Spending Review and Autumn Statement: Wales

Christina Rees Excerpts

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.

[Craig Williams (Cardiff North) (Con)]

The hon. Lady talks about 11% cuts to the Welsh budget, but how does that compare to the regions and Departments of England? She has not once mentioned the commitments on the national living wage. Will she welcome that as well as banging on with the diatribe we have heard on universal credit?

[Christina Rees]

The hon. Gentleman may think it is a diatribe but I do not—these are the facts, and the so-called national living wage is yet more rhetoric from the Conservative party.

In Neath Port Talbot, the county borough in which my constituency sits, the local authority has seen a cumulative cut of £65 million to its budget since 2010, not including this coming financial year, with further planned cuts potentially of £37 million over the next three years—a total of £102 million being taken out of its budget in eight years. That has meant its workforce has shrunk by 20%, and it is important to point out that those cuts have come as a direct consequence of UK Government cuts to the Welsh budget. That has hit local services hard, leading to the unwanted but necessary reduction in support for community facilities, such as libraries and leisure centres.

The IFS has estimated that the tax and social security changes introduced in the last Parliament cost the average Welsh family £560 a year and took £700 million out of the Welsh economy each year. According to the IFS, the Chancellor’s plans mean that Welsh households will lose a further £500 each year between 2015 and 2019, meaning an annual loss of £660 million to our economy.

The Chancellor made much of implementing a Barnett floor to ensure that the funding gap between Wales and England does not widen further. I welcome that announcement. Six years on from the Holtham report, which recommended such a floor, I am pleased that the Government have finally pledged to deliver that mechanism, but the simple fact is that the floor makes hardly any difference when spending on Wales is falling. What is unacceptable, and completely at odds with the recommendations of the Holtham report, is that the Barnett floor is only being set at its present level of 115% of spending in England for the duration of this Parliament, with the amount being “reset” at the next spending review

“to take full account of the Welsh Government’s new powers and responsibilities.”

[Glyn Davies (Montgomeryshire) (Con)]

Will the hon. Lady clarify something? If the 115% level is deemed to be too low, what level would the Labour party want to apply to Wales, in terms of the Barnett formula?

[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.

[Craig Williams]

I thank the hon. Member for giving way again. Will she take the point that there is also the Cardiff lagoon to consider, and that investors around the world are being shaken by what she and other Labour Members are saying about tidal lagoons at a very critical point, when we are negotiating the strike price? They are endangering lagoons, and not just the Swansea lagoon.

--- 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.

--- Later in debate ---

[Alun Cairns]

The hon. Lady needs to recognise that the amount of funding from DCMS is relatively small. The proposal to cut from £7.6 million to £5 million over an extended period of time provides an opportunity for S4C to make its contribution to the savings. The spending review proposed £400,000 of funding savings from S4C in the first year, but she needs to recognise that negotiations with the BBC are ongoing, and to recognise the statements coming from Tony Hall. We welcome those statements and hope that the BBC will be able to deliver on them.

The Welsh Government’s total funding is underpinned by our commitment to introducing a funding floor, as the hon. Member for Neath said. I would have hoped that she would have welcomed the funding floor, because it was only two weeks before the autumn statement that there was a debate in this Chamber about the need for a funding floor. There was doubt that it would be delivered, but a funding floor of 115% will be introduced. That is well within the Holtham commission’s fair funding range, and I would have hoped that that would be welcomed by the hon. Lady.

[Christina Rees]

I did welcome it, but there are too many provisos in there.

[Alun Cairns]

The surveyor and architect of fair funding for Wales, Gerry Holtham, analysed the position and came up with a range of solutions. After the autumn statement, he said that it was a fair settlement. That is the fundamental point. There will be political commentary from all around, but the person commissioned by the Welsh Government to provide the assessment and establish the financial relationship between the UK Government and the Welsh Government has said that it is a fair settlement, and that is testament to the strength of the Administration in Westminster, which has delivered on something that has been talked about, but never delivered, by the Opposition.