Cost of Living Crisis: Wales

David T C Davies Excerpts

Tuesday 19th July 2022 Westminster Hall

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

It is an honour to serve under your chairship, Ms Nokes. I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing the debate, and it is an honour to follow the hon. Member for Ceredigion (Ben Lake).

It is also wonderful to see so many Welsh Labour colleagues present for this important debate. That is a testament to the proud and long history that Labour has and will continue to have in the Senedd and among the Welsh electorate more widely. I note that a considerable number of Welsh Conservatives are absent this afternoon—I cannot possibly think what is distracting them at the moment.

The shambolic Tory leadership might be a priority for some, but I remain focused on the issues that keep coming up when I speak to constituents across Pontypridd and Taff Ely. The single issue impacting people the most is without doubt the cost of living crisis, which is putting working families on the brink. The crisis is hitting every single corner of the UK, but it is right to have a debate about Wales specifically.

In this place, we often talk about the north-south divide in England, but the complex situation across Wales is all too often forgotten in that narrative. Recent research by the Centre for Cities think-tank shows that regions in Wales are among the hardest hit by the cost of living crisis across all the devolved nations. Research by the University of Bristol suggests that 22% of Welsh households are in severe financial difficulty, meaning that they are forced to do things like buy lower-quality food, shower less and even sell their belongings just to make ends meet.

In my constituency of Pontypridd and Taff Ely, the local Trussell Trust food bank in Treforest has had to extend its opening hours simply to deal with the swelling demand for its services. Only last week, Wales Online reported that some food banks in Wales are on the brink of running out of food. Demand is sky-rocketing, but the generous donations that food banks depend on to function are drying up, because people can no longer afford to donate and are themselves feeling the pinch. The teams running the food banks do incredible work in extremely difficult circumstances, but it does not have to be this way, and it should not be this way.

The reality is that without proper, long-term investment from Westminster, people in Wales will continue to be impacted. I know some Members will disagree with my assessment and will be keen to point out that any support failure is that of the Welsh Government, but I must be frank. I speak on behalf of residents in my area when I say that this UK Government have never taken their responsibility to Wales seriously. It is the UK Government’s failure to recognise that wage stagnation and ineffective social security have now led to poverty and destitution, and that could have been avoided.

According to the End Child Poverty coalition, in Pontypridd and Taff Ely a staggering 31.3% of children were below the poverty line in 2020-21. That is almost a third of all the children in my area. It is a sharp statistic and one that all of us in modern-day Britain should be embarrassed by. However, let us be clear: with food banks running dry and the Welsh Government doing everything they can, without immediate action by the UK Government, living standards across the country will continue to fall.

In Wales, local and regional bodies have done everything to address the crisis. The Welsh Labour Government and my Labour-led council in Rhondda Cynon Taf must be commended for their work to relieve the pressures on households. The Welsh Government have committed more than £380 million to address the immediate and severe impacts of the cost of living crisis on low-income households in Wales. From the winter fuel support scheme to income relief for those on council tax bands A to C, Welsh Labour has worked tirelessly to fill the vacuum of support caused by UK Government inaction.

[The Parliamentary Under-Secretary of State for Wales (David T. C. Davies)]

Will the hon. Lady say where the Welsh Government got the money from for those schemes?

[Alex Davies-Jones]

It is not for Wales to come cap in hand to a Government in Westminster for what is rightly ours. We pay tax in Wales too and we are meant to be part of this United Kingdom. This is our money—we are not begging or asking for it. People in my constituency and across Wales are entitled to this money to help themselves. If the Minister will allow me, I will come on to the fact that in the recent uplift by the previous Chancellor, the right hon. Member for Richmond (Yorks) (Rishi Sunak), people in Wales got the equivalent of £9 a head, which is shocking and is nowhere near the amount of money that they need to survive the cost of living crisis.

We have done everything we can to empower local authorities such as mine to mobilise resources at a local level. The Welsh Government have held two cost of living summits attended by Welsh Government Ministers and key stakeholders from across Wales. Those events allowed grassroots organisations to directly inform the Welsh Government about the impact that the crisis is having on communities. In turn, they allowed the Welsh Government to target support at those most in need. I pay tribute to all involved in those summits for their incredible efforts to help the people of Wales.

Let us be clear that those measures pale in comparison with what the UK Tory Government have the economic firepower to achieve if only there was the political will. In Westminster, the Tories are completely asleep at the wheel. While the leadership contest continues to take centre stage, everyday working people and families will continue to struggle. Good governance starts at the top, which is why I am genuinely proud of the work that Mark Drakeford and the team in Wales are doing, despite the situation in Westminster.

