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Wales: Cost of Living

Volume 750: debated on Monday 2 December 2013

Question for Short Debate

Asked by

To ask Her Majesty’s Government what assessment they have made of the impact of the current cost of living and changes to the welfare system on the people and economy of Wales.

My Lords, when the banking crisis hit in 2008, we knew that someone, somewhere would pay a price, but even the most callous cynic would never have predicted that the people to be hardest hit would be the poorest people in Wales, while the richest people in Britain would be given a tax break and the bankers—the people who caused the crisis—would be receiving massive bonuses.

The cuts to the support mechanisms for the most vulnerable in our society and a compounding of the problem through the increases in the cost of living mean that there are, according to the Joseph Rowntree Foundation, almost 700,000 people living in poverty in Wales today. Let us just imagine what that looks like. Picture the Millennium Stadium full. Now picture it again and again and again. The number of people living in poverty in Wales today would be enough to fill the Millennium Stadium 10 times over. These are people living on a hand-to-mouth existence and in perpetual fear of how they will make the money last until the end of the week.

Research by Sheffield Hallam University found that Wales will lose more than £1 billion a year when all the benefit cuts are taken into account. That represents an average cut of £550 per year to every working age adult. That is 20% higher than the estimated average loss for Great Britain. Under benefit cuts, Wales is the hardest hit.

Of course, the point is that those cuts will not be equally distributed; they will be focused on those least able to cope with them. Merthyr Tydfil will be one of the areas hardest hit in the whole of Britain, where adults will lose an average of £722 per year. The biggest single loss of income will be felt by around 350,000 working-age benefit claimants and 330,000 families in receipt of tax credits as a result of increasing benefits in line with inflation by the consumer prices index rather than the retail prices index in future. This matters because the CPI inflation rate does not take into account rises in mortgages, rents and council tax. Guess what? These are going up, fairly significantly.

Just when you think it cannot get any worse you hear that the Government plan to reduce the income of 42,000 disabled people in Wales by removing their disability living allowance, costing them around £55 to £83 a week. This also means that their carers lose carer’s allowance. This will not mean that they cut down on little luxuries. There was never a latte in the local coffee shop for these people. They will have to decide between putting the heating on and feeding their children. Approximately 600,000 children live in Wales and of these around 200,000 are living in poverty—one in three of the total—according to a new report from Save the Children. Wales has the highest rate of child poverty of any nation in the UK. What does this mean in reality? It means that parents are skipping meals and are dreading Christmas as they know they cannot give the little treats that most of us can take for granted. Wales is hardest hit by child poverty.

Of course, times are tough and the deficit needs to be reduced but it is galling to hear these statistics while those who caused the crisis are earning more than ever. The European Banking Authority last week claimed that the total number of UK bankers earning more than £800,000 last year increased by 11% to more than 2,700 and their average pay rose by 43% to £1.67 million. The freezing of child benefit for three years will affect 370,000 families in Wales, each losing an average of £2.50 a week, with a total loss to Wales of £47 million in 2014. The cost of food, school buses and school uniforms has gone up, not down. Of course, we expect a Cabinet full of millionaires whose children attend private schools to be out of touch, but do they need to inflict further pain on those least able to bear it?

I want to touch briefly on the bedroom tax. This policy is ripping people away from their communities or forcing them into the hands of loan sharks. Again, Wales is hardest hit, with 46% of housing benefit recipients who live in social housing affected—40,000 households. Let me give a picture of what this policy means for Emma. Emma is 57 and lives alone in a three-bedroomed social housing property. She took tenancy of the property with her husband, who died two years ago. She has lived in the property for 25 years and brought her children up there. She looks after her grandchildren and is in receipt of jobseeker’s allowance of £71 a week. Once she has paid the bedroom tax of £18.50 a week, TV licence at £2.75, travel at £5, electricity at £10, telephone at £5, water at £8.50 and gas at £10 she is left with £11.25 a week for everything else. Emma is still making a valuable contribution to society but can anyone pay for all their food, clothes and other basic requirements for a civilised life from £11.25 a week? Wales is hardest hit by the bedroom tax.

Will the Minister give an assurance that if there are no smaller houses for people to move into in their area they will not be forced to pay the pernicious spare bedroom tax? Thank goodness that the Welsh Government are sensitive to the pressures of costs today. The cut in council tax benefit that the UK coalition has imposed—a new poll tax no less—has led the Welsh Government to put protection measures in place worth £22 million. It means that a quarter of a million poor families in Wales will at least not be hit by this coalition cut.

