Spring Budget 2024: Welsh Economy

Nia Griffith Excerpts

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.

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[Jessica Morden (Newport East) (Lab)]

I congratulate my neighbour, my hon. Friend the Member for Newport West (Ruth Jones), on securing this very important debate; in fact, I believe that this is the second year running that she has secured it. As always, she made her points well, as did all the speakers so far. I echo her comments on Gaza and the middle east. We share the city of Newport, and I know that that is a matter of great concern.

As my hon. Friend and neighbour set out, this is a Government clinging on to power, having presided over 14 years of managed decline. They lack the interest, vision and appetite to deliver the fundamental change that our country needs. We have had some excellent contributions from Members who will have had direct feedback from their constituents, be it on the doorsteps in places such as Monmouth, or in their surgeries. I certainly have: over the Easter recess we carried out a cost of living survey in Newport East, and people told us very strongly just how held back they feel by this failing Tory Government.

My hon. Friend put it well when she said that “never have a British Government asked their people…to pay so much for so little.” Having played fast and loose with the public finances, the Conservative party is passing on the cost of its incompetence to those who can least afford it just as public services, on which so many of them rely, are crumbling under the weight of its cuts. My hon. Friend the Member for Llanelli (Dame Nia Griffith) is quite right: the spring Budget is smoke and mirrors, and people are not taken in by it.

Let us take ourselves back to 2019, when those on the Government Benches stood on manifesto commitments not to raise taxes; to reduce debt; to reduce poverty; and to help people with cost of living pressures. Three Prime Ministers and five Chancellors later, and with the Tory chaos almost halving the Government’s parliamentary majority, those promises lie in tatters. As hon. Members have already said, it is the case, despite cuts to national insurance, which we support, that the income tax threshold freezes mean that taxes are rising at a record pace. They are now at a 70-year high, and rising in each year of the spring Budget’s forecast period. That will make households in Wales £700 worse off, as my hon. Friend the Member for Newport West said. I was very struck by what was said to me by a constituent I met in Magor on Saturday on the issue of the income tax threshold freezes, which was raised by my hon. Friend the Member for Llanelli. The constituent described to me how her small monthly pension was hit by the impact of that and how unfair that was.

[Dame Nia Griffith]

I am sure that my hon. Friend will mention what I forgot to mention, which is that pensioners do not pay national insurance, so they have had no benefit whatever from the NI cut.

[Jessica Morden]

I thank my hon. Friend for making that very pertinent point. There is a big impact on pensioners, as she has said.

The UK debt to GDP ratio is at its highest in 70 years, with no sign of falling. The number of people living in absolute poverty is expected to increase this year to 12 million, with 4.2 million children living in poverty. This year, 62,000 householders in Wales will face the Tory mortgage bombshell—which hon. Members have mentioned—as their fixed-term rates expire, with the average homeowner expected to face a £240 hike in their monthly bill. As hon. Members have said, this is the first Parliament on record for which living standards are set to be lower by the end than they were at the beginning. The Tory Government are breaking promises and breaking records—and all to the detriment of Welsh people struggling to make ends meet. The Prime Minister has joined his predecessor in backing the sort of enormous and entirely unfunded tax cuts that led to the swift demise of her premiership—this time in the form of the abolition of national insurance. Perhaps the Minister will explain to us in this debate, because the Prime Minister could not—he repeatedly failed to answer the question at Prime Minister’s questions today—what the Tory Government will cut to find the £46 billion needed every year for their new policy, or whether they plan to extend their tax-raising record by piling further costs on to Welsh working people.

Not only have the tired Tory Government lost any semblance of economic competence—driving down business confidence—but they have lost their moral compass. Over the last few days, my constituents Colin and Janet Smith have been sharing with the media the story of their decades-long fight for justice for their son, Colin, who tragically died aged seven, having contracted AIDS and hepatitis C from contaminated blood administered by the NHS. For years after his death they faced bullying, abuse and the loss of employment, due to the stigma surrounding his illnesses. I know the family very well, and the absolute tragedy of what he was put through. Members of the House will know that the Smith family’s story is not unique. They have campaigned tirelessly alongside so many others for the truth and for just compensation, so I would like the Minister to tell us why, despite the final recommendations on compensation having been delivered to Ministers by Sir Brian Langstaff, chair of the inquiry, more than a year ago, when he said the Government could get on with making the compensation payments, there is not a single word about it in the spring Budget. I think that is an absolute disgrace.

