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Mr. Deputy Speaker: Order. We must now move on to the debate on disadvantaged areas in Wales and to the right hon. Member for Caernarfon (Mr. Wigley).

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Disadvantaged Areas (Wales)

10.59 am

Mr. Dafydd Wigley (Caernarfon): I am very grateful for the opportunity to debate this subject and for Madam Speaker's choice of subject. I also thank the Under-Secretary of State for Wales, the hon. Member for Neath (Mr. Hain), who is here to reply. I had half expected a Treasury Minister to be present. Indeed, the Treasury can be said to have most to answer for with regard to the state of the Welsh economy. Perhaps Treasury Ministers know that all too well and that is why they are not here. Clearly, the problems of the Welsh economy go well beyond the competence of the Welsh Office; likewise, the solution, which is worth remembering in the context of the National Assembly for Wales, which is to be set up next year and which will have no greater remit than that of the present Welsh Office. Its powers may not be adequate to deal with the problems.

I am conscious that this debate follows the publication yesterday of "Pathway to Prosperity". No doubt we will have an opportunity to discuss that document in detail when the Welsh Grand Committee meets in Merthyr Tydfil next Monday, and I look forward to that debate. Suffice it to say now that the document is certainly strong on analysis. Indeed, it is brutally honest about the lamentable state of the Welsh economy--more honest than any previous publication. It recognises the appallingly low gross domestic product per head in Wales. According to the figures in that document, GDP in Ireland is 43 per cent. higher; it also admits to a job shortfall of about 260,000, which presents a massive challenge on any analysis.

Whereas the publication is strong on analysis, it is sketchy on how the problems will be put right and it offers no additional resources, which is its central weakness. It is remarkable for such a document to refer to the need for better education and skills, better road links, fibre-optic networks, strengthening business support services, creating industrial villages and providing basic rural services, when all that is to be achieved without one single penny of extra Government expenditure in Wales. It is appropriate that we are debating the matter this week--the week before the Government's spending review--as the Treasury has a lot of responsibilities to face up to in that context.

There are both disadvantaged people in Wales--people who may be disabled, unemployed, sick, poor or old--and disadvantaged areas, with high unemployment, low activity rates and low incomes. Those are areas of physical decay, with sub-standard housing, dilapidated social provision, old hospitals, schools and village halls and even old toilets--a decaying environment. They are areas of inadequate provision: a lack of new leisure facilities; a lack of doctors and dentists, which is a problem that is becoming more and more apparent in many areas of Wales, both rural and industrial; a lack of a modern transport system; and a lack of opportunity and hope.

The disadvantaged areas come in many forms and in several parts of Wales. Parts of our cities suffer acute deprivation and poverty. Equally, there are areas of acute rural poverty, which is being exacerbated by the present rural crisis. What is more, in the old industrialareas--the coal mining valleys, slate quarrying villages,

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iron and steel working towns and sea fishing ports--those old industries have gone, leaving only their relics behind, and new industry has yet to find them.

Between 1986 and 1996, while the M4 and the eastern A55 corridors gained 9,600 new manufacturing jobs, which we welcome, the western part of Wales and the valleys lost 9,200 manufacturing jobs, which is almost an identical loss. That shows how Wales is becoming polarised.

We often hear about Wales's success in attracting inward investment and we certainly welcome what has been achieved, but we are in danger of becoming victims of our own propaganda. There is a gross disparity in the distribution of the jobs created by inward investment within Wales. The six counties with most jobs in overseas-owned manufacturing plants are Flint, Wrexham, Bridgend, Rhondda Cynon Taff, Caerphilly and Cardiff. Between them, they have 52 per cent. of all the jobs that have come to Wales by way of such plants. As that pattern shows, they are mainly in the north-east and the south-east of Wales. The six counties with the least such jobs are Conwy, Gwynedd, Ynys Mon, Ceredigion, Pembroke and Carmarthen, which have between them only 8 per cent. Of course, those areas are all in the west. There is thus a massive east-west divide in inward investment and the creation of new jobs.

Needless to say, the prospects for disadvantaged people who also live in disadvantaged areas are acutely limited. Surely we must put a priority on Government action in those areas. Whereas the Government may not be able to answer the problems of every man, woman and family in every community and every company, they can and must create the conditions in which those problems can be met and overcome--problems of economic, social and environmental infrastructure. Only Government can provide those prerequisites.