Ultimately, people in Wales, including me, are tired of false promises. As we all know, the UK Government are the absolute kingmakers of gaslighting and U-turns. I cast hon. Members’ minds back to the spring statement, which I mentioned. The then Chancellor briefed the press that he was set to announce bold measures to support people through the cost of living crisis. He promised an increase in Welsh Government funding of just £27 million over the next year, which, as I stated, amounts to £9 a person in Wales.

It should shame the UK Government to treat us in Wales with such contempt. They try to palm off responsibility to the devolved Administrations, but refuse to properly fund their efforts. The Welsh Government have moved heaven and earth to mobilise their considerably limited resources, yet the Tories in Westminster refuse to act. It took relentless pressure from Labour for the UK Tory Government to eventually—reluctantly—endorse a windfall tax on North sea oil and gas, or, as the then Chancellor insisted we call it, because he cannot even admit that it was Labour’s idea, the energy profits levy. But they should have implemented it months ago and, for many, the support that the windfall tax will fund will simply be too little, too late.

The Welsh Government have announced that the Welsh fuel support scheme will return this winter to help those in need by providing a one-off £200 payment for their bills. That will bring significant relief to tens of thousands of Welsh residents, and I welcome the commitment of the Minister for Social Justice last week to support people who will struggle this winter. Without UK Government support, however, that will still not be enough.

When I wrote this speech, four candidates remained in the Tory leadership contest; now we have three. To the best of my knowledge, Wales has not been mentioned once—not by a single one of them. It is clear that whoever wins the leadership will continue to forget about Wales and that, sadly, it will be a case of business as usual.

Despite the Welsh Government’s limited resources, their actions show that Labour will always stand shoulder to shoulder with the country’s most vulnerable. The cost of living crisis is not going away in Wales or across the UK, so I implore the Government to do the right thing, to take responsibility, to see the crisis for what it is and to act today to reach solutions.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure to follow my hon. Friend the Member for Cynon Valley (Beth Winter), who emphasised the depth of inequality, despair and impoverishment in her constituency and across Wales due to the cost of living crisis and a long history of cuts that we have seen disproportionately in Wales.

We are talking about Wales, and it is worth remembering that Wales is poorer, sicker and older. That was already the case before the austerity cuts began to bite from 2010 onwards. Let us put this in context. Austerity cut public services and welfare, and Wales is disproportionately reliant on public service jobs, has more older people on welfare and all the rest of it. That was the starting point. We know, from a University of York study that was published by The BMJ, that something like 50,000 extra people across the UK died from austerity.

Then, of course, we had covid. Again, we had the background of a poorer, sicker and older nation, where we would have expected, therefore, a much higher death rate. In fact, the death rate above the five-year average was something like 13% in Wales and 20% in England, but of course the average was much higher to start with because we had a poorer and sicker nation. The lower death rate was through the good governance of Mark Drakeford and his Welsh Government.

We are now coming to a situation after having had those massive cuts. Let us face it: in Wales, we are operating at 70% of gross value added, so average wages are about 70% of the UK average. We are having cuts and pay freezes in a very difficult situation, so people are suffering more. We have had Brexit. I know that the Minister is a big fan of Brexit, but 60% of Welsh trade was with Europe. In England, it is more like 48%. The problems that we have had, including problems with the Northern Ireland protocol, are again disproportionately hitting Wales.

Take a typical example of a public sector worker, for instance a nurse who is the only breadwinner in a house in the valleys, or wherever it is. If there are pay freezes on public sector workers, that house is impoverished. We have all heard the sorts of cases that were just mentioned: children who hold back half their free school meal to eat in the evening, because they do not have any food at home; children washing their hair with washing-up liquid; people not having the lights on, and so on. We know from the Trussell Trust that there are now 14 million people in poverty. There are, I think, 2.6 million people using food banks in the UK—up a hundredfold—and the majority of people who use food banks have some level of disability.

There is a pressing case for the Government to act now, whether through indexing social security or the universal credit uplift. There is also a pressing case for doing something about rent, which is not talked about very much. We talk about energy and food, but the local housing allowance has not been indexed. For example, studies by the Bevan Foundation show that, in an online search of private rented accommodation in Wales, only about 1% fits in with the local housing allowance. People are therefore driven into squalid, Rachmanite living conditions—another terrible fact.

