Cost of Living in Wales

Before we begin, I remind Members of the House of Commons Commission’s guidance to observe social distancing and wear masks. I will call Jessica Morden to move the motion and then call the Minister to respond. There will not be an opportunity for the Member in charge to wind up because that is the convention in 30-minute debates.

I beg to move,

That this House has considered the cost of living in Wales.

I am most grateful to be granted a debate on this most pressing issue for constituents in Newport East and across Wales, who face an unprecedented cost of living crisis, which has perhaps more accurately been described as a “can’t pay the bills crisis”. Across Wales, our constituents face galloping prices fuelled by soaring energy bills, which affect the cost of everything. This is leading to deepening inequality, as price rises hit the poorest households hardest—inequality already entrenched by years of Government austerity. With things only set to get worse in April as constituents feel the impact of the energy price cap rise, the Government’s manifesto-busting national insurance hike and a forecast rise in inflation, the Government’s lack of understanding and empathy about the stark choice households are having to make, and the absence of any meaningful response to address it, is unacceptable. This is a serious situation that demands a serious response.

I am calling the debate today to give voice to the real stories that constituents have shared with me about their day-to-day existence and how their income is not enough to cover rising bills. The following are quotes that constituents have shared with me, because the cost of living crisis is real:

“I reduce the amount of meals I have a week so the food is spread further for my children, I do not use the heating if I am home alone as I cannot afford it and we cannot use it at night as it is just too expensive.”

“I’ve found that buying cheaper, less nutritional food is the only way I can make food last longer for my children. The cost of gas and electric means I struggle to wash and dry their clothes.”

“Almost all of my tax credits, if not more, a week go on my gas and electric. Very often I have to go without food to be able to have the heating on.”

Does my hon. Friend agree that things would be a lot worse in Wales if it were not for the Welsh Labour Government’s £330 million package to tackle the cost of living crisis, targeted at helping the most vulnerable through the winter support scheme and the discretionary assistance fund?

I thank my hon. Friend for her excellent intervention. In fact, we saw a further announcement and more detail last week.

Before the vote, I was talking about the soaring household gas and electricity prices and about how households in Wales and the UK would see their energy bills rise to nearly £2,000 a year from April, when the energy price cap lifts. I agree with the excellent intervention by my hon. Friend the Member for Neath (Christina Rees) about the interventions of the Welsh Labour Government in Cardiff and how they have used the levers at their disposal to do all they can to ease the cost of living crisis for Welsh people. I will talk more about that later.

The proportion of households spending at least 10% of their budget on fuel bills will be trebling from 9% to 27% and, on top of that, taxpayers will be asked to foot an estimated £120 a household to shoulder the extra costs of the energy companies that have gone under in the last year. Based on that increase alone, National Energy Action Cymru estimates that 280,000 households in Wales could be in fuel poverty come April. That is a further 100,000 households since October 2021, and all that at a time when pay is not keeping pace with rising prices. When we factor in inflation, average weekly pay packets across Britain fell in December by 1.2% and TUC research suggests that real wages are set to fall by £50 a month this year, after taking into account the cost of living, with incomes after tax forecast to drop by 2%. That represents the biggest fall since records began in the 1990s. Although the national living wage may be going up, the proliferation of insecure, casual jobs and cuts to in-work benefits mean that a higher minimum wage does not mean higher living standards.

Does my hon. Friend agree that, although many people think of benefits as going to people who are not in work, there are in fact a lot of benefits that go to people who are in work? The fact is that there have been swingeing cuts to tax credits since 2010, and even though there was some adjustment to the taper last year, that alone is not enough. With rampant inflation, there now needs to be a real effort to make sure that those tax credits are actually worth something, to make it worthwhile to be in work. At the moment, people face horrendous poverty because of that accumulation of 12 years of cuts.

I thank my hon. Friend for that intervention. She is absolutely right: the levels of in-work poverty are really terrifying, and it is those on the lowest incomes who are feeling the squeeze most acutely. As she said, that is made worse by the Government’s £20 cut to universal credit in the autumn, which impacted 8,630 households in my constituency. Research from Wales TUC and the Bevan Foundation suggests that Wales was particularly hard hit by the cuts to universal credit and working tax credit, especially when it comes to the in-work poverty that she mentions.

