From crisis to catastrophe: Why the cost of living crisis will soon overshadow the pandemic

'The biggest sticking point for Wales is that we do not control all the economic levers'

A photo of coins on top of an article explaining that Energy companies are raising prices

The cost of living crisis is set to become a “catastrophe” in April, according to a leading think tank, overtaking the pandemic as the biggest crisis we’ll face this year. Luke Fletcher, Member of Senedd for South Wales West, and Plaid Cymru’s spokesperson on the economy writes about the response we should be demanding from government.

“Spiralling energy prices will turn the UK’s cost-of-living crisis into a catastrophe” – these words came from the Resolution Foundation – the think tank behind the real Living Wage calculations – earlier this week.

April is when “crunch” will turn to “catastrophe” – why? Because this is when the cap on energy prices will be lifted.

If you’re not yet clear why this would trigger a catastrophe for many households, it’s because typical energy bills are predicted to rise by £700. According to the Resolution Foundation, this means the poorest third of households will be allocating at least 10 per cent of family budgets on energy bills alone.

These rises are on top of increases seen in this last month. Add to this rising costs of living, increasing levels of debt during the pandemic and stagnating wages, and you have what many are calling “the perfect storm”. As with many different catastrophes, it will be the poorest in our society that are hit the hardest.

With three months to go before April, it’s not unreasonable to expect some urgency from government: Not least in looking at what direct financial support might be available for the hardest hit, but also in mitigating some of the knock of effects that increasing debt will surely cause. The link between debt and mental ill-health is well established, and with much written about the negative effects of the pandemic on many people’s mental health, mitigating the fallout from this impending “catastrophe” should be high on the agenda.

Here in Wales, we’re already on the front foot in many respects, with a nation-building Co-operation Agreement between Plaid Cymru and the Welsh Government. This includes the promise of a free school lunch for every primary school child. With one third of Wales’ children living in poverty, and hunger putting too many children on the back foot before they’ve even set foot in a school, this is an important policy that will mitigate some of the cruellest effects of poverty. Hungry children cannot learn, and giving every primary school pupil a nutritious, free school meal will give all our children an equal opportunity to thrive at this most critical time in their development.

The Co-operation Agreement will also oversee the reform of council tax. This is one of the most regressive forms of taxation, which disproportionately impacts poorer areas of Wales, and our long overdue reform will ensure it is much fairer.

No matter how fast moving we can be on these policies, they may not come soon enough for many families in Wales. Citizens Advice Bureau say that council tax is one of the bills that people struggle with most. At this point last year, an estimated 3.5 million people were behind with their council tax in the UK. When budgets are due to be stretched to cover increasing energy bills, arrears on council tax will not get resolved any quicker.

It’s for this reason Plaid Cymru put forward a motion last month to begin talks with local authorities on debt bonfires for those with council tax arrears. It is not right that public bodies should be driving people into more debt. That’s why Plaid Cymru has also called on Welsh Government to look at introducing a duty onto public bodies to prevent debt.

For Wales, many of the economic levers are held by the Tory Westminster Government. In England, it’s all of them. So with the greatest responsibility on the shoulders of Boris Johnson and his government, what moves have we seen from them?

Sadly, at the start of October 2021, he did not heed the calls of my colleague Liz Saville Roberts MP, who implored him to find his social conscience and stop the £20 a week cut to Universal Credit.

Without that £20 uplift, benefits for the unemployed were at their lowest real-terms level since the early 1990s. Had Universal Credit grown in line with GDP per capita since 1990, it would actually be £40 a week higher. While the £20 extra was intended only as a temporary uplift during the pandemic, the truth is that actually, it didn’t go far enough. Not only was the cut the biggest overnight reduction of benefits in the history of the welfare state, it could prove to be a step too far for many.

Boris Johnson’s government says that work is the answer to poverty, but as my colleague Hywel Williams MP pointed out this week in the Opposition Debate in the House of Commons, 40 per cent of Welsh households claiming universal credit are already in work, and many are key workers.

For these households – many of them very hard working – evidence given to the Welsh Parliament’s Equality and Social Justice Committee showed that a quarter already had to cut back on clothing, heating and food at the start of 2021. The situation is expected to be worse now in 2022.

In the nine months since being elected, I have heard enough reviews to last a lifetime. People need help now. The purpose of the Welsh Parliament, and the purpose of the Members of that Senedd has to be to protect the people of Wales from the worst cruelties of the current Westminster Government.

The biggest sticking point for Wales is that we do not control all the economic levers, and I believe that a truly socialist Government would have no choice but to pursue the devolution of welfare as a matter of urgency to tackle poverty in Wales.

I know that through the Co-operation Agreement there is much we can do to start to transform our nation. And on all other matters, I will continue to push the Welsh Government in the fight against everything that this cost of living catastrophe will wreak on us.

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