In his intervention, the Minister implied, “Whose money is this, anyway?” I suggest that not only have the cuts disproportionately hit Wales but, as he knows from our meeting last week with Professor Mark Barry, there has been a historical lack of investment in Wales—of getting our fair share to boost productivity, jobs and wealth, so that we can pay our way. Over the last couple of decades, rail enhancement investment has operated at about 1.5% of the UK total, and we have 5% of the population and 11% of the rail track. Looking forward, instead of at the historical legacy, if we take 2020 as the baseline, Wales is being promised £0.5 billion out of an England promise of £106 billion, including High Speed 2, which is outrageous. HS2 is north-south. It will help Scotland much more than Wales, yet Scotland is getting its fair Barnett consequential. If we got it—90% of the 5% population—it would be £4.6 billion.

The Minister knows from that meeting that there are plans on the drawing board for about £2 billion to £3 billion. That is about half the amount that we deserve—from now on, I suppose, the legacy—and could make a big difference in moving us towards net zero, in productivity, in speed and in getting people to relocate. The truth is that once HS2 starts running, we will be able to get from London to Manchester in one hour and 10 minutes instead of two hours and 10 minutes, but it will still take nearly three hours to get to Swansea, so where will companies put their investment? In the case of Virgin, the answer is to take it out of Swansea and put it into Manchester. If we want to go to Staffordshire, it will take 45 minutes instead of one hour and 45 minutes, so on top of the historical inequalities I have mentioned, that will hammer Wales again.

The Minister asks, “Who will pay?” The way to pay is to invest in the productivity and future of Wales through moving towards a green future. We have talked about the windfall tax. Let us be straightforward: the big five oil companies have made excess profits of $2 trillion in the past few decades. They were making those operating profits above costs, and then Putin invades Ukraine and we have a price hike. They have done nothing to earn that windfall profit. It is our money, which was paid out of the pockets of the travelling public, and it should be given back.

In Spain, the people are getting free public transport; in Germany, it is €9 for a month. If we did that with the windfall tax, everyone could go to work for cheaper. We could get investment in green public transportation much more quickly, such as hydrogen and electric, and do something innovative. We could provide the background for pay settlements, such as the rail disputes. Instead of the National Union of Rail, Maritime and Transport Workers being told, “You can have 3% and 10,000 job cuts; what are you going to do about it?”—and, as we would expect, a strike is provoked—we could encourage everyone to go on public transport so that we do not need cuts in jobs. There might be a change to jobs, but there would be no cuts, and with more investment, we would not have to ask for so much. We can all agree to that.

[David T. C. Davies]

If that is such a good idea, why are the Welsh Labour Government not doing it in Wales? They have the power to do so.

[Caroline Nokes (in the Chair)]

Order. I gently remind the Member that this is a debate about the cost of living in Wales, not transport.

[Geraint Davies]

I know that, yes. It is not the Welsh Government’s decision: we do not have the money to do that, and it is not devolved. The Exchequer runs UK plc; we all know that. We do not charge the windfall tax. The Welsh Government are not in a position to introduce a windfall tax or nationalise the oil companies, sadly, although they have done something about rail.

[David T. C. Davies]

The Welsh Labour Government could raise tax to do that, if they wanted to.

[Geraint Davies]

I am not talking about raising taxes; I am talking about taking back the money that has been stolen from the travelling public by oil companies. They did nothing to earn that money: it was simply that Putin invaded Ukraine, and they said, “We’ll put the price up, take the money and fill our pockets.” The Government belatedly took a small share of that money, and now they are going to give 90% of it back to drill for more oil, when what they should be doing is investing in scaling up things like organic batteries. Swansea University has identified that the renewable energy from wind farms is only put into the grid at breakfast time and teatime, and is saying, “Let’s use that wind, create hydrogen, and put that hydrogen in the gas grid”—which takes up to 40% of hydrogen, as used to be the case for coal gas. That would reduce the carbon footprint.

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[The Parliamentary Under-Secretary of State for Wales (David T. C. Davies)]

It is a pleasure to serve under your chairmanship, Ms Nokes.

I thank the hon. Members for Pontypridd (Alex Davies-Jones), for Newport West (Ruth Jones), for Llanelli (Dame Nia Griffith), for Swansea West (Geraint Davies), for Ceredigion (Ben Lake), for Cynon Valley (Beth Winter), for Cardiff North (Anna McMorrin), for Swansea East (Carolyn Harris), for Merthyr Tydfil and Rhymney (Gerald Jones), and—last but certainly not least—for Caithness, Sutherland and Easter Ross (Jamie Stone). I may have left somebody out; if I have, I apologise. A lot of points were raised during the debate and I will try to deal with them as best I can within the confines of the time that I have.

