Skip to main content

Cost of Living in Wales

Volume 709: debated on Tuesday 22 February 2022

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.”

“The cost of food is jumping quite dramatically, my weekly shop was about £40 a week now it’s more like £60 to £80, unfortunately, my wages and benefits haven’t gone up to compensate. … I’m also disabled—I cannot get cold and I use hot water to manage pain!”

“I struggle to feed my children and to keep the house warm, I’m too embarrassed to use a food bank, especially as I work within the community. I have even gone without food so my daughters could eat.”

“I’ve had to cut down to one ‘meal’ a day to be able to heat our home at night. It’s so cold, too cold for my baby in his thickest sleeping bag, so I have no choice.”

“I am a community nurse and my pay rise is totally negligible. I am paying a lot of money for petrol and the increase in this is not reflected in the expenses I receive ... Food is costing me a lot more and my heating oil has gone up ... I try not to use the heating as much. I am a middle income family and I am not entitled to any financial support.”

“We’ve had to cut everything back to just the basics of daily living. We are a family of three. We have five jobs between us. We have no social life or time for relaxing … having to work to make ends meet. It’s not living, it’s surviving.”

These are just a small selection of the responses I received after asking constituents to tell me how life is for them. The overall results of the survey we carried out in Newport East was stark: 95% of those who responded said that they had seen an increase in the cost of living; 76% had cut back or made difficult choices to try and save money; and more than 15% offered that they had used food banks. This feedback chimes with the view of the Bevan Foundation, one of Wales’s leading think tanks, which called the current cost of living crisis the most challenging in living memory. Its most recent research paper describes how more than a third of Welsh households have had to cut back on heating, electricity or water, and more than a quarter have had to cut back on food.

We are seeing a perfect storm, with many factors coming together and hitting people at the same time. Since December, the UK’s rate of inflation has soared to its highest level for nearly 30 years, and it is expected to peak at 7.25% in April, higher than the growth in wages. A British Chamber of Commerce survey found that 58% of businesses are now planning to raise prices. As the prices we all pay at the till go up, household budgets will be further squeezed.

Food prices are already up. The most recent BBC food price index showed that the cost of some individual food items had skyrocketed by nearly 50% during the last year. Earlier this month, the chairman of Tesco warned that the

“worst is still to come,”

with a potential 5% increase in food prices over the coming months.

The cost of many food items has already shot up faster than the rate of inflation. According to research by Jack Monroe, the price of the cheapest loaf of bread is up by 92%, a can of baked beans by 45% and the cheapest bag of pasta by 141%. All this will be felt most keenly by those on the lowest incomes.

The Child Poverty Action Group suggests that the cost of a food shop will soon rise by £26 each month, with a disproportionate impact on families with children in poverty. The Government’s own food security report found that the poorest 20% of households spent a higher proportion of their income on food, and are therefore more impacted by the changes in food prices. These households have already seen their incomes drop since 2017.

Private rents are now £62 per month higher on average than in March 2020, with Wales experiencing some of the highest rent rises after London and Northern Ireland. The costs of mortgage repayments are also up. UK Finance estimates this will add around £26 a month on to a typical tracker customer mortgage repayment.

Rail fares will rise by 3.8% in March, the biggest increase in nine years. For the two thirds of commuters who drive to work, petrol prices have risen to an all-time high this year, with the cost of filling a tank up by an estimated £10. With oil prices likely to rise further, prices at the forecourts will only be ramped up more.

Then there are the soaring household gas and energy prices. Households in Wales and across the UK will see their energy bills rise by nearly £2,000 a year from April, when the energy price cap lifts, an increase of 54%, or an average of £693.

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.

Sitting suspended for Divisions in the House.

On resuming

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.

The Welsh Government have also announced an extra £200 for low-income households, by extending the winter fuel payment this year and next winter, £25 million for local authorities to help struggling households, and an extension of the Wales national discretionary assistance fund. They have also invested in crucial advice services, food banks and community hubs.

My hon. Friend might have been about to come on to this point. Will she also congratulate the Welsh Labour Government on their basic income pilot scheme for care leavers in Wales? That will give care leavers the support they deserve to develop and become independent young adults.

I thank my hon. Friend for that intervention. I am glad she mentioned that scheme because I am running out of time, and it is another thing we are able to highlight. All those steps are in addition to Wales’s more generous council tax reduction scheme, the warm homes programme, free prescriptions, a free school meals programme and more. Their actions ensure that people who need support get support, but many of the solutions fall in non-devolved areas, which is why it is the responsibility of the UK Government to step up.

The Government should look again at the practical solutions Labour is putting forward. A one-off windfall tax on North sea oil and gas profits could pay for the removal of VAT on energy bills for a year, and an increase and expansion of the warm homes discount. That is a support package that could mean up to £600 for those who need it most. The UK Government should also reconsider their increase to NI and cuts to support.

The Minister should look at the sensible five asks on the cost of living that the Welsh Government put forward last month, none of which has been responded to. They include the social energy tariff to support lower-income families, increasing local housing allowance, increasing the support available through the warm home discount and other winter fuel payment schemes, expanding suppliers’ ability to write off household energy debt and removing the regressive social policy costs imposed on household energy bills by moving those costs to general taxation.

In the longer term, we need a fundamental reform of our energy system. We also need the Government to set out a national strategy for food, including how they intend to ensure access to high quality, sustainable, affordable food for all and meet the United Nations goal to end hunger by 2030. The national Food and Drink Federation has been clear that it wants greater collaboration between the industry and Government on finding a solution. The next Labour Government would support business to bolster the sustainability and affordability of good quality food.

As the Welsh Government said last week:

“Paying bills, heating homes and putting food on the table shouldn’t be so hard.”

They have taken the action they can with the levers they have available to them. If the Conservative party will not take action, the Opposition stand ready to.

