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House of Commons

Wednesday 18 June 1997

The House met at half-past Nine o'clock


[Madam Speaker in the Chair]

Welsh Development Agency

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Jon Owen Jones.]

9.34 am

Mr. Dafydd Wigley (Caernarfon): I am grateful for this opportunity early in the new Parliament to put a focus on one of the key issues that arose from the general election--the failure of the Government, and the Government agencies, to overcome the job shortage in many parts of Wales.

I shall focus on the industrial location strategy of the Welsh Development Agency because the WDA is the main vehicle for delivering new job opportunities in Wales and because its strategy is laid down for it by the Welsh Office. Clearly, with a change of Government, there will now be fresh consideration given to a strategy that is appropriate in the light of the new Government's objectives. No doubt, discussion is currently going on between the Welsh Office and the WDA to that end. My objective in this debate is to spell out what we feel should be that strategy; I hope also to elicit from the Minister what is the Government's thinking on a matter that was central to Labour's general election manifesto.

I make it clear from the outset that I do not come to this debate carrying any baggage of hostility towards the WDA. I have long had an attachment to the agency; I can even claim paternity to it--or at least a share in the paternity. Back in 1970s, Professor Phil Williams and I published an economic plan for Wales in which a national development authority had a central role. I was on the Standing Committee in 1975 when the previous Labour Government brought forward the legislation that set up the agency.

I am the first to acknowledge that, in the 22 years since its creation, the WDA has played a significant role in the economic regeneration of Wales. It has given Wales a vehicle for fulfilling policies of which the regions of England have been understandably envious. It has also demonstrated how a national all-Wales body, working specifically for Wales, can have a direct, beneficial effect on the life and well-being of the people of Wales.

Having said that, I must acknowledge that--especially in recent years--there have been aspects of the WDA's policies with which I have disagreed, although such areas of disagreement have arisen primarily from the strategy laid down by the Welsh Office under the previous Government.

Let me first give some background to the economic context within which the WDA works and seeks to meet its strategic objectives. Wales has experienced a massive

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change in its employment structure over the past generation. Industries that used to be the backbone of the Welsh economy, such as coal mining and slate quarrying, have been virtually wiped out. Those industries often existed in communities that had almost no other source of employment. We have seen the rundown of agriculture as a source of full-time employment, and the farm labourer has become an almost extinct species. The sea fishing industry, once a major employer along the western seaboard of Wales, has dwindled to a shadow of its former self and in other areas the steel industry has been rationalised, resulting in its employment capacity being a fraction of what it was a generation ago.

We are, therefore, faced with serious endemic problems of long-term unemployment and a lack of job opportunities for those leaving school in both old industrial centres and rural areas. The loss of well-paid jobs in many of those industries has led to a severe decline in the level of personal incomes, so that gross domestic product per head in Wales has fallen from 92 per cent. to only 83 per cent. of the United Kingdom average. Part of that decline is due to the fact that where replacement jobs have been secured, they are often low skilled and sometimes part time--26 per cent. of the Welsh work force is employed in part-time work, which is the highest proportion in the European Union.

In the past decade, there has been a noticeable drop in average weekly earnings in Wales compared with those in the UK. Between 1985 and 1995, average weekly earnings of males dropped from 93.1 per cent. of the British average to 88.5 per cent; and earnings of females from 94 to 91.5 per cent. In the old county of Gwynedd, the drop was far worse: by 1995, Gwynedd males were earning only 83.8 per cent. of the British average and Gwynedd females only 86.1 per cent.

In 1995, men in Wales earned £43 a week less than the British average and women £22 less. To increase those earning levels must become a strategic objective of the WDA and that must be a factor in its industrial location decisions. Activity rates among men have fallen from 91.5 per cent. in 1971 to 81.2 per cent. by 1991. Those factors of low activity rates, high unemployment, low wages and a high level of part-time working have created pockets of acute poverty and deprivation.

That, of course, is not the entire picture for Wales. There are some areas where there has been considerable success in economic regeneration. Along the M4 corridor in southern Gwent and eastern Glamorgan, and along the A55 corridor in Deeside running through into the Wrecsam area, there has been a significant influx of new industry, not least by way of inward investment from overseas. About 50 companies from Japan have set up in Wales, along with many companies from the United States, and most recently we have heard of the immense LG project for Newport. We congratulate the WDA on its success in that area.

It is against that background that we must consider the appropriateness of the job strategy and location strategy of the WDA. That must be considered in geographic, sectoral and structural terms.

Until recently, the guidelines laid down by the Welsh Office for the activities of the Welsh Development Agency accepted that up to 80 per cent. of the new jobs created in or attracted to Wales should be in two target areas, representing less than 10 per cent. of the land area

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of Wales. Those two areas were, first, around the M4 corridor in southern Gwent and eastern Glamorgan; and, secondly, around the A55 corridor in Fflintshire and Wrecsham. It is worth noting that three of the four new counties with the lowest unemployment in Wales are Monmouth, Wrecsam and Fflintshire, all with about 5 per cent. unemployment, and all are counties that coincide with those target areas.

