Cost of Living Crisis: Wales — Caroline Nokes in the Chair

Part of the debate – in Westminster Hall at 2:48 pm on 19th July 2022.

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It is a pleasure to serve under your chairmanship, Ms Nokes. I congratulate Ruth Jones on securing this important debate. It is also a pleasure to follow Dame Nia Griffith, who made several important points regarding the situation we find ourselves in, most notably that it is the product of several failings over many years. I thank her for referencing some of the issues that rural communities face with the fuel and energy crises. That is something that I will focus on in my speech.

We have had a few opportunities in recent months to debate the impact of the rising cost of living on households and our communities. I am very grateful to the hon. Member for Newport West for securing this debate, because it allows us to focus on the impact it is having in Wales. As has already been mentioned, the April increase of 54% to the price cap has already caused a lot of concern and misery for households across Wales. I note that, as we debate today, there is speculation that the cap might rise again, in a few months’ time, to more than £3,000, with further increases expected when it is reviewed in January next year. That coincides, of course, with inflation soaring to a 30-year high and the UK facing the biggest fall in living standards since records began.

It is sobering to reflect on the fact that, following the April price cap review, the Welsh Government found that some 45% of households in Wales would fall into real fuel poverty. I shudder to think what the situation will be this autumn, when there will be increases in both the price cap and the demand for fuel to heat the winter months.

It is worth repeating a few of the statistics, just to give the background to the severity of the crisis. Domestic gas prices increased by 95% between May 2021 and May 2022, while domestic electricity prices, as we have already heard, rose by some 54%. In nominal terms, last April’s price cap increased the maximum for average bills from £1,277 a year to £1,971. Just last May, the chief executive of Ofgem said that he expected the price cap to rise by a further 40% in the autumn, to around £2,800. Perhaps demonstrating just how volatile and unpredictable the situation is, analysts now suggest that, rather than £2,800, the autumn price cap increase will actually surpass £3,000. If that happens, the price cap will have more than doubled in the last two years. That is why I think it is important that we discuss the sufficiency of the Government’s measures to date.

As the hon. Member for Llanelli mentioned, in so far as the price cap offers any solace to households, it is only for those connected to the mains gas grid. Sadly, some 72% of properties in my constituency of Ceredigion are not connected to the mains gas grid. We have the unenviable accolade of being the UK constituency that is most dependent on domestic heating oil. As has already been mentioned, the prices for off-grid heating oil and gas are not regulated by Ofgem, so they have increased to astronomical levels. Indeed, average heating oil prices increased by 150% in the past year and by some 250% over the past two years.

Without wanting to labour the point, rural households have particular challenges when it comes to heating their homes. Some are structural, and one of the things that I would like the Government to address before this autumn is standing charges. Wales is particularly badly served by typical standing charges. In April 2022, the daily cap rose by 94% in south Wales—the figure in north Wales was 102%—to a daily rate of 46p. Since April, daily rates for my constituents in Ceredigion are on average about 50% higher than those levied in London. It does not matter how much they use. and it does not matter if they save—that is the daily standing rate.

That is a particular challenge when we consider that most of the housing stock in my constituency performs very badly when it comes to energy performance certificates. Indeed, some 36% of homes in Ceredigion reach an EPC rating of C or above. It is perhaps not surprising that we do so badly when we consider that 35% of our homes were constructed in the 19th century. It is staggering that the vast majority of the housing stock that will exist in 2050 has already been built, and over a third of it was built in the Victorian age.

The reason that I draw attention to that is that, when we talk about energy efficiency measures, off-grid homes and old homes are particularly difficult to bring up to standard. The Department for Business, Energy and Industrial Strategy has estimated that 20% of off-gas grid homes are technically unsuitable for low-temperature heat pumps, one of the major policies of this Government.

