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11.25 am

Mr. Alan Williams (Swansea, West): I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on raising this subject. It concerns all hon. Members that there is gross imbalance in the Welsh economy.

When I came to the House in 1964, regional policy was based on a uniform system. There were development areas, and the rest of the country. Areas had development area status or nothing. As a Back Bencher, I argued that parts of the development areas were as much worse than their neighbours within those areas as the development areas were worse than, say, south-east England. We therefore needed a differentiated regional policy. I was lucky as a Minister in the Department of Economic Affairs in 1967 to be able to take my proposition through Cabinet Committee. That led to the creation of the special development areas that were so valuable to the valley communities while they were allowed to exist. They were destroyed by the previous Administration, however.

What worries me is that I am more depressed today than I was in 1964 when I was arguing for differentiated policy. I jotted some points down as I listened to the right hon. Member for Caernarfon. I am sorry that my remarks are not as structured as his speech was. He mentioned the 200,000 job shortfall. That conceals a problem in itself. The important thing is that the shortfall is not uniform across Wales. Most of it is in the areas that hon. Members here today represent. That is an internal problem of imbalance within Wales. The Cardiff area is doing relatively well, and I am delighted that it is. I find it incredible that Swansea, which was once a sub-regional hub of industrial development, now has some of the most deprived wards in Wales. Hon. Members present can cite wards in their constituencies in the same situation.

The job shortfall is not evenly spread throughout Wales, but is concentrated in the areas that have the least prospect of being able to make up the shortfall. It is not only that there has been job loss but that there has been a downgrading of jobs. New jobs have in general not matched the quality of the jobs that have gone. Well-paid, skilled and manufacturing jobs have been replaced by

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part-time and low-paid jobs. Welcome as such jobs are, it is implicit that the ability of the areas that have experienced this to pull themselves up by their own shoestrings is diminishing. As income levels in those areas go down, their ability to generate redevelopment becomes increasingly dependent on resources from outside.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): My right hon. Friend provides a telling description of the dilemmas facing communities such as mine. I was astonished that the press and other media did not record more prominently the stark and startling 200,000 jobs gap. So that we can get an impression of how much of a mountain that is, can my right hon. Friend tell us what is the averaged and annual net job creation over the past 10 years?

Mr. Williams: I have to confess that I do not have that information immediately to hand, but if my hon. Friend would give me two or three minutes, I am sure that I could produce it. My right hon. and hon. Friends on the Treasury Bench have access to the collective wisdom in the Box in the corner, so perhaps they can come up with those figures by the end of the debate. My hon. Friend is absolutely right to say that it is important that we should have that information, so perhaps the Under-Secretary of State for Wales, my hon. Friend the Member for Neath (Mr. Hain), can produce it when he winds up the debate. If he cannot, I have no doubt that he will provide the answer in a parliamentary answer as soon as possible.

The structural imbalance is sad, because it is a divisive force in Wales. We do not want Cardiff and the rest of Wales to be turned against each other. I rejoice in the prosperity that Cardiff and the south-east have in prospect; but to return to the comments of the right hon. Member for Caernarfon about resources, that prosperity has been achieved by an abnormal distortion in the flow of resources within Wales. We know that massive sums from the public purse have been put into the Cardiff bay development. That has been a success--as the Welsh Office rightly boasts, it has also drawn in £800 million or more in private funds--but when one adds the massive injection of lottery money, one can see how Cardiff has become what I would describe as a black hole: it has developed the capacity to draw in all the significant new developments that come to Wales.

Mr. Denzil Davies (Llanelli): My right hon. Friend makes the point that Cardiff is heavily dependent on public expenditure. Does he agree that some of that is old-fashioned public expenditure, in hospitals, universities, the BBC and other fields; and that that is where the danger lies, because restrictions on public expenditure could affect Cardiff's GDP?

Mr. Williams: My right hon. Friend is absolutely correct. One does not solve the problems of deprivation in an area as large as Wales without matching needs with resources.

I hope that my hon. Friend the Member for Merthyr Tydfil and Rhymney will forgive me for saying that part of the problem is that the valley communities, for example, were created as artificial economic units,

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bringing to previously sparsely populated areas people to drag the coal out of the ground. When we stopped mining the coal, economic logic ceased to be in the communities' favour. One needs only to look at an Automobile Association motorway map to see where the economic strength in Wales lies--at the focal point of all the motorways and of the Severn bridge.

