Spring Budget: Wales

Gerald Jones Excerpts

Wednesday 29th March 2023 Westminster Hall

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Newport West (Ruth Jones) on securing the debate, and the passionate way she opened it.

We can all agree that, when the Chancellor of the Exchequer presented his Budget, it was an opportunity to address the worsening impacts of the cost of living crisis, and to drive economic growth in Wales and across the United Kingdom. The Budget is also a statement of priorities, but it was clear from the lack of extra funding for our public services, as well as the bare minimum of additional support for people and businesses who need help now, that the UK Government do not have a grip on the bigger picture and are content to tinker around the edges.

The Chancellor announced that Wales would receive an additional £178 million over the next two years, as a result of spending decisions made in England, but the settlement in 2023-24 is still up to £900 million lower in real terms than expected at the time of the 2021 spending review. This was meant to be a Budget for growth but, while the London School of Economics Growth Commission, the OECD and others have highlighted the vital importance of additional public investment in the infrastructure to improve productivity and growth, the Budget contained a derisory £1 million extra in capital funding in 2024-25 for Wales.

We have had a wide-ranging debate. My hon. Friend the Member for Newport West rightly highlighted the UK Treasury’s callous clawback, which I will return to later. She also talked about the downgrading of growth, and highlighted the case of her constituent Dawn Jones. I am sure many others across Wales will relate to the concerns raised by her constituents and their experience in dealing with the Tory cost of living crisis.

My hon. Friend the Member for Caerphilly (Wayne David) raised the excellent report of the Bevan Foundation, and the evidence that the most vulnerable are affected by this Government’s policies. My hon. Friend the Member for Aberavon (Stephen Kinnock) highlighted the importance of the steel industry, its being the heart of economic growth. The hon. Member for Ynys Môn (Virginia Crosbie) picked highlights; in response to an intervention by the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) about the level of local housing allowance being far too low to meet housing needs across Wales, the hon. Member continued to talk about the Budget being overwhelmingly positive. That is definitely a matter of opinion, and not one shared by many of my constituents or others.

My hon. Friend the Member for Cynon Valley (Beth Winter) talked about the reality check of work on the cost of living crisis that was carried out last year, and about the need for fair wages for our public sector workers. In an intervention, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) talked about the use of local authority reserves. As an ex-local councillor of 20 years, I think people often do not differentiate between free reserves and committed reserves. The vast majority of reserves held by most local authorities tend to be committed reserves, rather than reserves that they can use freely. Many do use free reserves to plug the gap, and there is more of that at the moment.

My hon. Friend the Member for Cynon Valley also mentioned that the Welsh Government were cut out of the process around the shared prosperity fund, something that many colleagues have called out and said should be rectified. It is not right that the Welsh Government are cut out of discussions of such a significant investment in Welsh communities.

[Wayne David]

Does my hon. Friend share my concern that local authorities believe there is, unfortunately, a distinct possibility that they will be unable to spend the moneys that have been allocated, and we will see yet another clawback by the Government up here?

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[Gerald Jones]

I absolutely agree. The arrangements with local government about the timescales for the funding have been woeful. Given everything that local authorities have to contend with at the moment, it is unfair to expect them to meet the unrealistic timescales set.

My hon. Friend the Member for Cynon Valley also talked, like other Members, about the local housing allowance rates. I will return to that later. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) talked about the OBR analysis of the woeful spring Budget, and the impact of rising inflation. He raised concerns about the universal tax cut through the pension allowance benefiting the wealthiest 1%, and about plans for investment zones.

The hon. Member for Ceredigion (Ben Lake) highlighted the energy companies and the call for early renegotiation of contracts, which could significantly help many people across the country who are dealing with rising energy costs. He raised specific concerns about off-grid customers and the need for an economic strategy.

My hon. Friend the Member for Neath (Christina Rees) joined other Members in raising concerns about the local housing allowance rates in her constituency. All the evidence suggests that, across Wales, the rate is woefully inadequate. Change has been called for many times, and the Government would do well to listen to the concerns raised by the Bevan Foundation and address the issue. My hon. Friend also highlighted her concerns about universal credit and the rising use of food banks.

Earlier this month, the Senedd passed the Welsh Government’s budget for 2023-24, which provides significant investment for the NHS, social care and schools. The Welsh Government will, of course, consider how best to use the small amount of additional funding announced by the Chancellor to meet the needs and priorities of Welsh people.