Furthermore, the heat and buildings strategy assessment has suggested that the average cost to retrofit an off-gas grid home is around £12,000. However, if we include insulation, which we really need to do, that adds a further £2,000. That is the average figure quoted in the heat and buildings strategy, but a lot of analysts suggest that for certain rural off-grid homes, the cost could be a lot higher. Yet the Government are not providing those homes with enough support or important interventions to help make them more energy efficient. Furthermore, typically—not always, but typically—a lot of off-grid homes are in rural areas, which tend to have lower salaries. That is certainly the case in Ceredigion. We are, therefore, hit with many different challenges that we cannot overcome without Government support.

To summarise the challenges faced by my constituents and the severity of the situation, many have contacted me in recent weeks to say how they are taking extraordinary measures to try to keep their energy bills down. I have been told of people turning the boiler off so that they can save a little bit on that, having cold showers, turning their freezers off and saving on electricity by avoiding meals that need to be cooked in the oven. I do not need to point out to hon. Members that that will result in them making more use of microwaves, with the knock-on impact of typically less healthy meals. The most striking example was of a family telling me that they had bought solar-powered garden lights so that they can use them for indoor lighting in the evening, such was their concern about the electricity bill.

It is not just households that are being affected by the cost of living. I know of businesses and community organisations that are struggling, including to keep swimming lessons going in the community swimming pool. One hospitality business has quoted that energy bills have gone up by 450% in the last 18 months. Sadly, it is having to consider difficult decisions about whether it can continue to operate and stay in business.

I want to finish by referring to another problem we are facing in Wales and in rural Wales: the cost of fuel. We know that Wales is the most car-dependent nation of the UK, with some 83% of journeys being taken by private car as opposed to other means of transport. I would very much like it if, in the near future, the public transport infrastructure in Wales and in Ceredigion was such that we did not have to depend on the car. However, at the moment, many of my constituents simply do not have the choice. I want to put this point on record: we are not saying, as is sometimes suggested by colleagues elsewhere in the UK—though not in Wales, I should add—that car journeys are somehow a luxury. That is not the case. These are car journeys to go to work and to access services and healthcare. They are unavoidable journeys, and due to a lack of alternative options they are very vulnerable to the price increases in petrol and diesel.

I draw attention to one of the impacts that that has on public services. While this can be true across Wales, carers and district nurses in rural areas have explained to me that they will typically drive anything between 400 and 600 miles a week just to care for the residents on their rota, yet they are still having to pay astronomical prices at the pumps. I had a conversation with the previous Exchequer Secretary, Helen Whately, about the possibility of extending the rural fuel duty relief scheme to parts of Wales. Areas such as Ceredigion satisfy all the criteria, barring the fact that we fall within a hundred miles of a refinery. As the Competition and Markets Authority review found a few weeks ago, there is no real link between higher fuel prices at the pumps and proximity to the refinery. Actually, the major drivers are to do with competition, the volume of sales and the models of garages locally. We need to look at extending the rural fuel duty relief scheme to areas such as Ceredigion so that, if nothing else, we have a bit of consistency and there is not a situation where there is a 4p or 5p difference between prices in Aberystwyth and those in Cardigan to the south. That is a cause of considerable frustration.

What about some solutions? We have already heard about the Government’s £400 payment to households. Is that still sufficient, given the changes to the onward forecast for the energy price cap? I have some particular questions for the Minister, and I will be grateful if he addresses them in his summing up. We are still unsure whether the £400 energy rebate will apply to those living in park homes or on farms without a domestic electricity contract. I know that the Government are looking at that, but I impress on them the urgent need for clarity.

On short-term measures—I will not go into the long term—I think we need to look again at restoring the £20 uplift to universal credit, removing the two-child limit and increasing social security in line with more recent inflation figures, all of which are recommendations made by the Select Committee on Welsh Affairs in a recent report. I would also like the Government to increase the eligibility of those who can claim carer’s allowance better to reflect the true number of people providing vital care. Also, perhaps most boldly, if as has been reported the energy price cap exceeds £3,000, the Government need to consider whether they ought to intervene more directly to limit price rises, as other Governments in Europe have done. I have to say, in closing, that constituents across Ceredigion simply cannot afford any further dithering or delay.