Which areas am I describing as being disadvantaged? Some are economically and some socially disadvantaged, and the two overlap. One may be the consequence of the other or may cause a spiral with one leading to the other. Economically disadvantaged areas can be considered in terms of high unemployment. In May 1998--the most recent date for which figures are available--Aberdare and Blaenau Gwent had 10 per cent. unemployment and Ynys Mon and south Pembroke 9 per cent. Those are in the north-west and the south-west and the old coalfield valleys. The lowest unemployment is found near the border with England in the counties of Flintshire, Wrexham, Powys and Monmouthshire.

Clearly, Wales has a problem with low activity rates. Blaenau Gwent has one of the lowest, with 67 per cent., Caerphilly has 68 per cent., and Ynys Mon and Rhondda Cynon Taff, 69 per cent. Again, it is the same pattern. There is a massive gulf between incomes per head in Wales. The lowest incomes per head are due to part-time and seasonal jobs and low wage rates. The areas with the highest wages, on a band of about £340 to £350 per week according to last year's figures, include Cardiff, Wrexham, Neath and Flint. The lowest have wages of about £280 to £290 a week and include Conwy with£284, Gwynedd with £289, and Blaenau Gwent with £309. There is a gap of £60 between weekly incomes in the better and the poorer areas, a fact which reflects pockets of real poverty, both rural and urban, and the Government must do something to close that gap.

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Some areas have low wage rates. There are variations within manufacturing industry, of course, and some assembly jobs pay abysmally poor wages--only £3 to £4 an hour. There are also areas with high manufacturing wages, for example in the steel industry, which mean that the Port Talbot and Neath area have a relatively high income per head.

Without doubt, the biggest problem is in the service sector because tourism, for example, pays relatively low wages and is seasonal. The service sector in Wales has a level of remuneration that is about 10 to 16 per cent. below the average for Great Britain because of the difference of the mix within that sector--tourism and other such elements in Wales, compared with financial services in south-east England. The problem of low incomes is acute and is increasing in agricultural areas, where farm incomes have fallen by 43 per cent. Many small family farms in Wales are subsistence farms. With that sort of reduction, if the farmer's wife did not have another job, the farms would not survive.

In the socially disadvantaged dimension, we have areas of high sickness and disability, particularly in the old industrial areas and the valleys--that is particularly true of Merthyr Tydfil. Indeed, eight of the 10 constituencies in the United Kingdom with the highest figures for long-term illness are in Wales, in the old coalfield areas of Dyfed, Glamorgan and Gwent. Many of those areas have poor housing stock, which worsens health. Housing renovation should therefore be a priority.

The four factors of unemployment, activity rates, low wages and widespread sickness mean that some areas have desperately low GDP per head. Of the five counties in Britain with the lowest GDP per head, three are in Wales--Mid Glamorgan, at 62 per cent. of the European Union average, Dyfed at 68 per cent. and Gwynedd at 72 per cent. Yesterday's publication showed that, for 1988-98, Gwynedd got just 3 per cent. of regional selective assistance spending in Wales, and Dyfed-Powys got only 4 per cent. RSA has certainly not started to solve the problem.

In addition to the disparity in GDP per head among areas of Wales, the gap is widening. Between 1982 and 1995, real GDP per head grew by 72 per cent. in Flintshire, 78 per cent. in Torfaen, 62 per cent. in Bridgend and the Vale of Glamorgan, 69 per cent. in Wrexham and 55 per cent. in Cardiff. In the same period, it grew by only 13 per cent. in Pembrokeshire, 16 per cent. in Conwy, 25 per cent. in Anglesey, 23 per cent. in Carmarthenshire, 23 per cent. in Blaenau Gwent and 31 per cent. in Rhondda. Unless action is taken to help the west and the valleys, the gap will worsen.

The western areas and the coalfield valleys are structurally disadvantaged. They are further from markets than other areas. They are at the fringe--sometimes they seem beyond the fringe--of the modern motorway network and of railway links. The population's age puts immense pressure on local government to provide personal services. The skills pattern is often geared to an industrial structure that has long gone. There is inadequate investment in modern educational and training facilities. Housing stock is often old and in need of renovation. Many of the remoter communities have long travel times to work, to hospital and to recreational facilities.