The people receiving welfare support want to work and do not recognise the miracle uplift in the economy that is supposedly occurring. Most couples with children are now required to work at least 24 hours a week, up from 16 hours, to qualify for working tax credits. These people have demonstrated that they are able and willing to work but they will lose up to £3,800 a year if they are unable to find additional hours. Wales has seen the largest increase in the UK of people who want to work more hours but cannot find them due to the coalition’s failed economic policies. Some 65,000 people in Wales are under-employed. Wales is hardest hit by under-employment.

The Pope was right and I am not a Catholic so I do not have to believe that he is always right. He claims that the trickle-down economic theory does not work. It does not work from the richest to the poorest and it does not work from the centre, London, to the periphery, Wales. However, it is not just the people living on welfare who are suffering. Wales has the highest proportion of workers of anywhere in the UK, around 300,000 people—the same as the population of Cardiff—earning less than the living wage. Minimum wage jobs account for close to 7% of jobs in Wales compared with the average of 5% across the UK. Labour local authorities are leading the way in paying all workers a living wage, with Cardiff one of the first to sign up. Wales is hardest hit by low pay.

Women are suffering disproportionately from the cuts and are more likely to be on low pay than men, with 28% on less than the living wage compared with 16% of men. What is being done to make sure that than women’s voices are heard? It is not just the poor who are suffering; the middle classes are as well. Real wages have fallen in 41 out of 42 weeks and Welsh workers are now £1,600 worse off, with an 8% fall in annual pay since the coalition came to power. Energy bills in Wales have risen by almost £300 since 2010. South Wales has the highest combined gas and electricity bills in Britain and north Wales the third highest. Wales is the hardest hit by energy bills.

Where are the answers from the Government? The coalition boasts of more than £2 billion of new infrastructure that will benefit Wales. However, virtually none of this will be evident in this Parliament. Electrification of the Great Western main line to Swansea will not start until 2015. The north Wales prison will not be completed until 2017 and major onsite work at Wylfa Newydd will not start until 2018. The poor of Wales need answers now, not in 2015. Can the Minister give some examples of what is being put in place now by the UK Government to give some kind of hope that jobs will be available for those desperate to come off welfare support?

My Lords, I congratulate the noble Baroness, Lady Morgan, on securing this debate. It is good to see the spotlight on Wales. The noble Baroness and I go back quite a way. I anticipated that there would be some valid points and some party political ones and there were some of both although they did not often coincide, sadly. I thought, first, I would look at some of the points on welfare, secondly, look at the cost of living issues and then, thirdly, try to put it in the context of Wales in general, particularly looking at some of the devolved elements that apply.

The welfare changes have to be seen against the background of the deficit. The noble Baroness did allude to that. The deficit did not suddenly happen. A gaping deficit confronted the country in 2010 as Gordon Brown left office and the coalition Government under David Cameron took over. I think it was common ground among the parties that this deficit needed to be dealt with. Against that background, it was anticipated, and indeed acknowledged, that welfare reform was a key part of that. There have often been warm words from the Official Opposition about the need to tackle welfare reform, but nothing specific, and when any particular reform is put forward they always shoot it down. We need more than warm words. We need some concrete evidence of what they would do.

In the reform process the most vulnerable need protection. We have sought to do that with pensioners. For example, pensioners are now getting a protected pension with a rise in line with the consumer prices index, or average earnings, of 2.5%. That did not happen under the previous Government and there was, on one occasion at least, a derisory increase which was howled down even by people on the Labour side. We need to recognise that pensioners are being protected, as they are on the spare room subsidy. The noble Baroness referred to that welfare reform.

On some of the cost of living issues, first, what has happened on energy bills did not suddenly happen. The noble Baroness is well aware of that, having worked as a director for an energy company for much of the period in which these increases were happening. I am sure that her abilities and talents were being used to try to keep those increases down. But this is not something that suddenly happened and we are seeking to address that, too.

One thing that the noble Baroness did not refer to was the fact that employment has remained strong. Indeed, it has gone up at a time when it was anticipated, certainly by the right honourable Leader of the Opposition, that unemployment would go up. That has not happened. It has gone down in Wales in the past year by 22,000. Some policies have been pursued effectively in Wales by the Welsh Government; for example, on enterprise zones, a policy of the coalition Government, but with a Welsh spin. I declare an interest as a chair of the Haven Waterway enterprise zone in Pembrokeshire. We have seen local unemployment fall in Pembrokeshire and Carmarthenshire over the past several months, which is all to the good. Again, there is agreement among the parties, and this is certainly the case in Wales, that there had to be a move from public sector growth to private sector growth. That has long been anticipated.