Mr. David Hanson (Delyn): Does the hon. Gentleman accept that, irrespective of that point, there is still a high inactivity rate among many people in Fflintshire, Wrecsam and the surrounding areas, and that many people are off the unemployment register and have become long-term inactive for a range of reasons, not least the closure of the pit in my constituency?

Mr. Wigley: I shall shortly discuss the need to get accurate local figures, which were, of course, distorted considerably during the previous Government's term of office.

The WDA strategy defined as acceptable a situation where as few as 20 per cent. of the new jobs should come to the rest of Wales--90 per cent. of the land area of Wales--despite the fact that two thirds of unemployed people in Wales live outside the two target areas.

Mr. Donald Anderson (Swansea, East): Is it not an odd proposition that the greatest effort has been made where the need is least and where the locational advantages are the greatest in Wales, which adds to the imbalances within the Principality?

Mr. Wigley: That is the thrust of the argument that I am trying to develop; I accept the hon. Gentleman's point.

Between 1993 and 1996, a total of 134 manufacturing projects in Wales were offered regional selective assistance. Only five of those were in Gwynedd and only seven in Dyfed. That bears out the point that the hon. Member for Swansea, East (Mr. Anderson) made. That was a wholly unacceptable strategy, whereby Conservative Secretaries of State consigned countless thousands of unemployed people, and especially young unemployed people, to the economic scrap heap. As a result of the failure to establish a strategy and policy that would secure jobs within reasonable travelling distances of their homes--in north-west Wales, in south-west Wales and in the western industrial valleys of Glamorgan--those people have missed out severely.

The more cynical in our midst in Wales suggested that the Tory Government were deliberately using the Welsh Office industrial development budget to create a massive number of new job opportunities in Deeside in the north-east to try to meet the unemployment problems of Liverpool, and in Newport in the south-east to contribute to meeting the needs of Bristol. I readily accept that both those areas undoubtedly have their problems, but it is totally unacceptable that the budget of the Welsh Office should be used to solve their problems.

That deliberate policy of giving priority to securing new jobs in those parts of Wales which, because of geography and transport, were the easiest areas in which to secure employment, as the hon. Member for Swansea,

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East said, was a cynical betrayal of those areas of Wales where the challenge was that much greater and which required that much more effort to crack the problem. It has led to seething anger in those areas, because people feel that they have been abandoned by the Department of State that was supposed to safeguard their interests--the Welsh Office, which determined the strategy within which the WDA operates. If ever there was an example of why both the Welsh Office and the Welsh Development Agency should be made answerable to a directly elected Parliament of the people of Wales, this is it.

During the last few desultory months of the 18 years of Tory rule, as the last Secretary of State sat in his Welsh Office bunker, awaiting his party's richly deserved annihilation in Wales, there was a deathbed pang of conscience. On 19 March 1997, the Secretary of State adjusted the target figures, so that 50 per cent. of the new jobs might go to the two target areas and the other 50 per cent. should be secured for the other 90 per cent. of the land area of Wales, which includes most of the areas of high unemployment and deprivation. However, in adjusting the Welsh Office strategy for the WDA in that way, no indication was given of how those targets should be achieved.

There is, however, one intriguing sentence in the new guidelines which states that the WDA

What does that mean? Does it mean that the WDA can make grants to compensate for geographic disadvantage? If so, by what mechanism and from where is the additional cash to be found? I suggest that the cash found should be ring fenced in the same way as money was ring fenced for the LG project. Money should be ring fenced for the needs of south-west and north-west Wales and for the western industrial valleys.

One of the answers given by the Welsh Development Agency and the Welsh Office in justifying their former strategy has been that many of the footloose international companies, when considering coming to Wales, stipulate that they want to be in one or other of those two corners of Wales and that in trying to persuade them to come to a more westerly part, the WDA might risk losing investment in its entirety. That is, no doubt, because so many of the inward investment projects are manufacturing to sell their products in the main markets of continental Europe and, therefore, want to be strategically located to take advantage of road, rail and air links to continental Europe. It is worth pointing out to little Englanders on both sides of the Chamber that it would be disastrous for the economic regeneration of Wales if we were to withdraw from the European Union.

If attracting industrial projects to more westerly locations than Newport or Wrecsam is impossible for the UK Government, how is it that the Irish Government have succeeded in creating 10 times more new jobs in Ireland in the past five years than the UK Government have succeeded in creating in Wales? Ireland is divided by greater distances and a maritime crossing from the main markets of those companies, but, if the circumstances offered to companies are right, industries can be established and located in such locations.

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