In many disadvantaged areas, money from grants, subsidies and social security immediately flows back out through the centralised structure of retailing and the

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banking sector. It is also difficult to retain maximum benefit in those areas from any Keynesian-type investment project. There are three approaches to those problems. First, there is the Thatcherite, free market response: "Let them decline; if they cannot regenerate, let them die." Plaid Cymru emphatically rejects that approach. Communities have rights; people are entitled to reasonable hope of decent jobs and services within reasonable reach of their homes. Young people should have a future within their localities, and should not simply be told to get on their bikes. Elderly people should not be left in limbo in aging communities that their grandchildren have left to search for work.

A second approach is Government intervention to help disadvantaged areas. What can the Government do? They could compensate for disadvantage by subsidising low wages through systems such as family credit. They could provide job creation schemes, although those may not survive in the long term. They could subsidise industrial premises, rents or capital.

However, a third approach, which we favour, is to work to remove disadvantage and to create better communications by air, rail, public transport and fibre optics. I was glad to see a reference to that idea in yesterday's publication, although there was no reference to the money needed. We could create better skills through investment in education. Ireland has used regional colleges of technology to boost the skills of its labour force, and to increase income per head. We need to make curriculums relevant to places of work, a point also referred to in yesterday's paper. We need to invest in infrastructure--hospitals, clinics, schools, energy conservation measures, housing and leisure facilities.

The second two approaches--subsidy to compensate for disadvantages, or action to remove the disadvantages--involve public spending, on social security and on rebuilding the capital stock of our communities. If we reject the Thatcherite approach, we must face the need for higher public spending. That is where the Government's juggernaut of promises crashes into the rocks of reality. It is not possible to implement a meaningful programme to rectify the disadvantages of western Wales and the coalfield valleys without higher public spending, a point ignored by "Pathway to Prosperity".

I can hear the Thatcherite mandarins, whose writ still seems to run in the Treasury, claiming that private capital will sort out the problems of the disadvantaged areas. However, private capital goes only to areas in which it will make a profit. It has not gone to western Wales and the valleys, because no profit can be seen. The private sector could be bribed to go there, but that would mean continuing subsidy, diverting public money into private pockets. It would be better to use public money to remove sources of disadvantage, and to harness public and private activity in competition or co-operation, as appropriate.

We cannot hope to tackle the problems of the disadvantaged areas if we adhere to Tory spending ceilings. We need to improve education with more teachers, schools and better equipment; to improve health care, build hospitals and clinics, and employ more doctors, physiotherapists and community nurses; to improve the housing stock through renovation and insulation, better rooms and replacement of defective

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doors and windows; to tidy up derelict buildings and the environment, bringing wasteland into proper use; to create a proper public transport system and new railways; and to develop recycling schemes.

If Tory orthodoxy were not in charge at the Treasury, we could choose between two options. First, we could divert expenditure from Trident and aircraft carriers to schools and hospitals, from millennium domes to fibre optic networks, and from nuclear weapons to energy conservation. The second option is to raise total public spending. The United Kingdom spends about 40 per cent. of gross national product in the public sector, less than in all but one EU country--Ireland, which ought to spend more in the public sector, too. Finland spends 52 per cent. of GNP in the public sector, Denmark 57 per cent. and Sweden 62 per cent. Yet those countries have high standards of income and quality of life, and of public services. We could raise taxes to allow ambitious plans to go ahead. We could, of course choose both options, changing spending priorities and raising taxes to meet our agenda.

If the Labour Government are not willing to put more public resources into helping disadvantaged people and communities, what on earth was the point of electing them? Were they elected just so that we could see different smiling faces at the Dispatch Box as they carried out the same old Tory Thatcherite policies? From May, responsibility for health and education, housing, roads, jobs and the environment will pass from the Secretary of State for Wales to the national assembly, to which the Welsh Office will be answerable. Where will the assembly get the extra resources to spend on disadvantaged parts of Wales to help attract private sector investment in new industry?

Are we restricted by the Barnett block, which Lord Barnett himself has acknowledged to have been inadequate to meet the needs of Wales? What new expenditure will there be? The figure seems to have fallen to £6.7 billion for 1998-99. Will that be the figure included in next week's spending review, or will we be allowed the £6.9 billion mentioned in April, or the £7 billion stated in the White Paper on which the referendum was fought? The White Paper provisions are being met in many other areas, so I hope that the spending priorities to be published next week will not take the figure below £7 billion.