First of all, may I make it absolutely clear that, although I am pleased that we are having a debate on this matter, there is absolutely no doubt at all in my mind or the mind of anyone in Government not only that we have a cost of living challenge, but that it is a global matter? Hon. Members can just look at the statistics for any countries across western Europe or the rest of the world to see that the problem is not an isolated one; it has come about for reasons that I will turn to in a minute. Before I go into detail on the UK Government’s commitments to support the people of Wales, I just want to make it clear that things such as the pandemic and the war in Ukraine have had a significant effect on the global economy.

The UK Government have been steadfast in our support for the people of Wales throughout these global economic challenges. We have certainly not been asleep on the matter of Wales—far from it. My right hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), who is my former ministerial colleague, and his successor as the Secretary of State for Wales, my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), who of course is from Llanelli, are well aware of the problems in Wales and have been raising them at all times in Cabinet.

I often stood in for Mr Hart when he was unable to attend meetings—

[Caroline Nokes (in the Chair)]

Order. Could you please use Members’ constituency names and not their own names?

[David T. C. Davies]

Yes. He is one of the Pembrokeshire seats—[Laughter.]

[Alex Davies-Jones]

Carmarthen West.

[David T. C. Davies]

Yes, Carmarthen West.

As I was saying, I stood in for my right hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) many times in Cobra meetings and I know how hard he was working. Incidentally, on the matter of Cobra—I know this issue came up earlier; it may have been the hon. Member for Newport West who mentioned it—it is not normal for the Prime Minister to attend all Cobra meetings, any more than it is normal for the First Minister to attend all Cobra meetings. I attended a number of them during the covid crisis, when—quite rightly—the Welsh Government were represented by the Health Minister, or sometimes by another Minister from the Welsh Government. That is normal, because the principle of Cabinet Government is that Cabinet Ministers, whether they are in the Welsh Government or the UK Government, are there to take decisions. Therefore, quite correctly, we did not always expect to see either the First Minister or the Prime Minister at Cobra meetings. Sometimes they were there; sometimes they were able to allow other Ministers to take their place.

[Ruth Jones]

Although I understand the point that the Minister just made, the last two Cobra meetings have been all about the climate emergency, which is happening now. I am surprised that the Prime Minister should not be in his place at these Cobra meetings and I suspect the whole country is surprised, too.

[David T. C. Davies]

I do not know whether the First Minister was at those meetings, but I imagine that somebody from the Welsh Government was. Does the hon. Lady know whether the First Minister was there, or did the First Minister send a representative? I do not know, but it would be interesting to find out, because the point is valid: the First Minister of Wales should have enough confidence in his Cabinet Ministers to know that they can go along and represent the Welsh Government at Cobra meetings, just as the UK Prime Minister does. Anyway, let us not go down that—

[Geraint Davies]

Will the Minister give way?

[David T. C. Davies]

Okay. I am only one page into my speech, but why not? The hon. Gentleman was honourable enough to give way.

[Geraint Davies]

The Minister’s basic proposition is that this cost of living crisis is some sort of global issue. Will he accept that the issue is about the level of underlying resilience before these global shocks occur? If the rate of growth under the Labour party had continued thereafter, according to the Institute for Fiscal Studies, the average wage would be something like £13,000 better, so we would be in a much better place to take the shocks. Instead, we are impoverished by the Minister’s party.

[Caroline Nokes (in the Chair)]

Order. I remind hon. Members and the Minister that they should stick to the question.

[David T. C. Davies]

If we are going to have an economic history lesson going back to 2010, we will have to look at the enormous amounts of money that the then Labour Government borrowed, the financial crisis and its impact, and then the impact of covid and then a war. Generally speaking, every 10 years or so, a Government will face a serious crisis of global proportions. It could have been the fall of the wall in 1989.

[Caroline Nokes (in the Chair)]

Perhaps the cost of living in Wales, Minister.