Perhaps I may say something in a wider context about the devolved settlement after 14 and a half years of devolution. I strongly support devolution, of course, but that does not mean that I support all the policies that have been pursued in Wales. We have seen Welsh GDP fall back not just against English GDP, although that has been the case over the past 14 years, but as against many parts of eastern Europe. We are now behind them, too. Sadly, that is something to be placed at the foot of the devolved Government. The noble Baroness also referred to increases in council tax, but one reason for those is that the freeze which has happened in England has not happened in Wales. That is because the Welsh Government choose not to use the Barnett money to reduce council tax in Wales. That is their privilege but it has been the main reason that council tax has gone up by so much in Wales. That needs to be recognised.

Lastly, perhaps I may ask the noble Baroness to use her undoubted talents to persuade the Labour Party to embrace the Silk commission on Part 1. Again, I declare an interest as a commissioner on the Silk commission. The power of taxation and the power to borrow money, which largely do not exist in Wales at the moment, would be all to the good. Such powers would strengthen Wales’s hand and the Welsh economy. I hope that we can develop consensus among the four parties so that we are able to bring such powers forward and enhance Wales’s position in terms of economic performance.

My Lords, I congratulate the Baroness, Lady Morgan, on obtaining this debate. I cannot congratulate her on her speech, however, which rather overstates the case. One would have thought, listening to it, that history began in 2010—the year when the Chief Secretary to the Treasury left a note saying that there was no money left. The noble Baroness took some populist swipes and pressed the right buttons about bankers and about a Cabinet full of millionaires who had had private education. I did not know that she was personally opposed to private education. She also talked about the poll tax—she was really going back in history there—being the equivalent of the bedroom tax. That is not, I suggest, the right way to approach the very serious problems that the people of Wales are facing.

A more objective view can be found in the Chief Medical Officer of Wales’s report for 2012-13. It said that there were three major economic issues facing Wales. First, there was long-term structural poverty and deprivation—not structural poverty and deprivation starting in 2010, I point out. Secondly, there was the economic downturn, which happened in 2008, I think, long before the coalition Government came into power. Thirdly, there was the impact of benefit reform, to which I shall refer in a moment.

On escaping poverty and deprivation, we have all been doing that in Wales for centuries. Most of us have benefited from the very good state education that we had in Wales. It is sad to see the state of education today in the hands of the Labour Government in Cardiff. Tomorrow, we will hear from the Programme for International Student Assessment, or PISA, whose report in 2009 about Welsh education was a disaster. It will probably be worse tomorrow and I would like to have had this debate tomorrow evening, when we have heard what it has to say. I have to declare an interest. I have 10 grandchildren who are either going through or about to go through the Welsh system and I have a great deal of interest in the way in which Welsh education performs. It is failed by the current Welsh Labour Government in Cardiff.

On health, equally, the Welsh Labour Government have failed in comparison with what is happening elsewhere in the United Kingdom. According to the Chief Medical Officer, £386 million per year is spent by NHS Wales on smoking. What are the Government in Cardiff doing about that? There is obesity and excessive alcohol, with £140 million going on that and £600 million on physical inactivity. These are problems that have been in the hands of the Welsh Labour Government—occasionally with other partners, I concede, but mainly in their hands—for a period of time and are costing a great deal of money.

As for the impact of benefit reforms, it is true that welfare benefits, according to the Chief Medical Officer, will be cut by 4.1% as opposed to 3.8% across the rest of the United Kingdom. However, she said it was possible that the welfare policies that have been adopted,

“might have positive impacts on health if they lead to more people moving into work”.

She also said:

“Negative impacts on health might … be offset … by the positive effects on health associated with employment”.

The purpose of that legislation—one of the drivers of welfare reform—is to make it profitable for people to go into work and escape welfare dependency, as much in Wales as anywhere else.

What I am concerned about in Cardiff at the moment is that we have given the Government the power to legislate and now they are producing framework Bills, such as a Social Services (Wales) Bill and an Education (Wales) Bill, with the policies not being spelt out. The policy is to come in regulations, which will be subject to a negative vote at a later date. That is not the way to go about legislation. Those policies should be fully discussed and open to amendment in Cardiff itself. I could go on at length. However, when it comes to accountability, how is it that the First Minister of Wales puts off a referendum for introducing tax powers which would make that Government accountable to the people of Wales, who in my view are being seriously let down?

My Lords, I join other noble Lords in thanking my noble friend for securing this debate, and for the way in which she introduced it. All noble Lords in the Chamber would surely agree that this is not a situation where we need to indulge in party politics. The situation in Wales is extremely serious.