What will happen if the Department of Trade and Industry changes industrial development policy by giving Wales higher status? In 1993, the Tories reduced development areas in Wales from covering 35 per cent. of the population to covering 15 per cent. Will resources additional to the Barnett block be available, or will money have to be diverted from education or health? Will the assembly be able to borrow to invest in infrastructure projects in disadvantaged areas? What are the prospects for the European structural funds, especially objective 1 funding? I am glad that the nomenclature of units of territorial statistics, NUTS 2, map has been accepted by Eurostat.

Wales has the lowest gross domestic product per head of any country or region in Great Britain and stands 68th in the league table of European regions. It is ridiculous that, unlike England, Scotland or Northern Ireland, we in Wales have never had any objective 1 funding. It is time that changed, and I hope that it will later this year with the announcement for the period 2000 to 2006.

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What will happen if we get objective 1 funding? May we assume that the additionality rule will apply and that such funding will be over and above current expenditure patterns? If so, it would logically be over and above the Barnett formula. Will the Minister confirm that? If we need to find 25 per cent. matching funds to trigger the objective 1 money, will they have to come from within the Barnett formula; and will there be enough to meet that cost without depriving other necessary social projects?

Can the Minister give an idea of the timetable for objective 1 decisions? Can he confirm that Eurostat accepts the east-west NUTS 2 map, as I think he can? Will he confirm that 75 per cent. of GDP per capita will still be the threshold for objective 1 eligibility? Will he clarify the financial implications for the assembly and ensure that a beefed-up Welsh Office team will work on projects to take advantage of objective 1 money for disadvantaged parts of Wales?

Will the Minister clarify the position on the new regional policy map? When can we expect the details? I realise that that is not a Welsh Office decision, but it is no doubt involved in discussions. Does he accept that the UK regional map should reflect the UK NUTS 2 bid, as in all logic it should? We hope that significantly more than 15 per cent. of the population will be in the new development areas.

On direct public spending programmes, will the Minister take note of the great dissatisfaction among local job seekers and local subcontractors about the way in which capital projects are managed? In many disadvantaged parts of Wales, for significant capital projects such as the A5 scheme across Anglesey the companies with the contracts bring in their workers with them. It is not only the key workers; we realise that they must come. They also bring people in to do work when local unemployed people could equally well do it. They give subcontracts to outside companies when local companies could do the work.

I realise that the European Union public contract rules tie the hands of central and local government but there must be some way of maximising local employment from such projects. Unless that is done, we lose half the benefit of the investment programmes. If Wales is to get objective 1 status, the objective is surely to raise the standard of living in these areas, not to let the benefit leach away and so lose the maximum impact in the NUTS 2 and objective 1 areas. I hope that the Minister will consider that.

We hope that the Welsh Office will create a new European project department that has some clue about how to use European funds to the maximum benefit of disadvantaged areas. The main issue is how those resources can create long-term self-regenerative economic activity in such areas to ensure that they develop in a way that makes subsidy and grants unnecessary, as Ireland has succeeded in doing. I acknowledge that Ireland has not yet distributed its new-gained wealth to eliminate its pockets of acute poverty.

These are the basic issues. In our disadvantaged areas, how do we ensure that we maintain and expand employment in existing enterprises in manufacturing, agriculture and services? How do we make them more efficient to give better rewards? How do we create more indigenous enterprises and innovation? How do we attract inward investment to disadvantaged areas and create in them the social infrastructure that enhances the quality

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of life? What is the role of public expenditure in creating industrial, transport and communications infrastructure? How do we adapt UK and EU regional policy to that end? Can that ever be a priority here in London; and shall we have the vision, drive and resources for it to be an effective priority in the Welsh assembly?

We give the Welsh Office credit for recognising the size of the problem, but we are far from convinced that it is providing the answers. We do not believe that it is possible to create 260,000 new jobs and increase GDP per head by 40 per cent. in an environmentally sustainable manner without higher public spending. We suspect that the Welsh Office ministerial team share that misgiving but are constrained by Treasury rules. "Pathway To Prosperity" ends on a significant note. Paragraph9.6 states:


We shall indeed judge the Government by those criteria. We look forward to working in our national assembly to achieve what Westminster has so far manifestly failed to deliver.


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