[David T. C. Davies]

Let me go back to what the Government have been doing. We have been steadfast in our support. We have provided more than £37 billion across the UK to help people with the cost of living challenge. Millions of the most vulnerable households across the UK will receive at least £1,200 of one-off support in total this year to help with the cost of living. The maximum possible benefit for a household is more than £1,600. We put in place a targeted £12 billion energy bill support scheme for domestic electricity customers in Great Britain to help with rising energy prices. We are supporting people across the UK with one-off cost of living payments, including £650 for 8 million households on means-tested benefits, £300 for more than 8 million pensioner households and £150 for around 6 million people who receive disability benefits. We are increasing the national living wage by 6.6% to £9.50 an hour, which was also mentioned here. Along with increases to the national minimum wage, we expect to be able to give a pay rise to 120,000 workers in Wales.

We also want to ensure that people across Wales keep more of what they earn. We are raising income tax personal allowances and freezing alcohol and fuel duty, saving car drivers up to £15 every time they fill up. We have reduced universal credit taper rates from 63% to 55% and we are increasing universal credit work allowances by £500 a year. Those together will see households keep an extra £1,000 a year on average. This July, we raised the national insurance contribution threshold to £12,570, meaning a typical employee will save more than £330 this year. Frankly, I could go on and on.

Opposition Members may say we are not doing enough, but to say that we have slept through this crisis and do not care is ridiculous and outrageous. I have lists and lists of stuff that the Government have been doing to support people across Wales. It is a £37 billion package. To try to suggest that there is not an enormous amount of work going on or that we do not recognise the problem is unfair. We absolutely recognise the problem—I cannot say it enough times. There is a cost of living challenge out there and there are people suffering. I do not want to hide from that in any way. At the same time, it would be nice if Opposition Members could at least recognise that when we put £37 billion into a whole host of schemes, it is deeply unfair to suggest we do not know about the challenge, we do not care about it and we are doing nothing about it. That is simply incorrect.

To take one example, the hon. Member for Newport West, who I greatly respect and who I appreciate is a hard-working MP, made a point about prescription charges. Yes, prescription charges are free to everyone in Wales. Wonderful. I get a free prescription as a Member of Parliament. In England, the number of people who get free prescriptions is very large. People in full-time education, who are pregnant, who have certain medical conditions, NHS in-patients and people on income support, income-based jobseeker’s allowance, employment support allowance, pension credit guarantee or universal credit. Anyone who faces difficulties will not have to pay for their prescription in England, but the hon. Lady did not make that point. She gave us half the story and gave the impression that everyone is paying for their prescriptions in England. That simply is not true. In fact, it is rather more progressive to target free prescriptions at those who need them because they cannot afford to pay than just to give them out to everyone.

It has taken me probably a minute just to rebut that single point. That is the problem I face. There are quite a few other points I would not mind rebutting if I get the chance to do so.

[Carolyn Harris]

I want to raise a point about the English prescription charge. Is the hon. Gentleman aware that men in England who need Viagra are able to get it on prescription?

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[David T. C. Davies]

I was not aware of that, although I would be registered for it in Wales if I was. I do not think the hon. Lady got around to making her fair comment—no doubt the press can have some fun with that. I think she was also going to lead into the situation with women and the menopause; there is possibly an unfairness that needs correcting. She has been very good at raising that issue, and I praise her for it. I am not pretending that we get everything right all of the time, so I always listen to the hon. Lady with interest, because she can sometimes shed light on things that need changing. There might be an unfairness, but I am not here to discuss health policy; I am sure the hon. Lady will raise her point elsewhere.

To go back to Wales, this July we raised the national insurance contributions and I am also pleased that the Welsh Labour Government have used the £180 million Barnett consequentials from the UK Government to match the UK Government’s £150 council tax rebate offer in England. Frankly, that was a scheme brought about by the Conservative Government: the money was given to Wales, and I am delighted that Welsh Labour are following our lead in this. If hon. Members want to take the credit for it, that is fine, but let us remember that it was a Conservative Government policy, brought about by a recognition of the problems that the current crisis creates.

Our support does not end there. We are expanding eligibility for the warm homes discount by almost a third, meaning that 3 million vulnerable households across the UK will benefit as a result. We are increasing the extension of the warm home discount, and shielding the most vulnerable across the UK from the impact of global recessionary forces. I am somewhat concerned because I think, Ms Nokes, you are about to inform me that I am about to run out of time.

[Caroline Nokes (in the Chair)]

Ninety seconds.

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[David T. C. Davies]

Thank you, Ms Nokes. There are still concerns about the cost of living and the challenges ahead, not only for Wales but for the whole of the UK. The one simple thing that I want to do is reassure hon. and right hon. Members present that the measures we have put in place recognise that, and we will continue to put more in place over the next year. We recognise the cost of living challenge, and we want to see our great nation through all adversities. Thank you; diolch yn fawr.