I must declare my interest. I am a consultant to the Welsh Government in developing a cultural heritage strategy for Wales which will, I hope, address the problems of poverty and disadvantage to greater effect in Wales. My greater interest is that I grew up in Wales at a time when it was celebrated as being among the most successful and spirited communities in the country. The same places are now notorious for levels of disadvantage. The toxic concentration of long-term unemployment, underemployment, low skills, low wages, chronic sickness and low educational achievement has not only reduced living standards but reflects living standards in Wales. The Government of Wales are absolutely right to say that poverty in Wales is everybody’s business, which is why every government department in Wales has to make a contribution—and that includes culture.

There is no question that the structural problems of Wales started with the deficit. My noble friend made no allusion to that at all. The structural problems of Wales, not least, were grossly intensified by Thatcherism, which created a long shadow across Wales to this day. Now we have a third generation who do not know what it means to go to work; we have an entrenched low-skills and low-pay culture and there is no room at all, anywhere, for complacency in Wales. These people have to contend with recession and welfare changes, which, as my noble friend said, are hitting Wales harder than many other parts of the country.

We are told that the recession is over. I was in Tredegar a month ago; I was in Townhill in Swansea some weeks ago; I was in Anglesey recently and I have been in Rhyl. The recession is not over in Wales and there is no sign of an end to it. Indeed, Wales has become a social laboratory, rather as London was at the end of the 19th century, where surveys and investigators come to look at the impact of poverty. The figures are horribly familiar: 26.5% are economically inactive, higher than the rest of Britain by 3.5 percentage points. Disability rights, as my noble friend has said, have hit disabled people in Wales hardest of all. With the transition from IB to ESA, the loss by 2014-15 will be £165 per year per working family. The impact on children has been very well described; it is inevitable and it is increasing. Only parts of London are worse.

For those in work, the figure that astounds me is not so much that 23% of employees are earning less than a living wage, but that only 3% are earning more than a living wage. We have already discussed how Wales, with the highest energy bills, has seen the sharpest increase in the number of people falling behind with their energy bills: 85,000 households. Then there is the bedroom tax. I cannot be the only person in your Lordships’ House for whom there is an echo of the means tests of the 1930s, when the inspectors looked at the quality of furniture in people’s homes to assess when they were actually eligible for unemployment benefit. That was when the piano went out, for example.

Community Housing Cymru has said that 78 per cent of its members have seen an increase in rent arrears. It expects bedroom tax arrears to double to more than £2 million by April next year. That is enough to service £40 million worth of debt, which could be used to deliver 400 new affordable homes. Does the Minister agree with me that that money could be much better spent?

There are certainly many brilliant housing associations in Wales, including RCT homes, which I visited last week. They are not only providing affordable housing: they are training adults and young people in very difficult circumstances to acquire very basic skills, because about 40% of adults living in Community First areas, for example, are without basic skills. Their record of getting people into work is three times the predicted employment outcome. Will the Minister promise to visit RCT homes and see how money is being well spent on those sorts of challenging situations? Community First is obviously part of the most challenging problem we have in Wales in terms of the areas it covers.

Part of the task is to enable young people and adults to acquire confidence and skills. Digital exclusion means not just not finding jobs; it means not being able to access legitimate benefits. Libraries are being reinvented across Wales as places where people acquire these basic skills alongside, sometimes, basic services. Will the Minister tell the House how many libraries in Wales are threatened with closure because local authority budgets are reduced? Will she say what she thinks the Government should do about this?

Above all, Wales urgently needs an economic policy that lifts living standards by anticipating the future. It needs ambitious leadership; a new approach to use public sector procurement for creative social enterprises; a national investment strategy to identify the creative industries of the future and the skills they need; a community regeneration strategy; and a national strategy for voluntary skills development and apprenticeships. These are the strategies than can lift Wales out of poverty for the next generation.

My Lords, I congratulate the noble Baroness, Lady Morgan of Ely, on securing this important debate. It is great to have a spotlight on Wales. I know that time is very short so I will confine my remarks to the findings of an extremely revealing snapshot report published by Shelter Cymru in November this year. It looked at “the bedroom tax”—I do not want to cause offence to the Minister by not referring to it as “the spare room subsidy”—and, based on Shelter’s direct experience, working with people in housing need in Wales, it reported a real increase in the number of people threatened with homelessness as a result of the spare room subsidy, or bedroom tax. It said that landlords were pursuing possession proceedings, sometimes when the bedroom tax was the sole source of arrears, and that some vulnerable people, very worryingly, were facing real injustices because of the failure of their local authorities to provide the level of service suitable to their needs.

