Cabinet Sub-Committee on Cost of Living meeting: 17 October 2022

• Rt. Hon. Mark Drakeford MS (Chair)
• Julie James MS
• Lesley Griffiths MS
• Jane Hutt MS
• Mick Antoniw MS
• Vaughan Gething MS
• Julie Morgan MS

External attendees

• Torsten Bell, Chief Executive, Resolution Foundation

Officials

• Andrew Goodall, Permanent Secretary
• Des Clifford, Director Office of the First Minister
• Jane Runeckles, Special Adviser
• Alex Bevan, Special Adviser
• Kate Edmonds, Special Adviser
• Jo-Anne Daniels, Director General Education, Social Justice and Welsh Language
• Reg Kilpatrick, Director General, COVID-19 recovery and Local Government
• Jo Salway, Director Social Partnership and Fair Work
• Claire Bennett, Director Communities and Tackling Poverty
• Toby Mason, Head of Strategic Communications
• Catrin Sully, Cabinet Office
• Liz Lalley, Director, Recovery & Re-start division
• Maureen Howell, Deputy Director, Tackling Poverty and Supporting Families
• Tom Smithson, Deputy Director COVID recovery and Local Government Group
• Christopher W Morgan, Head of Cabinet Secretariat
• Damian Roche, Cabinet Secretariat (Minutes)

1.1 Croesawodd y Prif Weinidog Torsten Bell, Prif Weithredwr y ‘Resolution Foundation’ a gwahodd i gyflwyno i'r grŵp. The First Minister welcomed Torsten Bell, Chief Executive of the Resolution Foundation, to the meeting and invited him to present to the group.

1.2 Inflation was rising significantly due to unprecedented increases in energy bills, driven mainly by the war in Ukraine and the impact on gas supplies for the global market. 

1.3 The Energy Price Guarantee (EPG) cap had been vital to protect vulnerable and middle income households from the unsustainable energy bill increases, but this had now been reduced from 2 years to 6 months, with a Treasury review due before April 2023. This would cause worry for households throughout the country, and Wales would feel the effects more greatly given its demography and older housing stock.

1.4 The mini budget announced by the former Chancellor on 23 September was regressive, which idealistically sought to drive growth by cutting taxes for the wealthiest in society. However, due to the market reaction to the potential strain from borrowing, potentially upwards of £100 billion, the cuts had been reversed in one of the greatest fiscal u-turns ever to take place in the UK.

1.5 To try and control inflation, the Bank of England was likely to continue increasing interest rates. This had inevitably led to higher mortgage bills for those moving from fixed rates to new deals and those on variable mortgage rates. This in turn was causing more strain on household budgets, alongside the rising cost-of-living such as food, materials, energy and housing costs.

1.6 The outcome, and one hinted at by the new Chancellor, was that spending cuts were inevitable across the public sector. Benefits and potentially pensions, if not uprated in line with inflation would suffer significant real-term cuts, with the effects being felt the most by those with the least, such as disabled people. These impacts would again fall disproportionately heavily on Wales, with incomes potentially dropping by up to 15% for the poorest households if benefits only rose in line with average earnings and not inflation.

1.7 In response, the Welsh Government had been calling for a removal of the benefits cap and an uprating to the Universal Credit amount by £25, alongside seeking to address the numbers of people on Pre-Paid Meters (PPM) who were disconnecting themselves from heat and power simply by the fact they could not afford to top up the meters.

1.8 The committee thanked the Resolution Foundation for its expert assessment of the situation.

2.1 The Minister for Social Justice introduced the paper, which provided an update on financial inclusion activity and outlined the current position regarding the provision of broadband social tariffs. It identified the challenges and outlined options to consider, with the aim of supporting people to remain digitally connected during the cost-of-living crisis.

Financial inclusion

2.2 It was reported the Welsh Government was working with the Money and Pension Service and key stakeholders to deliver the UK Strategy for Financial Well-being Delivery Plan for Wales, to drive positive changes to people’s personal finances.

2.3 Allied to this, an Income Maximisation Working Group (IMWG) had been established in May 2022 through the merger of the Welsh Government’s Welfare Benefit Take-up Group and the Debt Task and Finish Group to ensure the work being progressed on both components was joined up.

