Spring Budget 2024: Welsh Economy

[Peter Dowd in the Chair]

I beg to move,

That this House has considered the impact of the Spring Budget 2024 on the Welsh economy.

It is a pleasure to serve under your chairmanship, I think for the first time, Mr Dowd. I am delighted to be able to bring this debate before the House today, but I want to start by acknowledging the seriousness of the situation in the middle east. My hopes and those of my constituents are for a more peaceful world and a meaningful de-escalation.

As we consider the impact of the spring Budget 2024 on Wales and the Welsh economy, I want to acknowledge the voices, views and concerns of the people of Newport West. My constituents have shared their worries and concerns with me in recent weeks since the Chancellor delivered his Budget. Of course, I am also thinking about people right across Wales who are dealing with the consequences of a Conservative Government that are out of touch and out of time.

The recent Budget could and should have been a unique opportunity to unlock Wales’s promise and all the potential we see in and around our communities, but instead it was more decline and decay. It is clear to everyone in the Chamber, and I suspect to the Minister too, that this Government have decided to continue papering over the cracks of almost 14 years of Conservative economic failure, rather than giving us the change we need.

As we consider the impact of Budget 2024, we need to think about where we are thanks to this Government. Every colleague in this Chamber will know that, after 14 years of Conservative Government, people in Newport West, Monmouth, Clwyd East and Bridgend, and indeed right across Wales, as well as in the rest of the United Kingdom, are worse off. Families continue to struggle with the cost of living crisis, higher taxes and eye-watering energy bills.

The list is depressing and long: debt and interest rates are much higher; Britain’s standing in the world is diminished; economic growth is stagnant; our much-needed and valued but seriously underfunded public services are on their knees; and taxes are higher than at any time since the second world war—indeed, never have a British Government asked their people in Wales and across the UK to pay so much for so little.

Let us take a moment to talk about the Tories’ unfunded plans to abolish national insurance contributions, and the Chancellor’s promise of £46 billion of unfunded tax cuts, which would leave a gaping black hole in the public finances. That reckless approach exposes the clear risk of five more years of the Conservatives. They will gamble with the public finances, and working people will be forced to pay the price yet again.

This Tory Government clearly have not learned anything since the former Prime Minister, the right hon. Member for South West Norfolk (Elizabeth Truss), crashed the economy and sent people’s mortgages spiralling, as we heard this morning during Prime Minister’s questions. I welcome the approach of the Leader of the Opposition and the shadow Chancellor, the right hon. Member for Leeds West (Rachel Reeves), who have been very clear that Labour will never play fast and loose with the nation’s finances.

On average, households in Wales will be £700 worse off under the Tory tax plan, which gives 5p for every 10p taken from people across the country. The Budget confirms that the UK has the highest tax burden in 70 years, rising every year of the forecast period. The Office for Budget Responsibility figures speak for themselves: for every 10p extra working people pay in tax under the Tories plan, they will get only 5p back as a result of the combined national insurance contribution cuts. That includes the OBR’s revised estimate for the impact of tax threshold freezes, which raise £41.1 billion over the forecast period and will create 3.7 million new taxpayers by 2028-29.

As we go back to the people in this general election year, we will be closing the door on the worst Parliament on record for living standards—the only Parliament on record where living standards have fallen. I welcome the Minister to her place, but it is important to remind her that real pay has gone up by just £17 a week over 13 years of Conservative Government; under the last Labour Government, wages rose by £183 a week over 13 years. The spring Budget reveals that growth in GDP per capita is negative this year, and has been downgraded in the four years of the forecast period.

The OBR confirmed what may be called “Rishi’s recession”, with GDP per capita smaller than when our unelected Prime Minister moved into No. 10, taking over from the former Prime Minister, who was beaten by a lettuce. The Conservatives have wrecked the public finances, debt has almost tripled under them, from £1 trillion to just under £2.6 trillion, and borrowing has been revised up for the next five years of the forecast period. That is the legacy handed down to the people of Wales after 13 years of Conservative Government.

Mr Dowd, you will not be surprised to hear me note that this is not just about the impact on Wales, as part of the United Kingdom; the Government have presided over the biggest drop in living standards in Wales since records began, but the same is true for England, Scotland and Northern Ireland too. That will obviously have a huge impact not only on the economy in our part of the United Kingdom, but right across the country.

In recent months, more than 7,000 homeowners across Wales have faced a Tory mortgage bombshell as their fixed-term mortgage rates have come to an end. The average estimated hike is approximately £240 per month; that is the real cost of the Conservative party. Under this Prime Minister, the Conservatives do not have a plan for our future. They crashed the economy and now they expect working people to pay the price.

Our country needs change, and that is why I am proud that the defining purpose of the next Labour Government, if we are fortunate enough to win the trust and support of people across Wales and our United Kingdom, will be to grow Britain’s economy so that we can invest in our future. Labour’s plan for growth is about making working people better off, boosting the Welsh economy and moving our country forward. We will put economic stability first by introducing a new fiscal lock to bring economic security back to family finances. We will back British business. Importantly for me, as a former president of the Wales TUC, Labour will make work pay.

The impact of Budget 2024 on the Welsh economy also shows how important it is that colleagues of mine standing for Labour across Wales are elected to this place. Many are strong Welsh women, such as Becky Gittins in Clwyd East, my neighbour Catherine Fookes in Monmouthshire—a constituency I know very well indeed—and Jackie Jones over in west Wales. They stand alongside colleagues such as the shadow Secretary of State, my hon. Friend the Member for Cardiff Central (Jo Stevens), and my hon. Friends the Members for Newport East (Jessica Morden), for Gower (Tonia Antoniazzi), for Pontypridd (Alex Davies-Jones), for Swansea East (Carolyn Harris) and for Llanelli (Dame Nia Griffith). Their re-election to this place will help ensure that better days lie ahead, and that any future Budgets under a Labour Government will have a significantly better impact on Wales and our economy than Budget 2024.