All this paints a worrying picture but I ask the Minister to respond to two specific important points. First, what can the UK Government do, in partnership with the Welsh Assembly Government, to encourage social services to work together with housing agencies to ensure that vulnerable people are not unfairly subject to possession proceedings? Shelter Cymru has seen a number of cases where the bedroom tax has caused serious difficulties for people who should have been protected due to their vulnerability. In one case, a woman in a three-bedroom house was facing possession action for rent arrears but was unable to move. She was in the process of having her two children returned to her from care. If she downsized, she would not have been able to have her children back. However, because the children were not resident, her discretionary housing payment application was turned down. Only after Shelter Cymru’s intervention did social services agree to clear the arrears and consider paying the shortfall until the children could be returned to their mother. What does the Minister feel that she can do to help bring those agencies together in the interests of vulnerable people?

Secondly, I ask the Minister for her response to the handling of the discretionary housing payments, specifically for disabled tenants. We all know that this was a key measure in the Government’s approach to the introduction of the spare room subsidy—or bedroom tax. The provision of funding for discretionary housing payments was, as I understand it, intended to soften the impact, albeit in the short term. However, while discretionary housing payments have indeed offered a temporary lifeline for some households in Wales, some landlords are not routinely letting tenants know about DHPs and there is great concern about the future increase in homelessness that this will lead to down the track when people’s awards run out.

In particular, there is serious concern that many housing benefit departments are counting disability-related benefits as income for the purposes of DHP, making it considerably less likely that disabled people can successfully apply. We know that it is within local authorities’ discretion to disregard income from disability-related benefits when making their assessments for DHP, since these benefits are intended to be used for the extra costs of disability. Surely it must be good practice for these disability-related benefits to be completely disregarded in calculating eligibility for these important transitional payments. If not, it means that disabled people need to work extra hard to justify their case in applying for DHP. As we know, there is nothing in the letter of the law to prevent local authorities from doing this, but I would argue that this really is extremely poor practice. It means that while disabled tenants are more likely to be affected by the bedroom tax, they are less likely to be able to access this assistance. They have fewer options to self-mitigate the impact of these reforms as they will often have to wait longer in order to achieve a downsize option.

Shelter Cymru and a coalition of disability charities in Wales are compiling a detailed report on this matter. Is the Minister prepared to meet them to look at what can be done to mitigate such a difficult situation for disabled people in Wales?

My Lords, I ask the Minister: what responsibility do the Government consider they have to assist the industrial areas of Wales? Wales is experiencing economic change on an unprecedented scale and at an unprecedented pace. Digital technology, globalisation and the rise of new industrial economies have unleashed tsunamis of disruption on the regions that pioneered the first Industrial Revolution, notably south and south-east Wales. The mature industries of Wales are being battered by competition from businesses in newly industrialised economies that enjoy state-of-the-art technology, which Welsh industries certainly ought also to have, and pay very low wages, which could not and should not be paid in Wales.

Where manufacturing continues and prospers—and there are still magnificent manufacturing businesses in Wales, and we are very proud of them—the workforce is being hollowed out by automation and off-shoring. That hollowing out is occurring among the white collar workforce as well as the blue collar workforce. We are seeing the development of the gap between the 1% and the 99%, with fabulous increases in wealth and income for a tiny minority at the top and really significant real-terms falls in income for a great many people lower down the scale. Therefore, the challenge for the Government is to develop policies to overcome the traumatic distributive consequences of contemporary economic growth.

The Government have a duty to help businesses and individuals cope with this whirlwind of economic change, but the coalition’s response to that challenge is to do the very opposite. Instead of an industrial strategy redeploying some of the wealth arising from property values, financial services and exportable services, the Chancellor has engineered an asset bubble, which he calls a recovery. The Governor of the Bank of England clearly has doubts about the validity of this recovery but, from the Chancellor’s point of view, these are policies not in the interests of Wales but to help his party get through the election.

The ethic of the Government is: “To them that have, more shall be given”. Instead of an intelligent welfare state that stays alongside people who are the casualties of economic change, helping them to reconstruct their lives, the Chancellor abuses them as shirkers and people who cannot be bothered to open the curtains in the morning. He cuts their benefits and at the same time he cuts the taxes of the 1%. Instead of a strategy to raise our educational levels and skills to those of our competitors, the Government wage an ideological war against local educational authorities and raise fees for university education to insupportable levels.

For Wales, devolution is a device to absolve the Government of responsibility. They tauntingly propose to people in Wales, whose incomes are on average significantly lower than the incomes of people in England, that they should vote in a referendum so that the Government of Wales should have income tax-raising powers; thus they would be able to borrow to pay for infrastructure and all will be well. Ministers must know that that strategy is disingenuous. The sums cannot possibly add up. Devolution should not be a device to get the Government off the hook. These infrastructure developments would benefit the whole of the United Kingdom and the cost ought to be borne fairly across the United Kingdom.