Welsh steelworkers are right to feel betrayed by a Government willing to countenance 3,000 redundancies across south Wales while our European steelmaking competitors make historic investments in green steel. The almost-overnight end to our virgin-steelmaking capability in Port Talbot is not an inevitability. Rather than relying on imports from across the world, exposing us to the same global risks that precipitated the energy crisis, Ministers must revisit the multi-union plan, described by Tata itself as credible, to work with our steelworkers towards a just transition to the greener future for steel that we all want.

As my hon. Friend the Member for Llanelli mentioned, a Labour Government in Westminster would invest £3 billion in green steel within the first term, protecting livelihoods and the future of our sovereign British steel manufacture, which is vital for our plan to make Britain a clean energy superpower by doubling onshore wind, tripling solar and quadrupling offshore wind.

It is not too late for the Government to change direction on this, and it would be particularly important for my hon. Friend the Member for Newport West, with the Llanwern steelworks in Newport. It would not be the first time a Conservative press release has sounded suspiciously familiar to Labour colleagues. Whether it is the narrowing of the non-dom tax loophole or the half-hearted levy on oil and gas giants, the Prime Minister appears to be slowly realising that the path to a fairer, brighter future for Wales and Britain is through the progressive policies of a Welsh Labour Government working with a Labour Government in Westminster.

The consequential funding that will flow from a UK Labour Government to Welsh public services will be critical. Importantly, my hon. Friend the Member for Pontypridd (Alex Davies-Jones) mentioned the cost burden on local government too. Our public services face intense challenges, particularly in the context of the value of the Welsh Government’s budget having dropped by £1.3 billion in real terms as a result of the Tories’ economic mismanagement.

Some progress was to be welcomed from the spring Budget. We have repeatedly called on the Government to get a move on with the new nuclear site at Wylfa. The purchase of the site is therefore good news, but we are still nowhere near seeing the prospect of clean energy and thousands of good jobs returning to Anglesey. Had they not dithered for five years, we could have seen the plant 50% complete, with up to 8,500 construction jobs under way, around 900 permanent jobs to follow and £400 million for the local economy in wages.

What we saw in the spring Budget was a Conservative Government without a proper plan to grow the economy, without an industrial strategy to match the ambition of our talented Welsh workforce and without the appetite for investment in a greener Wales. Those will only be achieved with a UK Labour Government working with a Welsh Labour Government and a Secretary of State for Wales who stands up for Welsh interests.

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[Fay Jones]

Indeed. It shows what Welsh women can do when we get together.

Turning to the matter at hand, it is absolutely clear that the Conservative Government have a plan to deliver the long-term change that our country needs and that that plan is working. We have seen yet again today that inflation has fallen by over half its recent peak. The cost of living pressure is easing, and economic growth is more resilient than previously suggested. Debt is also forecast to fall. But the recovery is not over yet, and it is at risk from other political parties that do not have a plan for the economy and are instead making unfunded promises that will take us back to square one.

With the economy now turning a corner, the Chancellor has been able to make further tax cuts responsibly to boost growth across Wales and the UK by ensuring that working people keep more of their hard-earned money. Thanks to announcements made in both the autumn statement and the spring Budget, we have seen national insurance cuts benefit 1.2 million workers in Wales.

[Dame Nia Griffith]

Does the Minister accept that while national insurance cuts help all working people, they give a lot of money to the better off and are therefore a very blunt, not at all targeted way of helping people?

[Fay Jones]

The hon. Lady will not be surprised to know that I do not agree. I point her to the fact that at the end of 2010, a worker earning a wage of £15,000 was paying around £1,700 in taxation. Today—after 14 years of a Conservative Government—that amount is around £500. That shows that the Conservative party will deliver for working people.

Thanks to announcements made at the autumn statement and the spring Budget, we have seen national insurance cuts of about £701. Further tax cuts have been announced, included the freezing of fuel duty for yet another year, further easing cost of living pressures and saving the average car owner about £50 over a year. I believe that that is the 14th time since the Conservatives came to power in 2010 that we have frozen fuel duty. Alcohol duty has also been frozen once again to support Wales’s crucial hospitality industry. There was great news for Welsh SMEs, with the UK Government raising the VAT registration threshold to £90,000, building on last year’s autumn statement announcement that the UK Government are backing Welsh business through the British Business Bank’s £130 million investment fund for Wales.