I have several questions for the Minister. Figures from Citizens Advice Cymru show that the number of people in Wales unable to top up their prepayment meters has increased by 36 times since the last general election. Will the Minister tell us how many households in Wales still have prepayment meters, and whether any have been forcibly installed since the ban in February 2023? I appreciate that she may not have the figures to hand, so perhaps she will write to me about that.

A recent Which? survey found that one in five working-age parents in Wales are skipping meals due to high food prices. Has the Minister had any recent conversations with supermarkets in Wales about keeping the cost of food down?

This year, 62,000 homeowners in Wales will face a Tory mortgage bombshell as their fixed-term rates expire. A Labour Government would require banks to protect homeowners, so what is the Minister doing to help owners with the bills caused by her party’s disastrous economic mismanagement?

The Conservatives have crippled working people with the highest tax burden since the second world war. The Prime Minister’s latest gimmick means that if a British person pays £10 in tax, they will get just £5 back. Does the Minister agree with Iceland boss Richard Walker that Labour is now the right choice for his customers?

You will be pleased to hear that I am drawing my remarks to a close, Mr Dowd. It will come as no surprise that, in my view, the best thing to do is to change course, deliver for our people and move forward with a Labour Government—and the sooner, the better.

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.

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.

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.

Diolch yn fawr, Mr Dowd. I congratulate the hon. Member for Newport West (Ruth Jones) on securing this debate. The Government have tried to spin the Budget as the deliverer of long-term growth for Wales, but people’s response is at odds with the spin. The lack of faith in the Government’s rhetoric is rooted in what they experience day in, day out, and how little faith they now have in attention-seeking announcements.

The real story is one of stagnating living standards, higher taxes on poorer people, cuts to public services on top of years of austerity, and food banks providing meals to working families. The Budget’s headline announcement of a 2p cut in national insurance plays out in different ways in different places. London wage earners will benefit the most, at £621 on average, while those in Wales will get only slightly more than £1 a day —£380 on average.

This is not a matter of begrudging gains for some people in some communities, but what needs to be called out is the disregard for how the national insurance cuts, as a policy, will entrench inequality in different parts of the United Kingdom. There is nothing in the spring Budget to address the deep economic challenges facing Wales, such as flagging productivity. In Wales, gross value added per hour worked is 84% of that of the UK—the lowest productivity of any of the four UK nations, although it varies within Wales and in the English midlands. It plays out in different places in different ways.

Those indicators also reveal how little effect that worthy, familiar, perhaps misused 2019 election slogan of levelling up has actually had. I know the Tories will delight in telling us that Wales has had more than our per head of population share of levelling up since then.

On that point about the Tories telling us we have never had it so good and Wales is benefiting, will the right hon. Member join me in being disappointed that, apart from the Minister, who is compelled to be here and for whom I have a lot of respect, there is not a single Welsh Conservative MP in this debate? That shows how much contempt and disregard they have for the people of Wales.

They must be content with the crumbs that we get from the table with levelling up, frankly.

Is the per head of population distribution really a good measure of success? Under the European funding schemes, Wales also got the highest per head of population contribution for a reason, and the reason was recognised deprivation—proven need. How has the Tory levelling-up agenda grasped the challenge of replacing the European money previously distributed specifically to lift the poorest communities out of poverty? I will tell hon. Members how it has done that. It has done it by invoking the United Kingdom Internal Market Act 2020 to undermine the Senedd and any pretence at strategic working. It has done it by setting cash-strapped local authorities in direct competition with one another, like supplicants begging for pennies. It has done it by providing money without sufficient time even to use it to best effect. And it has done it by ensuring that there is scant effective evaluation of money used, so that we do not even know whether it is levelling anything up for anybody.

Of course, that is not the point. Levelling up was never about ensuring that Wales got not a penny less than it did under European funds. We know that we are getting £1.3 billion less. Levelling up has become a byword for cynical short-termism, lollipops for a Government to hand out with an eye to the next election—pork barrel politics. That is clear from the fact that the Budget included Canary Wharf in the £242 million of London levelling-up cash. Canary Wharf, of all places! That is hardly somewhere that needs further investment and levelling up when compared with other places in the UK.

The Chancellor announced departmental spending cuts of up to £20 billion in the spring Budget. Let us be clear that those cuts will make a wasteland of our public services, and they will do so in a country, our country—Wales—where we place a high value on how a community works for everyone. I fear for the future of Welsh public services. We have already seen the Welsh Government’s refusal to step in when they defended cuts to Wales’s National Museum. I am sad that, rather than demonstrating the political courage to protect our cultural institutions, First Minister Vaughan Gething tells us to wait patiently for a future Labour Chancellor to start properly funding Wales. I fear that he is referring to the same shadow Chancellor, the right hon. Member for Leeds West (Rachel Reeves), who drops heavy hints that Labour will go ahead with public spending cuts if it forms the next Government.

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.

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.

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.

It is lovely to see you in the Chair, Mr Dowd. May I start by congratulating the hon. Member for Newport West (Ruth Jones) on securing this debate? I thank all right hon. and hon. Members for taking part. I hope the hon. Lady knows that I have great affection for her. We have been on opposite sides of many a Bill Committee over the last few years, and while we have often disagreed, we have always had fun doing so. It is a pleasure to respond to her debate. I very much enjoyed her speech and will refer to it throughout my contribution, but my favourite bit was the love letter to Labour women standing in marginal seats across Wales, which I thought was charming, if transparent. I congratulate all hon. Members who have taken part in this afternoon’s debate, who all happen to be women—

Welsh women!

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.