The cost of living crisis is a crisis of structural change, of growth that benefits only the rich, top managers and shareholders. The creative destruction of capitalism is not going to lead to a free market nirvana in the regions that experience very much more destruction than creation. What responsibility does the Minister consider the coalition has to support people in the crisis of industrial Wales?

My Lords, I, too, appreciate the opportunity to speak in this debate, and thank the noble Baroness, Lady Morgan, for providing it.

We have heard many statistics, and I shall not add to them, only to say that of the four countries of the UK, Wales is the poorest. We have 73% of the average wage of the rest of the United Kingdom; for instance, when the average income in London was £27,000, in Wales it was £17,000. This has been the case over the centuries; it is not something new. I particularly enjoyed the book written by the noble Lord, Lord Rowlands, Something Must Be Done, about the valleys of south Wales during the depression before the Second World War. We were struggling in poverty in those terrible years. It is a historical insight into the poverty of south Wales that goes on from generation to generation.

There has been a chance to turn this round. We have objective 1 funding for the valleys and west Wales, which brought some hope. I am not sure it was always spent in the best way, but at least it was some European income for Wales. Anybody who says that we should withdraw from Europe and that Wales would be better off is doing Wales a tremendous disservice. We have heard before that the money we pay into Europe could be directed to the poorest. It did not happen in the past and it would not happen now. I am sure the noble Baroness will agree that the link with Europe is absolutely essential.

Not only do we need to keep the link with Europe, we need to keep the link with our partners across the border in England. Wales has 166 miles of border with England; Scotland has 96. Our border is a very busy one, and the links between north Wales and Merseyside prove that. There was a time when Lerpwl—Liverpool—was regarded as the capital of north Wales. There were so many Welsh people in Liverpool that the streets were named after them. The biggest chapels with the largest congregations were not those in Wales but the ones in Liverpool. You go to Liverpool and what are the names of the stores? TJ Hughes, Owen Owen and Lewis’s were founded by Welsh families. That link has been there for many, many years.

In Wales, we depend on hospitals such as Broadgreen, the David Lewis Northern Hospital, the Royal Liverpool University Hospital and Clatterbridge. When there was talk of removing the link between Wales and the Walton Neurological Centre, there was an outcry in north Wales because that is where we were, over the years, sending patients in need of that sort of treatment.

We have depended on Liverpool and the north-west, but so have they depended on us. Where would the workforce of the Wirral be without Airbus, which is over the border in Wales? There would be 7,000 jobs lost there if we decided to dig Offa’s Dyke again. Where would my town of Llandudno be without the hundreds of thousands of visitors who pour in from the rest of the UK? We need one another; it is a mirage to say that we do not. My noble friend Lady Humphreys was a teacher in Liverpool, as were many thousands of other Welsh women and men. We sent our teachers there; we belong to one another.

Not only must we keep links with Europe and with our friends across the border but we must take care of our communities, which are now deprived of essential facilities. Try to find a post office in some of our villages: you cannot buy a postage stamp there, or a loaf. The school has closed; the teacher lives miles away; the ministers and doctors are no longer in our villages. Try getting petrol between Betws-y-Coed and Tremadoc. Unless you have to go through Penrhyndeudraeth you are lost. We have got to keep these communities alive because the 73% of people on low incomes have to spend such a large proportion of their income or pension going to places that are now farther away. The links, and the need to keep our communities, are essential.

My Lords, I commend the initiative of my noble friend, in part because she focuses on the issues of real concern to the people of Wales and not to the elites. I cannot plausibly claim that there was some recent golden age in which we were close to the top of the UK premier division of prosperity and jobs. However, I do claim that our position is poor and deteriorating relatively as a result of government policies. We no longer have the high-wage jobs we had in the past. We now seem increasingly to specialise in low-wage, tedious jobs in areas such as call centres. Jobs in the high-paying financial sector elude us. Regional job creation and decentralisation of government entities, such as the Royal Mint and the DVLA in Morriston, seem to have stalled.

The Silk report has some alarming statistics on earnings differentials. Of the 1.4 million taxpayers in Wales, only 4,000 paid tax at the additional rate of 50p. Our economic and social profile shows a great dependence on the public sector—thus Wales is hit hard by the squeeze on public sector jobs. There is greater poverty, greater dependence on welfare and, therefore, more vulnerability to the Government’s welfare changes. The Rowntree Foundation report, published in September, concluded that 26.5% of the working-age population of Wales was economically inactive in 2012. This was higher than in Scotland or any English region.

