council tax. But make no mistake—these cuts in services and rises in council tax are a direct result of the way in which central Government have squeezed the Welsh budget. That leaves people in Wales paying more for poorer services.

Not only is the Welsh Government budget for 2024-25 £3 billion lower than if it had grown in line with GDP since 2010, but it is £700 million lower in real terms than was expected at the time of the 2021 spending review, which of course means that the Welsh Government have to manage even more cuts than had been expected. The Minister may point out that the Welsh Government will receive an additional £168 million in resource funding for 2024-25, but that is the result of spending decisions made in England and relates to funding for NHS pay and local government adult social care, which have already been factored into Welsh Government spending plans.

People in Wales are still seeing costs rise. Although inflation may have slowed, there is still inflation, which means that prices are still rising, and the price rises are for essential household costs such as food. That has left people really struggling.

Some 62,000 homeowners in Wales are also facing a mortgage bombshell as fixed-term agreements come to an end, because of the totally irresponsible mini-Budget the Tories pushed through—collectively—in the autumn of 2022, when the right hon. Member for South West Norfolk (Elizabeth Truss) was Prime Minister, which sent interest rates soaring. Homeowners will have to find hundreds of additional pounds year on year to cover their mortgage interest, which of course has a knock-on effect on rents as well, with increasing numbers of people finding that their rent is simply unaffordable.

People in Wales also face higher energy bills, and the UK Government’s failure to roll out renewables more quickly has made that situation all the worse, which has meant the loss of yet more precious time in the race to bring down bills and combat climate change. Last year, the fiasco of the UK Government’s handling of the bidding process meant that no proposals came forward for floating offshore wind projects.

There is no help for the least well-off. The Conservative Government have been squeezing household incomes for 14 years. Back in 2011, the Tories increased VAT to 20%, which increased household bills, hitting the poorest in particular. In an unprecedented move, they also broke the historic link between benefits and inflation. They have cut and cut the benefits paid to the least well-off in society, many of whom, of course, are in work, leaving many people with not enough to live on and not even enough to cover their essential costs. It is shocking that the Joseph Rowntree Foundation and the Trussell Trust have had to call for the implementation of an essentials guarantee to ensure that those in receipt of universal credit are able to meet their essential costs. Benefits should always cover essential costs.

On regeneration and the replacement of the European structural funds, it is disappointing that the UK Government have rowed back on devolution and cut the Welsh Government out of the consultation on the way that funds should be used and managed. The result is a tendency for the money to go to one-off projects in specific geographical areas, rather than us looking at the real levers that will drive up GDP and prosperity, such as apprenticeships and skills training.

What worries me in particular is that there is little in the Budget to suggest that the UK Government are serious about growth. Every Conservative Budget since 2014 has promised higher wages, higher skills or higher growth, but a year on from the so-called Budget for growth, the economy has actually shrunk, as have wages. We have some world-class manufacturing in Llanelli—Tata Steel, car component companies such as Gestamp, engineering firms that supply companies such as Aston Martin and so on—but the international competition for business and investment is fierce.

The lack of a UK Government industrial strategy makes it difficult to compete for investment with other geographical locations abroad, whether that is because of cheaper energy costs in neighbouring European countries or the Inflation Reduction Act in the US, where we now see growth forecast to be twice that of any other country in the G7. The Government are investing £500 million in an electric arc furnace in Port Talbot, but there has been no attempt by the Government to encourage investment in the technologies needed for green primary steel production.

We see Tata investing in such facilities at our competitor plant at IJmuiden in the Netherlands. I understand that one reason for not bringing that investment to Wales is our high energy costs—something we have been warning this Government about for years. Labour has pledged to invest £3 billion to secure green primary steelmaking in the UK, as well as a national wealth fund, bringing public and private funding together to invest in the green industries of the future, thus creating quality jobs as well as tackling climate change.

People in Llanelli and across Wale are desperate for change and for hope of a better life. That is why we need a Labour Government that will slash energy bills for households and industry, invest in the new green technologies of the future, and invest £3 billion to ensure that we develop primary green steelmaking in Wales—the sooner, the better.