Spring Budget: Wales

Christina Rees Excerpts

Wednesday 29th March 2023 Westminster Hall

[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.