Ahead of the Budget, the Chancellor was asked to provide support for households, to increase funding for public services and to invest to grow the economy. While it is positive that he listened to the many calls to maintain the energy price guarantee at £2,500 from April, it is disappointing that he refused to take the other practical actions that were called for—measures that could have made a real difference to those most exposed to the cost of living crisis.

The reality of the Chancellor’s Budget is that it represents sticking-plaster politics, with no growth for the many. The OBR has confirmed that the hit to living standards and working people’s pay over the past two years is the largest since comparable records began. In fact, the only permanent tax cut in the Budget, as we have heard, was the £1 billion cut for the richest 1% of earners, via changes to pension allowances. The Resolution Foundation found that a high earner with a £2 million pension pot will get a tax cut of almost £250,000. How utterly unfair, yet it is probably not a surprise, coming from this Government.

Compared with the forecast in 2021, the OBR now thinks the average interest rates on outstanding mortgages will be twice as high. The Tory mortgage penalty has hit £1,950 for a typical household remortgage, thanks to the Tories crashing our economy with their kamikaze Budget last September.

The OBR revealed that the Government have left £10.4 billion on the table last year and this through holes in the windfall tax. Labour announced a form of windfall tax on oil and gas producers in January 2022. The Government announced an ineffective windfall tax in May 2022. Just think what that £10.4 billion left on the table could have made to the lives of people in Wales, and across the UK, supporting them against rising energy costs and other cost pressures. Is it not the case that Tory MPs looked at the state of the nation after 13 years of Tory Governments, and at the cost of living crisis that families are facing, and chose not to vote with Labour against the pension changes, but to benefit those with the biggest pension pots?

The Welsh Labour Government have put in place a range of measures to help people through the Tory cost of living crisis. The Welsh Government fuel support scheme extends to 400,000 homes, with eligible households receiving a £200 payment to help them pay their energy bills. The council tax reduction scheme helps more than 270,000 households in Wales with their council tax bills; around 220,000 households pay nothing at all. More than 300 warm hubs have been set up across Wales thanks to Welsh Government funding.

The hon. Member for Ynys Môn mentioned the Holyhead breakwater. The Holyhead port is one of most important economic drivers in north Wales. The £20 million funding for the breakwater in the Budget follows Welsh Government calls and underlines the importance of the port. The announcement is welcome but long overdue, and the proposal is viable only because of Welsh Government commitments.

Hon. Members also raised freeports. Wales has a better deal on freeports thanks to the Welsh Labour Government, given that the Tory Government proposals were for freeports in Wales with no extra funding, and there was a threat to impose a freeport from the centre without involving the Welsh Government. Through grown-up politics, hard work and negotiation, the Welsh Labour Government convinced the UK Government to deliver a better deal for Wales, which means that UK Ministers will provide at least £26 million of non-repayable starter funding for any freeport established in Wales. The Tories tried to rip off Wales and ride roughshod over the devolution settlement, but Labour in Wales stood up for Welsh communities and businesses. Welsh Tories in Cardiff and Westminster did not fight for them.

I raised the callous clawback from the Welsh Government with the Minister yesterday, and my hon. Friend the Member for Newport West, the right hon. Member for Dwyfor Meirionnydd and the hon. Member for Ceredigion spoke about it today. I hope the Minister shares our concerns. The Welsh Finance Minister has made it clear that the actions of the UK Treasury were wholly unacceptable, as the Welsh Government stayed within their overall budget. The UK Government refused to switch between the revenue and capital budgets—a process that, as the Minister knows, has been agreed many times before. It is all the more questionable given that Welsh Government underspends during the exceptional financial year 2020-21 were significantly below those of UK Departments. The Treasury’s arbitrary application of its guidance in this instance remains deeply regrettable, and has left Wales deprived of £155 million.

As of last month, only £392 million of the levelling-up fund—just 8% of the total—had been spent since November 2020. Many of the projects that have been promised to local communities are a long way from being delivered. Labour believes in the importance of bringing power closer to communities. The Government’s replacement for EU structural funds has been a disaster that has left the poorest communities in Wales empty handed due to unfair formulas, and the distribution of funds is in the hands of Departments that are not even trusted by the Treasury.

Labour is committed to working in partnership with the Welsh Government to set the policy agenda for the use of structural funds. When we were part of the EU, Wales was in receipt of EU structural funds that contributed to a number of programmes, in particular on regional development and employment. The shared prosperity fund was announced in 2017, partly to replace the EU structural funds, but, as we have heard, the governance was changed to cut out the Welsh Government from that process. The effect of that decision is that the Tories have failed to provide an equivalent replacement regime to EU structural funds. They have centralised decision making, cut funds and allocated the remaining resources inefficiently.