Of the 280,000 individuals in receipt of universal credit in Wales, around 104,000, or 37%, are in work—the highest proportion of any nation or region in the UK. In April, universal credit will increase by 3.1%, just as inflation is predicted to peak at 7.25%. As the Child Poverty Action Group has highlighted, that means that the real value of universal credit for families with children will fall by around £570 a year on average.

Citizens Advice tells us that, heading into the winter, one in 10 families were already facing financial crisis. With food prices going up, utility bills going up and the extra burden of the national insurance payments, families are having to decide between heating and eating.

I thank my hon. Friend for that intervention. She is absolutely right. The experiences of her constituents that she relays were borne out in the comments from my constituents that I read earlier on. The average fall of £570 will affect 3,355 families and 6,272 children in Newport East alone. Meanwhile, families across the UK hit by the benefit cap will experience an even greater fall.

Increases in other benefits are totally insufficient in the face of the inflation juggernaut. Carers allowance has increased by only £2 a week, statutory sick pay by £3 a week and the severe disability premium by £2.10 a month. Local housing allowance rates were also frozen again until 2023, meaning that help for housing costs through universal credit and housing benefit have not kept pace with inflation.

Pensioners are also hit hard. Comparing state pension increases to inflation projections, there is a real-terms cut of £355 for a couple on the basic state pension and £222 for an individual. That is not to mention the hundreds of thousands whose pensions have been underpaid because of admin errors and the 1 million pensioner households still missing out on pension credit.

I apologise for missing the first part of the hon. Lady’s speech—I was keen to vote. Does she agree that we need a measure of inflation that reflects the costs that people—including pensioners and families with children—actually face? In fact, 3,153 children in my constituency will be hit by the change to universal credit.

I very much understand the point that the hon. Member makes about inflation, which runs through this whole debate.

On top of all that, the Government have decided to go ahead with the national insurance rise in April, with the average worker’s contribution set to be hiked from £274 to £500 a year. National insurance contributions will be charged at 13.25% on earnings up to £50,000, but just 3.25% on income above that threshold. Low and middle-income earners will be affected yet again—a tax on ordinary working people and on jobs. The Government have had an opportunity to do something about the cost of living crisis, but the Prime Minister and the Chancellor have been distracted and slow to act. What have we had so far from the Chancellor?

The accounts from her constituents that the hon. Lady read out earlier were very moving, and I take that to heart. Does she not think it is time, with the cost of living crisis, that the Welsh Labour Government did more to tackle the huge council tax bills in Wales? Welsh councils are consistently and disproportionately some of the most expensive in the UK. That comes up time and again with my residents. Should she not be putting pressure on her colleagues in the Senedd?

We have some of the lower council tax rates, compared with the UK as a whole. The support packages from the Welsh Labour Government are more generous than those of the UK Government. The hon. Gentleman’s intervention was timely, because I had just asked what we have had so far from the Chancellor. The answer is a £150 council tax rebate for a limited number of households, which is already less generous than the council tax reduction scheme in Wales, where on average people will pay £17 less on their council tax bill. An average band D council tax bill in England is £167 more than in Wales.

The second measure the Government have come up with is the buy now, pay later scheme of a £200 loan to help with bills, which the public are expected to pay back in full over five years, even if their wages fall in the meantime or energy bills rise further still, or even if they become a bill payer later and do not receive the initial £200 loan. The TUC General Secretary, Frances O’Grady, has highlighted that, for most families, the Chancellor’s support package equates to just £7 a week, with more than half of that having to be paid back. As she said,

“It’s too little, it’s poorly targeted, and it’s a stop-gap measure instead of fixing the big problems.”

Conservative MPs voted down Labour’s proposal to cap VAT on energy bills, after suggesting that we could do that once we left the EU. The Government, let us not forget, have casually written off £4.3 billion lost to fraudsters, but refuse to tax properly North sea oil and gas profits, despite the fact that leading energy companies such as BP are boasting about being cash machines, as gas prices across global markets reach record highs.

In contrast to the Tory Government, in Wales we have a Labour Government who are prepared to step in and help by using the levers that they have. Last week, the Welsh Labour Government set out a £330 million package of extra help. That is a funded package that is significantly larger than equivalent support provided by the UK Government. It includes matching the UK Government’s £150 council tax rebate and extending the eligibility criteria, so that many more households will benefit. That is funded by the Welsh Government, as the UK Government made no extra money available, even though they said they would.