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8.46 pm
Mr. Denzil Davies (Llanelli): The Bill has been welcomed enthusiastically on both sides of the House, and I, too, pay tribute to my right hon. and learned Friend the Member for Aberavon (Mr. Morris), who piloted the original legislation through the House. We should also remember that the original Welsh Development Agency Act was passed in 1975 by a Government who believed that Governments should intervene in the economy; who believed that Governments should intervene positively to
reduce disparities--in this case regional disparities--within the United Kingdom; and who believed that Governments can make a difference.
That is an old-fashioned view and, in some ways, this is an old-fashioned Bill. It is a kind of old Labour-ish Bill, as it increases borrowing and financial limits. The Welsh Development Agency is the only agency left in Britain which can intervene economically. Scotland does not have its development agency any more--it has gone, and is now called something else. It is with some pleasure that I notice that, despite all the fashion for global markets, the ideology of small government, the jargon about partnerships and the philosophy of communautarianism, we are all here this evening extolling the virtues of central Government using taxpayers' money to intervene in the economy. Perhaps there is still hope for that somewhat tarnished, old-fashioned view.
I read in the excellent briefing paper produced at the request of my hon. Friend the Member for Caerphilly (Mr. Davies) by the Secretary of State that there will be substantial increases in Government expenditure. There are problems, and the bottom line may not be as good as the figures I shall mention, but for 1996-97 the original figure was £40 million and the outturn--that lovely Treasury word--will be £65 million, an increase of 60 per cent. I must applaud a Government who increase public expenditure in a year by 60 per cent. The following year, the figure is up to £84.7 million, a further increase of 30 per cent. We can congratulate the Government on that at least. In a world of low taxation and balanced budgets, the increase is refreshing.
Despite its ups and downs, the WDA has made a difference. No institution is perfect, and every organisation has its problems occasionally. Sadly, despite the difference it has made, Wales is now the poorest region in Britain. Wales has the lowest gross domestic product per head of population. The other day, I was reading the budget put out by the Welsh Office. It is difficult to have regional budgets in a centralised economy and state such as Britain. It tells a horrendous story. It tells of a massive difference between the money that is raised in Wales through taxation and the money that Wales receives--properly--by way of public expenditure.
The difference can be illustrated by considering the financial deficit figure, or borrowing requirement. The budget is now two or three years old, but as of today the Welsh financial deficit in the United Kingdom economy is about 15 per cent. The budget mentions 20 per cent., but that is the figure from two years ago. Despite the difference made by the WDA, the Welsh economy still has a financial deficit of about 15 per cent. France and Germany are having trouble reducing their deficits from 4 per cent. to 3 per cent. to meet the Maastricht treaty conditions. The scale of a 15 per cent. deficit demonstrates the still sad state of the Welsh economy after 18 years of Conservative government.
My right hon. and hon. Friends have made the point that, in the quest for major inward investment in manufacturing industry, the WDA and the Welsh Office have, in the past 17 years, neglected an area that I describe as industrial west Wales. Industrial west Wales extends from the west of Bridgend to the western end of my constituency of Llanelli. I may be being slightly churlish because, as the Minister may point out if he has time when he winds up, Llanelli has received large sums from the
WDA for land reclamation, environmental works and the regeneration of its town centre. I accept that and I welcome it. Those projects have improved the environment and generated some, but not much, economic activity. However, the money has not created the sort of wealth that is required. In industrial west Wales and in Llanelli, we still have a problem of high unemployment, especially among young people, low activity rates and low income per head.
About 30 per cent. of those who are employed in my constituency still work in production, mainly manufacturing and engineering. That figure is probably somewhat higher than the average for industrial west Wales. We have some excellent companies, as do other nearby constituencies. Many of the companies are car component firms. We have five or six that can, and do, compete with the best in the world; the same is true of some of the factories in my hon. Friends' constituencies in industrial west Wales. The area needs major inward investment in manufacturing engineering, as it is now described. Because of the car component plants, I believe that the area could now support a major car assembly plant.
I welcome the Secretary of State's statement that the emphasis may change, but I hope that the guidelines permeate down to the WDA in Swansea and the so-called Swansea bay partnership. A deliberate decision has been made in the past not to go for inward investment, but to support and nurture existing industry. That is fine, and I do not decry it, but we miss out on major inward investment.
Some time ago, the Mercedes car company announced that it was to build a small car, the Swatch, outside Germany. It is to be built just on the French side of the Franco-German border. At the time of the announcement, I tried to discover how a constituency such as Llanelli could attract that investment. I found it difficult to penetrate the bureaucracies, especially that of the WDA, to find out what was going on. I was told that Mercedes had employed a firm of management consultants in Boston and that nobody except Government agencies was allowed to talk to it.
Finally, I was able to obtain--unofficially--a list of Mercedes' seven requirements. My constituency fitted all of them, as did those of my hon. Friends in industrial west Wales. There was not one requirement that we could not have fulfilled. One of the main requirements was for clean air and for the site not to be too close to factories that pollute the air. That would be possible in Llanelli.