2.4 The IMWG included representatives from a wide range of organisations such as the Wales Office of National Energy Action, Wales TUC, Bevan Foundation, Disability Wales, WLGA and Welsh Government officials.

2.5 The Discretionary Assistance Fund (DAF) Covid flexibilities had been extended to people in receipt of Universal Credit to mitigate the loss of the £20 uplift. An extra £15 million funding in 2022-3 would support people who needed emergency help during the cost-of-living crisis. Between 1 April 2022 and 31 August 2022, more than 100,000 awards were made from the DAF, totalling over £11.1 million to those in the most financial need. Nearly £7 million were emergency cash payments helping people meet the cost of food and fuel.

2.6 In terms of Credit Unions, an extra £620k was made available in 2022-23 to continue an intensive digital marketing campaign and expand their lending so they could support more financially vulnerable people. This was in addition to £500,000 already in place to support the work of credit unions. £1 million was in place for a No Interest Loan Scheme, which would begin in Wales next month, delivered by Robert Owen Community Bank, Purple Shoots and Plend. It would support more people to access affordable credit when they needed it.

2.7 Another initiative was the Breathing Space Regulations, which were introduced in Wales in 2021. The regulations provided legal protection from creditors for those people struggling with debt, by stopping lenders increasing debts or taking early enforcement action. It provided individuals with the time they needed to get good advice and to start bringing their finances under control.

2.8 A recent meeting with partners had further explored ideas and solutions to support Welsh households who were struggling to find credit, which led to a commitment from Communities Housing Cymru to facilitate a dialogue with responsible lenders and housing associations across Wales to explore ways they could work together. A further commitment from the responsible lenders at the meeting was to embed a benefit calculator check into their loan application process.

Social broadband tariffs

2.9 The Covid-19 pandemic had clearly demonstrated digital connectivity as fundamental to the functioning and resilience of a modern society. New ways of working and living continued to demand access to fast and reliable broadband and mobile services, as society emerged from the pandemic.

2.10 There was anecdotal evidence from third sector partners that individuals were having to reduce their data costs, which were considered critical expenditure. This could lead to a deepening of inequalities where those who might be disconnected, or who might disconnect themselves voluntarily did not have access to the best opportunities or information available to them.

2.11 It was noted that whilst telecommunications policy was not devolved to Wales, the Welsh Government had consistently stepped in to improve digital connectivity where possible, leveraging funding from the EU and other sources to assist citizens and businesses in Wales.

2.12 The committee noted the update and the ongoing work in this area.

3.1 The Minister for Climate Change introduced the paper, which provided an update on Energy Efficiency and Water Affordability.

Energy efficiency

3.2 It was estimated that up to 14% of households in Wales were living in fuel poverty as of October 2021, and up to 45% of all households would be in fuel poverty following the price cap changes that took place in April 2022.

3.3 The price cap introduced on 8 September by the UK government had been in response to an announcement from Ofgem that the domestic energy price cap would rise by 80% on 1 October.

3.4 Given the age and thermal inefficiency of many Welsh properties, Welsh residents would pay more on average than the rest of the UK.

3.5 Welsh Government considered that existing UK government measures failed to target meaningful support towards the most vulnerable households. Wales Fiscal Analysis noted that nearly 90% of the gains would go to households in the top 50% of the income distribution, with 40% going to households in the top 10%.

3.6 Despite this, the Welsh Government was making significant investment to improve the wellbeing of those worst off through its Warm Homes Programme. In 2020-21 the warm homes programme had delivered free impartial advice to 15,557 households; 4,559 households had received free home energy efficiency measures; and a modelled average energy bill saving of £300 per year based upon the energy prices of 2020-21, and approximately £1 million of support had been provided to eligible homes.

3.7 Improvements had been made to the Warm Homes Programme Nest Scheme in response to the cost-of-living crisis. Investments had been made in solar PV, retrofitting and battery storage, which would enable future eligible homes to use energy at source.

3.8 An enhanced winter fuel campaign, delivered through the Nest scheme and led by the Energy Saving Trust was designed to target a wider audience with energy efficiency advice and guidance and was linked to the Advicelink Cymru campaign.

3.9 The Welsh Government’s flagship Optimised Retrofit Programme provided effective, practical pathways to ensure homes reached their lowest achievable carbon footprint. The current focus of the programme was on existing social housing, with the scheme allowing social landlords to provide affordable warmth by ensuring homes were more energy efficient and cheaper to run.