I have listened to a lengthy list of complaints about the Conservative Government, but I remind Labour Members that while we are backing Welsh businesses, their own Government—their own colleagues in Cardiff Bay—have slashed business rates relief from 75% to 40%, meaning that hospitality businesses in Wales will pay thousands more in comparison to their colleagues in England.

The spring Budget also outlined the UK Government’s commitment to securing a diverse energy system with Wales at its heart, through the decision to purchase the Wylfa Newydd site on Ynys Môn. I welcome the shadow Minister’s rather muted celebration of that announcement. New nuclear developments have the potential to transform the north Wales economy, creating thousands of jobs while contributing to our net zero and energy security ambitions. Beyond nuclear, the renewable energy sector is also flourishing in Wales. The Government are supporting floating offshore wind by securing a long-term pipeline of projects in the Celtic sea and unlocking port infrastructure investment through the £160 million floating offshore wind manufacturing investment system. The Chancellor has also announced that the Crown Estate will bring forward an additional 12 GW of floating offshore wind in the Celtic sea in the 2030s.

The Budget was also a great moment for the creative industries—a sector that is hugely important to Wales’s economy. I am mindful of how many Members represent south Wales, so I am surprised this was not mentioned. Cardiff is now one of the UK’s largest media productions centres outside London. I was thrilled to see that the UK Government continue to back the creative sectors in Wales, with £500 million of new tax reliefs for the UK industry, as well as—a cause close to my own heart —a further £5 million for the agrifood industry in mid and north Wales, supporting research and development in our rural heartlands and helping to develop a more sustainable future for our vital agriculture sector. Again, this stands in stark contrast to the actions of the Welsh Labour Government, who have cut the rural affairs budget.

[Dame Nia Griffith]

Will the Minister give way?

[Fay Jones]

I will not.

Indeed, this Government are working hard to ensure that Wales’s sector strengths are empowered to move to the next level. That is why we confirmed at the autumn statement that there will be two investment zones in Wales: one located across Cardiff and Newport—again, a surprising omission from the speeches of the hon. Members for Newport West and for Newport East (Jessica Morden) ; and a second zone located across Wrexham and Flintshire. The Chancellor confirmed at spring Budget that the programme has been extended in Wales from five to 10 years, with each receiving £160 million in funding over this period. This will supercharge key sectors across both locations, creating jobs delivering growth and prosperity across Wales.

A determination to create new jobs has also been spearheaded by Wales’s freeports programme, and here —the hon. Member for Newport West will be surprised to hear me say this—I will praise the Welsh Government for working hand in hand with the UK Government. The freeports programme was further supported once again at this Budget by the Chancellor when he announced that there would be an extension in tax relief from five years to 10 years, providing greater certainty to businesses looking to invest, delivering growth and jobs, and levelling up the economy.

The Chancellor’s spring Budget has provided Wales with substantial additional funding, as I think was mentioned by a number of hon. Members this afternoon. Back in 2021, a record-breaking £18 billion block grant was secured at the spending review. This year’s Budget announced almost £170 million of additional funding through the Barnett formula for 2024-25. That is on top of the £820 million already provided to the Welsh Government since that record-breaking grant in 2021—blowing away Labour’s and Plaid Cymru’s argument that Wales has been underfunded. This is almost an extra £1 billion in additional funding for the Welsh Government. On top of this record funding, the Prime Minister recently announced £60 million for apprenticeships in England. That will result in yet more money for the Welsh Government.

Despite the negativity of Members opposite, there is no doubt that the Welsh Government are adequately funded to deliver on their responsibilities. It is a question of priorities. While the Conservative Government are pouring billions of pounds into Wales and turbocharging the Welsh economy, it is the decisions of the Welsh Labour Government, propped up by Plaid Cymru, that are undercutting Welsh public services.

I was disappointed by the negative and miserable tone taken by Opposition Members during the debate in relation to levelling-up funding in Wales and was surprised to see them criticise the record amounts of funding received in their own local authorities. An announcement at the Budget added to our commitment of long-term regeneration and growth in Wales. I am thrilled that Rhyl is the latest of five Welsh towns to benefit from £20 million as part of the long-term plan for towns.