The problem was not one of resources. We are close enough to major highways, ports and an airport to satisfy all the requirements. I pointed that out to various people and was told that Mercedes was interested only in the north-east of England. I never got that in writing, and I do not know who made the decision. I was never told that by Mercedes. I suspect that the decision was made by the Department of Trade and Industry-- I suspect that it was the Invest in Britain Bureau. My right hon. Friend the Member for Swansea, West (Mr. Williams) is not here, but he set that bureau up in 1974. It has become the "Invest in England" bureau. I do not decry that. England has to have that sort of investment arm, serviced by the Department of Trade and Industry, but I suspect that all
this nonsense about Mercedes not being prepared to go anywhere in Britain but the north-east of England came from that bureau.
Mr. Roy Hughes (Newport, East):
My right hon. Friend must appreciate that this is merely a case of history repeating itself. Lord Walker's autobiography--as Peter Walker, he was Secretary of State for Wales--clearly states that the Toyota motor company was to build its manufacturing plant in Newport. As a result of the intervention of the Prime Minister of the day, Lady Thatcher, it was sent to more marginal political territory in Derby.
Mr. Davies:
Unlike my hon. Friend, I have not had the pleasure of reading Lord Walker's autobiography. Perhaps one of these days I shall. I do not know, but I suspect that the Invest in Britain Bureau exists to attract industry to England, and we must be sure that we get our fair share.
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney):
My right hon. Friend the Member for Llanelli (Mr. Davies) described this as an old-fashioned Bill. Indeed it is, and thank God for it.
Not only is this an old-fashioned Bill, but the agency ought to be fulfilling a couple of old-fashioned functions. It is worth reminding ourselves what its early functions, both of which it inherited, were. The first was industrial estate development; the second was the derelict land reclamation programme. The first function had previously been conducted by the estates corporations; the second by the Welsh Office, particularly after the Aberfan disaster.
The first function was nothing new. Indeed, in some ways the agency continues a great tradition. In the early days, the Government discovered that investment was necessary to deal with the problems of large-scale unemployment in particular areas. The first industrial estate in Wales was a result of the first U-turn by the then National Conservative Government of 1935. Mr. Baldwin and Mr. Chamberlain, who had raised to a fine art the principle of non-intervention--to the point that they tried to transfer large populations out of our communities--were driven by the threat of an election in 1935 to announce that they were willing to finance the Treforest industrial estate. It was the instrument by which the first major inward investors came into Wales. It is interesting that, of the 70-odd companies that came to Wales in the late 1930s, 49 were a result of Jewish immigration from central and eastern Europe. They were the first inward investors into the south Wales economy as we know it today.
I draw attention to the history of industrial development because, after the war, Government power and the investment of Government money brought small industrial developments into mining communities and mining villages, which created new manufacturing opportunities where only the coal and iron industries had
offered employment. The development of those small industrial estates and groups of factories helped us to diversify, and created the post-war south Wales economy.
One of the worrying aspects of the drift in the Welsh Development Agency budget is the way in which smaller industrial estates are being sacrificed for large inward investments. I must plead with Ministers, and especially with my hon. Friend the Member for Caerphilly (Mr. Davies) when he assumes ministerial responsibility in the coming months, for the traditional role of the WDA in developing small industrial estates in communities that cannot attract or physically fit the large inward investment developments that we have seen in recent years. Those small developments should be just as much of a priority. They should be part of any WDA strategy or budget.
I was at the meeting of the heads of the valleys standing conference last Monday, when the Secretary of State was presented with a list of the smaller industrial estate developments that could take place, but which seem to have been put on stop because of the WDA's budgetary problems.
The second function that the Welsh Development Agency inherited was land reclamation. The agency assumed what had previously been the direct responsibility of the Welsh Office. Indeed, had it not been for the Welsh Office decision to clear the land at Pentrebach in 1975, there would not have been a site to attract the first Korean inward investment that was announced only a few months ago.
The Halla Engineering scheme was brought to a site that was cleared under a land reclamation programme as early as 1976-77. That programme has played an enormous and vital part in the regeneration of our mining communities. The Secretary of State told us that the amount of land reclaimed could have filled X thousand football pitches; ironically, in many cases--certainly in my community--it is football pitches that people want to develop in the reclamation programmes, to create a balanced recreational facility in a community in which tips and waste once lay.
There is great bitterness in communities such as Treharris, Trelewis and Bedlinog that have watched the vandalism of the accelerated pit closure programme. They were left with all the problems, and now we are told that the WDA does not have the money to develop those sites and clear the waste land, offering new opportunities and a new environment to the villages. The Minister came and saw for himself, and he will have understood and appreciated the strength of feeling about the delays--indeed, the stop--to land reclamation programmes as a result of the WDA's current budgetary problems.
The Secretary of State kept on referring to the targets that he intends to set. Some are like Soviet grain targets; a figure that has been plucked out and which it is assumed will be reached. There was a specific target that we took seriously: that for land reclamation by 2000. That objective was set by Welsh Office Ministers and should be met, but on present budgetary plans, and certainly on present WDA performance, it will not be.
We are all, understandably, fighting over funds for millennium projects of one kind or another. That target was something to aim at for the millennium, but unless there is a significant change of heart and improvement in the WDA's land reclamation budget, it will not be met.
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