Spring Budget: Wales

Wayne David Excerpts

Wednesday 29th March 2023 Westminster Hall

[Ruth Jones]

The right hon. Member makes the point perfectly well; that rule would be fair. Opposition Members will pick this issue up in the coming days, along with the issue of the inadequacies of the spring Budget, because it is a new case of robbing Wales to pay Westminster, and it cannot go on. We have seen this before with High Speed 2, an England-only project that should, according to a Welsh Affairs Committee report of 2021, be classified as such. The acknowledgment of this simple truth, which I and cross-party Welsh MPs spelled out to the Government nearly two years ago, would give Wales the £5 billion it is owed. We are seeing the same thing play out again with the Northern Powerhouse Rail project; that is another £1 billion that could and should have gone to Wales. That money would have a real and substantial effect there, but it has been withheld. The Secretary of State for Wales may have entirely ducked responsibility for his Government’s role in this matter, but we will not let this go.

Growth was downgraded in this Tory Budget. That will surprise nobody in Wales who is battling with rising inflation, rising energy bills and rising food costs. That is why Labour will not allow Wales to keep bumping along this path of managed decline from Westminster. I mentioned my constituent Dawn Jones in the Budget debate in the Chamber last week, and I mention her again here. She is a pensioner living in Caerleon who has worked all her life and now cannot afford to put the heating on. She has not had it on all winter because of the expense, and every time she goes to buy anything in the supermarket, she finds it has increased in price. She wrote to my office and said: 

“I am really struggling now with all these increases and do not know how I am going to pay my way; I am worried to death!”

It seems like every other day my constituency office receives more cases of desperate people who have found themselves at the end of the options for help and support. It is heartbreaking, and to be quite frank, it makes me deeply angry with those who have made the political choice to put my constituents in that position.

[Wayne David (Caerphilly) (Lab)]

Is my hon. Friend aware of the Bevan Foundation report? Only last month, its in-depth analysis showed that it is the poorest people, the elderly, the disabled and people who are renting socially who are suffering most from the cost of living crisis.

[Ruth Jones]

Absolutely. My hon. Friend has made a perfect point; the Bevan Foundation in Wales is very clear and accurate in its reporting. I pay tribute to Victoria Winckler and the other staff there. That is why I welcome Labour’s mission to secure the highest sustained growth in the G7; that will be good for Wales, the Welsh economy and the people of Wales.

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[Virginia Crosbie]

I thank the right hon. Member for her intervention. My concern is that Labour in Cardiff should be building more homes that people want, in locations where they want to live, including for young people starting off their life.

In addition to delivering the day-to-day support that people need with the cost of living crisis, caused by Russia’s illegal war against Ukraine, the UK Government have delivered hope, and a promise of long-term prosperity in Wales. We need to grasp that with both hands and work together for the benefit of the Welsh people. We have seen what working together in a constructive way means for Wales. It means a freeport on Anglesey, with 13,000 new jobs and £1 billion in economic investment.

The Budget is an example of how this Conservative Government are investing in Wales, and levelling up communities both north and south. Families across north Wales see that the UK Government, rather than the Labour one in Cardiff, are supporting the region with long-term investment and good-quality jobs. I was delighted that £20 million for the refurbishment of the Holyhead breakwater was announced in the Budget. That investment in a vital piece of infrastructure is important if we are to keep Holyhead from flooding, and are to attract new investment to the port—the second busiest roll-on, roll-off port in the UK. That follows the announcement of £17 million from the levelling-up fund to regenerate Holyhead town centre.

The funding will attract new investment and good-quality, long-term job opportunities for local people across the whole island. It will give Ynys Môn a new lease of life, and turbocharge the island’s economy. My island has one of the lowest levels of gross value added in the UK, with high levels of temporary and seasonal work. Every year, we lose young people, who move in search of decent employment elsewhere. My dad had to leave Wales to find work. These investments will ensure that other young people do not have to leave Wales. The UK Government are investing to protect our island’s communities and our Welsh language.

It is the nuclear energy announcements in the Budget that will have the greatest long-term impact on the people and economy of Ynys Môn, and across the whole of north Wales. That point was highlighted when the Chancellor mentioned Ynys Môn in his speech. Earlier this month, I wrote a letter to the Prime Minister, co-signed by 57 of my right hon. and hon. Friends, asking him to push ahead with Great British Nuclear, and to make new nuclear energy part of our green taxonomy. The steps the Chancellor took in the spring Budget underline the Government’s commitment to our long-term energy security and net zero. With energy independence and jobs in new nuclear, alongside renewable energy production, this country can become a more prosperous and balanced economy.

The Budget was overwhelmingly positive for nuclear in the UK: there was the launch of Great British Nuclear, and the labelling of nuclear as environmentally sustainable in the green taxonomy. It was also great to hear the Chancellor’s commitment to nuclear providing a quarter of Britain’s electricity. That means a massive ramp-up of new nuclear projects on a scale that we have not seen for a very long time. What does that mean for Wales? It means opportunity. GBN will make the delivery of new nuclear projects, including in Wales, much more efficient, enabling us to build vital new stations more quickly than ever before.

[Wayne David]

I welcome the announcement by the Government on Great British Nuclear, belated though it is, but does the hon. Lady think it is certain? If so, perhaps she would like to say on what date nuclear on Wylfa will be given the go-ahead.

[Virginia Crosbie]

The last time a nuclear power station was invested in and built was under a Conservative Government. As the hon. Member will know, we have a huge energy statement tomorrow in the Chamber; I would not want to pre-empt what the Minister will say.

GBN means jobs and investment in areas that are calling out for them, including my constituency of Ynys Môn. I want good jobs for hard-working people—jobs that support Welsh communities—and nuclear can deliver that. Wales can be a centre of energy innovation. In the Budget, we learned of plans for a small modular reactor competition. There is already a long list of companies looking to Wales to house these game-changing stations, which will help decarbonise not only the power grid, but energy-intensive users in the heavy industry sector. We need these projects to come to Wales, but of course we need to attract investment.

Giving nuclear the green label will drive crucial investment. Nuclear has the lowest life-cycle carbon intensity, lowest land use and the lowest impact on ecosystems of any electricity source, according to the United Nations Economic Commission for Europe. If that does not attract investment, I do not know what will. Wales has a world-class site in Wylfa and Trawsfynydd at its disposal. It is essential that we make the most of those sites; it would be a huge missed opportunity if we did not. Over the next decades, there will be a significant ramping up, with new nuclear projects across the UK, facilitated by Great British Nuclear. Wales can and should be part of these plans, and the Budget was a big step forward, but there is much to do.

This Budget has delivered for Wales; it is way more than the hand-to-mouth support that the Labour Government in Cardiff asked for. It has paved the way for long-term sustainable growth and employment in Wales, for levelling up parts of Wales that have seen little interest or investment from Cardiff in the past 20 years, and for an economic revolution in Ynys Môn.

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[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.

[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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[Wayne David]

Is it not the case that the people who will benefit from the new arrangements are not just doctors, but many other wealthy people?

[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.