3.10 Grant funding of circa £70 million had already been provided through the Optimised Retrofit Programme. £60 million had been provided across all social landlords in this financial year, an increase of £10 million over previous years.

Water affordability

3.11 The committee discussed water affordability and noted that all water companies had schemes in place to offer support to customers who were unable to afford their bills. If customers were struggling with water bills at any time, they were advised to contact their water company immediately.

3.12 Water companies could help in many ways, such as setting up payment plans; advising on saving water; advising on resources that may be available from other funds to support customers; or signposting to further free money advice from Citizens’ Advice Cymru or other money advice services.

3.13 Dŵr Cymru offered one of the most generous support packages, and in February they set aside an additional £12.4 million for 2022-23 to help up to 54,000 additional eligible customers.

3.14 The committee noted that highly visible messaging on how to access assistance and community events were just 2 ways that Dŵr Cymru were engaging with the public on the support they offered.

3.15 The committee noted the update.

4.1 The Minister for Climate Change introduced the paper, which asked the committee to note the pressures on housing and the range of interventions focussed on preventing home loss.

4.2 The cost-of-living crisis presented specific risks and challenges for the housing sector. Fundamentally, individuals, families, businesses, Registered Social Landlords, local authorities, and third sector support organisations were all likely to have less money, and face increased costs. The most likely and significant direct impact would be people losing their homes, so requiring transitional accommodation, or presenting as homeless.

4.3 To tackle pressures in the system Welsh Government had already provided an additional £10 million funding for local authorities to provide temporary accommodation to support its ‘no-one left out’ policy, and an extra £6 million to local authorities for a Discretionary Homelessness Prevention Fund. Indications were that this money had been already fully utilised by many local authorities.

4.4 The need for additional homelessness prevention funding had been exacerbated by the Department for Work and Pensions reducing the Discretionary Housing Payments (DHP) funding awarded to Welsh local authorities in 2022-23 by 27% compared to 2021-22. This was on top of an 18% reduction in 2021-22 compared to 2020/21. This compounded Local Housing Allowance rates payable to those on housing-related benefits, which were significantly below rents being charged.

4.5 £65 million for local authorities and Registered Social Landlords had already been provided to rapidly increase good quality transitionary and permanent accommodation capacity across Wales as part of the Transitional Accommodation Capital Programme (TACP).

4.6 Despite these interventions, there remained considerable pressure in the homelessness and housing system, with new presentations continuing at a worryingly high rate, and local authorities indicating that due to capacity issues they were struggling to administer the schemes and provide individuals and families with the support they needed.

4.7 Keeping residents in their homes wherever possible was crucial and preventative measures were the most cost-effective approach.

4.8 To that end, the Renting Homes Act when implemented in December would provide for a 6 month notice period where eviction was on a no-fault basis, but this would only apply to new tenancies. A consultation was underway on a proposal to extend this to existing tenants from June 2023.

4.9 Maximising the use of Discretionary Housing Payments and Homelessness Prevention Fund (HPF) funding could support people struggling to meet the obligations of their tenancies. The HPF provided local authorities with maximum flexibility in using the funding to prevent homelessness. This might include providing people with bond money, rent in advance, clearing rent arrears or providing items of furniture.

4.10 In addition to the above, Mortgage Rescue assistance had been provided via the Social Housing Grant (SHG) programme since 2008. The current scheme helped those in financial hardship from losing their home by repossession and prevented homelessness.

4.11 The committee welcomed the update and noted the ongoing work to help those struggling as a result of the cost-of-living and energy crisis to stay in their homes wherever possible.

5.1 The First Minister introduced the paper, which provided an update on the suite of cost-of-living measures previously identified by Cabinet for further work. The paper outlined updated principles and priorities to inform the work of the committee including an update on measures previously identified by Cabinet and a summary of programmes responding to cost-of-living pressures. There was also a first draft summary of evidence in priority areas.

5.2 The areas where risks were greatest to individuals, children and communities had been prioritised and updated and included:

• Heating: reducing energy costs and helping people stay warm this winter
• Eating: ensuring everyone had access to regular and healthy food
• Shelter: helping keep people in their homes, solvent and able to meet household costs
• Living: helping people stay connected and do more than just survive
• Travel: helping people get to work, access goods and services and visit others