I recently spoke to a young graduate with a good honours degree and a master’s degree. The only job he could find had no prospects and a wage of £12,000 a year. I invite the Minister to look in the windows where jobs are advertised and see the type of jobs on offer. I wonder how that young man reacted if he heard Boris Johnson exulting in greed and inequality, or if he saw last Friday’s Evening Standard headline: “London has 2,700 bankers earning more than £1 million”. This compares with 212 in Germany, 117 in France and 109 in Italy. I wholly agree with my noble friend that it is hard for a Cabinet with so many millionaires to understand the plight of the poor in Wales. Our Government are just out of touch.

The bedroom tax has already been touched on, so I will not mention it, save to say that the prospect of downsizing to single-bedroom houses is just not available for the great majority of people who are now on housing benefit.

South Wales is the region in Britain with the highest combined gas and electricity bills, while north Wales has the third-highest. The number of energy accounts where the customer has fallen into arrears has increased more in Wales than elsewhere in Britain. In 2012, Wales had the highest proportion of workers who earned less than the living wage than elsewhere in Britain. Clearly, government action—or rather inaction—affects us the most. I could continue with these depressing statistics, so one is inclined to consider some dramatic moves, such as, for example, the abolition of the Severn Bridge tolls, which work as a heavy tax on the Principality.

In conclusion, I recall a classic cartoon that showed people standing on the steps of a ladder that descends into water. One person stands on the lowest rung, with the water up to their neck. Let us call him or her “Wales”. Someone then arrives and boldly proclaims, “I feel your pain; we are all in this together”, and orders everyone, save those on the top rungs, to take one step down in the interests of austerity. Let us call that person “the Government”.

My Lords, I know that the noble Lord, Lord Wigley, would like to speak in this debate. However, that ability is contingent on time available. If he speaks past 8.25 pm he will eat into the Minister’s time, but perhaps he will be very quick.

My Lords, I am very grateful. I will take one minute flat and truncate my comments. I thank the noble Baroness, Lady Morgan, for facilitating this debate.

I will make three points. First, earlier, we heard about the Government’s plans to cut energy bills. However, it appears that they will do little to help off-grid consumers, of whom there are many in rural Wales. My party, Plaid Cymru, wants to see the establishment of a not-for-distributable-profits company, Energy Wales, which could buy gas and electricity on the wholesale market, pass on savings to consumers and invest in services. Dwr Cymru provides a viable model for that.

Secondly, I draw attention to the 51% increase in excess winter deaths in Wales compared with the UK-wide figure of 29%. Last year’s figures showed Wales increasing from 1,260 to 1,900. Hardship can lead not only to misery but to death. People in rural communities in particular are suffering. That is why I want to see winter fuel payments made earlier in the year to off-grid pensioners so that they can buy gas at a lower price.

Thirdly, I will not trespass into Barnett, but I will point out that if the total public spending per capita in Wales was at the same level as that of Scotland in 2012-13, Wales would have received a staggering additional £1.6 billion—more than £500 per person. I hope that Labour will commit, during the 2015 election campaign, to putting that right.

My Lords, I thank the noble Baroness, Lady Morgan of Ely, for securing today’s debate on what I believe noble Lords all agree are important issues in Wales. I have listened carefully to noble Lords this evening and I recognise their concerns. As a Government, we understand that it is and remains a difficult time for low earners in particular, and for those on benefits.

The UK economy is recovering from the most damaging economic and financial crisis in generations. The Government appreciate that times are tough for families, so we have continued to take action to help with living standards. Last year, real household disposable income grew by 1.4%, which is the fastest growth for three years.

One of the key actions that we have taken to help hard-working people is to reduce the income tax burden by raising the threshold to £10,000. Many noble Lords have referred to low pay. This Government’s policies will take the 130,000 lowest-paid workers in Wales out of income tax altogether and will benefit 1.1 million taxpayers in Wales. That will make a real difference to low-income households. That increase in the personal allowance will be worth £705 per year for the typical taxpayer.

Noble Lords, including the noble Lord, Lord Wigley, have referred to energy prices and highlighted the importance of energy costs. We are in the process of restoring the neglected infrastructure that the coalition Government inherited from their Labour predecessor. Between 1997 and 2010, the average domestic gas bill doubled and the price of liquid fuels, on which many rural households in Wales rely, increased by more than 300%.

I must remind noble Lords that in 2000, there were 14 major energy suppliers. By 2010 there were just six. That took the bottom out of the market in terms of competition and its impact. However, we are reforming the energy market and encouraging investment in our energy infrastructure, which will help to stabilise consumer prices and reduce our exposure to fossil fuel price hikes in the longer term. We are committed to ensuring that all customers are on the lowest available tariff and we are making it easier to switch suppliers.