As a number of Members said, universities in Wales have been at the forefront of innovative ideas that could change the way we live, thanks to £370 million of EU structural funds that have been invested in university-led projects in Wales. The structural funding from the EU is suddenly coming to an end, so Wales is at a cliff edge. Welsh universities face the loss of 1,000 skilled jobs from 60 projects focused on generating green growth. Hopefully, the Minister will enlighten us about what the Government intend to do to prevent that.

Labour is committed to bringing power closer to communities, and therefore believes that we should work in partnership with the Welsh Government to deliver structural funds in the future. A UK Labour Government would restore Wales’s role as decision maker and budget holder for the relevant structural funds. We would work with Wales to set the UK policy agenda and the use of structural funds, allocate money and agree a robust evaluation process.

The 2023-24 Welsh Government budget has been one of the toughest since devolution because of the significant financial pressures caused by the UK Government’s mismanagement of the UK economy, made worse by the kamikaze mini-Budget last September. The UK Government hold many levers relating to energy costs, and there must be greater support for businesses—particularly energy-intensive industries—and charities. Sadly, the Chancellor’s spring Budget misses the big picture, lacks ambition and fails to demonstrate how he intends to grow the economy.

The Welsh Government settlement in 2023-24 is, as I have said, still £900 million lower in real terms than expected at the time of the 2021 spending review. This was meant to be a Budget for growth, but the derisory £1 million in capital funding for Wales shows that the UK Government really have no interest in building their way out of the current financial crisis. For the Welsh Government to deliver further on behalf of the people of Wales we need a strong partnership between the Welsh Government and a UK Labour Government, working together to deliver on the priorities of the people of Wales and ensuring that Wales has a strong part to play in a strong United Kingdom. To that end, the general election cannot come soon enough.

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[Dr Davies]

Inevitably, those at the pinnacle or conclusions of their careers often earn a lot more, but they also have a great deal to offer the economy and society in general. It is difficult to be too black and white about those who are of benefit and those whom we need to retain in the workforce. As the hon. Gentleman knows, in some respects the Budget centred on trying to ensure that the workforce are there for the economy that we need.

My hon. Friend the Member for Ynys Môn referred to childcare. I hope that the Welsh Government will replicate our offer to parents of 30 hours’ free childcare for children between the ages of nine months and four years, and that they will not, as the First Minister appeared to suggest the other day, be different for the sake of it.

The shared prosperity fund has been raised. This is a complicated matter, but the Welsh Government have alleged that Wales is being short-changed. However, I argue that they are making flawed and hypothetical assumptions, and it is my understanding that Welsh Government officials in the Finance Committee in Cardiff Bay have broadly accepted that. It is important to compare like with like. The SPF is intended to replace the European regional development fund and the European social fund, while the remaining funds, covering agriculture and fisheries, are accessed through other means. Different time periods can be looked at as well—it is not just about when the funding is received, but about when it is spent. The funds do ramp up and down in the UK Government’s intentions, as they did with the EU. The Institute for Fiscal Studies has validated the UK Government’s approach. I also emphasise the fact that the local growth funds, including the levelling-up fund and the community ownership fund, are in addition to the shared prosperity fund, so actually Wales has a record level of investment coming from the UK Government.

[Gerald Jones]

The Minister mentioned the shared prosperity fund, which is significant investment that could transform communities across Wales. He also highlighted the positive joint working of the Welsh and UK Governments on freeports. Why does he think that the UK Government have frozen out the Welsh Government in the case of the shared prosperity fund, when there is an example of good working together? Why can that not apply across the board?

[Dr Davies]

My understanding is that the Welsh Government have been feeding into the general approach on shared prosperity fund allocation. In my local area, there is a Welsh Government representative on the body that advises on the funding. There are a range of contributors, as there should be. Proper devolution is the key point, in that local authorities are taking a leading role.

Hon. Members are right to raise the issue of universities, because of course universities in Wales have been dependent on European structural funds. My understanding is that Universities Wales has consistently expressed concerns that the Welsh Government do not invest an equal amount in Welsh universities compared with England. It has also highlighted that the lower level of core funding places Welsh universities at a disadvantage compared with their counterparts in England when competing for UK-wide research and development funding opportunities. To be constructive, I emphasise that the Secretary of State for Wales has asked universities to provide details of the economic value of programmes that were previously funded by the EU structural funds. He and I are very interested in trying to assist on that.