It is a pleasure to serve under your chairmanship, Ms Fovargue. I apologise for the fact that I was at the vote for a few minutes, as one or two others were. I congratulate the hon. Member for Newport East (Jessica Morden) on securing this debate, and I thank those who have contributed. I am pleased that we are having this debate on a subject that is of great importance to colleagues. I want to make it absolutely clear that I fully accept that there is a cost of living crisis. It is a global crisis with many causes, one of which is the quadrupling of gas prices as a result of factors such as the sudden increase in demand for goods and energy as we come out of the covid crisis, and the inability of some suppliers to match that need. It is a global crisis, and I do not deny for one minute that people are suffering.

It is worth reflecting on the unprecedented support provided to businesses and individuals by the UK Government in Wales during the pandemic: 475,000 Welsh jobs have been protected through the furlough scheme, billions have been provided in Government loans to Welsh firms and an extra £3.8 billion of Barnett-based funding has been provided to the Welsh Government. The hon. Lady suggested that the extra money for the council tax rebate had not been supplied yet. That might be the case, but it will be supplied because it was a Barnettised sum, so I am certain that that money will arrive. That is why the Welsh Government were right to pass that reduction on.

The pandemic has had a significant effect on the global economy, and the Government have intervened to ensure that the UK persists and is strengthened throughout the economic challenges. As a result of actions taken by the Government, more people are on a payroll than before the pandemic began. The UK economy is the fastest growing among the G7 nations, so I hope we can agree that the best way to support people’s living standards is not through handouts but by offering access to good quality jobs, better skills and higher wages.

We are helping people across the UK, including in Wales, to find work and to boost wages and prospects through our plan for jobs. That includes the kickstart scheme, which has seen 122,000 young people begin work across the UK, including 6,000 in Wales. I am pleased to say that the Wales Office has a kickstart worker from Merthyr Tydfil working in our Cardiff office, and I was absolutely delighted to meet her today.

We are increasing the national living wage by 6.6% to £9.50 an hour, which will benefit more than 2 million workers. We want to ensure that people in Wales keep more of what they earn, so we are raising income tax personal allowances and freezing alcohol and fuel duties. Although the price of filling up a tank has gone up, it is still £15 cheaper than it would have been if we had kept the original fuel duty escalator.

We have also, as the hon. Lady knows, reduced the universal credit taper rate from 63% to 55%, and we are increasing universal credit work allowances by £500 a year. Together, that should mean more than a million households—I do not have the exact figure, but it is certainly a significant number of households—keeping an extra £1,000 a year, on average.

We absolutely recognise that this is a worrying time because of significant increases in global energy prices. We understand that people such as the hon. Lady’s constituents are concerned, and we have done what we can to help. We have provided £12 billion of support over this financial year and next to ease the cost of living pressures across the UK. We have targeted help for working families, low income households and the most vulnerable in society, in addition to providing a £9.1 billion package of support to help households with rising energy bills during 2022 and 2023.

The hon. Lady is right about the impact that these prices will have, but we cannot do very much about the fact that global gas prices have quadrupled in the last year alone. This will be an issue for every country across the world. The more dependent a nation is on gas, the more of an impact that will have.

The Minister is quite right, but he missed the comments that I read out from constituents about how hard life will be. He is also quite right that there is a global gas crisis, but we are more exposed to it because of a decade of Tory mismanagement. Gas storage has been cut, so we are reliant on Russia and other countries. We have been slow on insulating homes and we have not been investing in renewables. Does he not accept that?

Funnily enough, I do not accept that. First, gas storage will make no difference whatsoever to the price. It does not matter if we are storing two, 20 or 200 days’ worth of gas, because if the unit price of gas has gone up at some point, we will have to pay that higher price.

I will in a moment. Let me finish my speech—as Opposition Members know, I like to take interventions and then I completely lose my place.

I do not accept that storage was an issue. We made a decision, as a nation, that we were not going to frack for cheap gas, but we are not dependent on Russian gas. Only about 2% of the gas we use comes from Russia, and we could easily do without it. We import mainly from Norway and take liquefied natural gas, as well as using our own. We are not dependent on Russian gas, but other countries in the EU are, and that will have an impact on supplies overall.

As far as renewables are concerned, we have an amazing story to tell. We have vastly increased the amount of renewables we use, mainly from wind. We are now developing offshore wind power, and even looking at floating offshore wind. The hon. Member for Newport East will realise that the transition towards carbon neutrality comes at a cost. We should not hide the fact that low-carbon energy sources, such as wind and solar, generally cost more than carbon-based energy sources, such as gas and coal. I wonder how many minutes I have left.

In France, where the industry around energy is nationalised, there have been nowhere near the price hikes that there have in this country, where we have allowed the Government to allow the companies to get away with blue murder.

I fear the hon. Lady may not be right about that. About 70% of the electricity in France comes from nuclear power plants, which are already built. That is one reason why they have managed to control their costs. I hope we will be building nuclear power stations across the UK, and I would very much like to see one built at Wylfa in Wales; there is pretty much cross-party support for that.

I welcome the fact that we are going further and looking into developing modular reactors. I know the hon. Member for Newport East is chair of the all-party parliamentary group for the western gateway, and I may see her later on when I talk to that group about the spherical tokamak for energy production, which could lead to nuclear fusion by 2040.

Does the Minister accept that a failure to regulate our energy market has led to dozens of energy companies going bust and consumers footing the bill for that? Consumers have had to move their bills to new energy companies, and they do not know what those will be like in the future.

A fairer analysis would be that a lot of energy companies had not expected prices to quadruple and had given people fixed prices. In conclusion, this has been an excellent debate and I wish we had more time for it.

Motion lapsed (Standing Order No.10(6)).