Many noble Lords referred to welfare reform. The picture of poverty that the noble Baroness, Lady Morgan, painted is one that has existed for far too long and has got steadily worse since the turn of the century. The picture of child poverty is one that is only too familiar to me. The situation has got steadily worse. The picture on GVA, which several noble Lords referred to, is also one where Wales, versus the rest of the UK, has steadily declined since the turn of the century. These are not issues that started with the coalition Government. I am grateful to those noble Lords who pointed out that the history of poverty in Wales did not start in May 2010.

I have also listened to concerns from noble Lords about government policy to reform the dependency on welfare in the UK. I must say I am greatly concerned that there are, for example, 200,000 people in Wales who could work but who have never worked. I am grateful to the noble Baroness, Lady Andrews, for pointing out that this is a third-generation problem in Wales, not something that started recently. Worklessness is a persistent problem in Wales and successive Governments have failed to reform the system. However, this Government are working tirelessly to improve the incentive to work, as work remains the best route out of poverty.

Already we are seeing people moving into work in order to accommodate the changes to their benefits. This is a positive step for Wales, its communities and the individuals who were previously locked into the benefit system. There is no fairness in retaining a welfare system that traps people in a life on benefits; it is not good for them, or their families, and it is certainly not good for Wales.

The noble Baroness, Lady Morgan of Drefelin, referred to the Shelter report. I point out that it is the responsibility of local authorities to ensure that all those people who are eligible, get discretionary housing payments. It is important that local authorities in Wales are pursuing that in the way that they should. I was concerned, however, to hear the noble Baroness say that social landlords—discretionary housing payments relate to social landlords—are not letting tenants know about discretionary housing payments in some cases. I will take that issue up with the Minister in the Welsh Government to ensure that that is undertaken. I will also write to the relevant body, Community Housing Cymru, about the issue.

In relation to comments of the noble Baroness, Lady Andrews, I am very happy to visit RCT Homes. The noble Baroness also asked me about libraries and local government. Those are entirely a devolved issue. Those issues are entirely the result of decisions by the Welsh Government, and it would be improper of me to make detailed comments on their policy and their decision.

I turn now to the spare room subsidy. We accept that some people will need extra help and the Government are continuing to support local authorities in Wales, in particular with the housing benefit reforms via discretionary housing payments. In Wales we have trebled the funding available and are now providing more than £7 million, with extra money for some rural communities. The noble Lord, Lord Bourne, made reference to council tax increases. Once again, those are, as he pointed out, the decision of the Labour Government in Wales. As a responsible Government, the coalition Government feel that we must be serious about welfare reform. We inherited a welfare system built to deal with a 1940s society and no longer able to deliver the support that people need in a modern, flexible labour market.

The noble Baroness, Lady Morgan of Ely, made the point that Wales has been hit hard by welfare reform. Of course it has; it is one of the areas of Britain most heavily dependent on welfare. I point out to the noble Baroness that two-thirds of the additional jobs created in the past year in Wales have been full-time, and that 80% of those working part-time have said that they do not want a full-time job.

The noble Baroness asked me to make a comment about women. There are 20,000 more women in work now in Wales than there were in May 2010.

The noble Lord, Lord Thomas, referred to the Chief Medical Officer’s report and to the importance of good public services, and our dependence on them. That is something that the Joseph Rowntree Foundation highlighted as one of the main actions to alleviate poverty in Wales. It said that there was a dependence on, and a need for, good public services. Too often, unfortunately, in Wales, those services lag behind the rest of the UK. The Joseph Rowntree Foundation also pointed out the importance of job creation. I am proud to say that that is what the coalition Government are doing in Wales, more than ever before. Overall, 71,000 more people are in employment in Wales since May 2010, economic inactivity has fallen by 49,000, and the number of unemployed people has fallen by 15,000.

The noble Lord, Lord Anderson, pointed out how few people in Wales pay the higher rate of income tax. That is a problem, and it is one that we can overcome only by a very determined effort, with the formation of new businesses. The noble Lord, Lord Howarth, asked what we were doing in a time of rapid change to accommodate that change. Our response, as a Government, is a massive investment in infrastructure. I say to the noble Baroness, Lady Morgan of Ely, that it is a great pity that the previous Labour Government did not undertake that investment in infrastructure in the 13 years for which they were in power, because it takes a very long time to build infrastructure. Therefore, it is very difficult for us to make up for that lost time.

I do not share the politics of envy that was expressed here on one or two occasions. Wales must aspire to have wealthier people and successful businesses. I am proud of Wales and I want to talk Wales up. I am sad that over so many generations Wales has suffered from poverty and has gradually fallen back in respect of the rest of the UK. I am confident that Wales can deliver, that Wales can prosper and that Wales will continue to cultivate an economy that sustains good jobs, develops infrastructure and improves standards of living for everyone.