Mr. Rowlands: All roads lead to Merthyr.

Mr. Williams: I desperately hope that Merthyr, too, will enjoy all the benefits that are currently flowing to Cardiff, but the fact is that, in addition to that capital and resource inflow, the south-east benefits from its strength of location, with its distribution network leading via the M5 and the M4 to the north of England, middle England, the east of England and the continent.

That enormous advantage is, as I said, creating a development black hole, which presents the rest of Wales with a double problem: we are in danger of being wedged in, because although we talk about what Ireland has achieved, we tend to forget that Ireland is our competitor. Those of us who represent western areas of Wales, not just the south-west, are competing against the attractions that Cardiff has to offer and against the massive incentives that Ireland has to offer. I remember my hon. Friend the Member for Merthyr Tydfil and Rhymney telling me that the ratio of European Community funds per head flowing into Ireland compared with Wales is about 5:1.

Recently, it looked as though Swansea was going to get a worthwhile electronic development, but we lost it. The Welsh Development Agency has suggested to me that the reason why that happened was not only the incentives that Ireland offered, but the fact that Ireland's tax regime is far more favourable to investment than is ours. It seems to me that that is a matter which we can solve without worrying about the EC. I recognise the constraints on Ministers and I know that, in respect of regional policy and incentives, we are in an EEC straitjacket--but we are free to set tax policy. When I was in charge of regional policy and inward investment in the last three years of a 1970s Labour Administration, we had the best tax regime of anywhere in Europe, with optional one-year 100 per cent. write-off with roll-on facilities, so a firm could choose the form of depreciation and write off that which best suited it. That enabled us to get a disproportionate share of new industry.

Ireland now occupies that position. It has probably the most benign tax regime in Europe, in addition to its regional incentives. The result is that new industry that looks beyond Cardiff has to ask itself whether it wants to go to the relatively low incentives available in west Wales, or whether it might as well go that little bit further and enjoy the tax regime plus high incentives available in Ireland. We are negotiating from a position of weakness, which is why it is essential that we do not lose out in the current negotiations in Brussels on the objective 1 status that Wales so desperately needs to keep. I welcome the announcement made by my right hon. Friend the Secretary of State about what appears to be a marked improvement in our prospects in those negotiations.

Let me conclude on the following point. Recently, my right hon. Friend the Secretary of State devised the term "powerhouse"; but a powerhouse that is created purely by merging three existing quangos, without providing extra

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resources, is a form of support that is only a marginal improvement on what was there before. All that can be achieved is a few efficiency gains. If a powerhouse is to work, it has to have power; and in this context, power is resources. I know that my right hon. Friend has been fighting his corner in the Cabinet, but so has every other Minister. We will see the result in the near future. It is important to recognise that the powerhouse is symbolic unless it has the resources to match the needs with which we expect it to deal.

11.39 am

Mr. Richard Livsey (Brecon and Radnorshire): I congratulate the right hon. Member for Caernarfon (Mr. Wigley) on introducing this subject to the House. As we well know, there are many disadvantaged areas of Wales, including the valleys, Pembroke dock, Llandudno junction and areas to the west and the north as well as rural areas such as Powys and west Wales.

Rural and urban disadvantaged areas share similar problems in some respects, but there are causes and effects specific to certain areas. The key signs are poor housing, failure in education and training and, in many parts of Wales, low aspiration. That is a sad commentary.

The economy is the key to improving those social problems. The document published yesterday, "Pathway to Prosperity", is to be welcomed as far as it goes, but it does not tackle the issues of rural Wales comprehensively enough. It does not provide information or data specific to the area that I represent, which is Powys. Powys is lumped with Dyfed. I should like to know why no figures are available for Powys. It is a unitary authority. Will the Minister confirm that the Welsh Office does not intend to provide individual figures for the county of Powys? Why is it being ignored? The Office for National Statistics has the figures and I understand that it consulted civil servants in the Welsh Office, only to be told that the figures were not required.

I led a campaign in the early 1990s, when the previous Government were in office, to obtain economic indicators for Powys. I was told then that they were not available. I warn the Minister that I will bombard his Department with questions to get the answers as soon as possible because it is a serious matter. We need those indicators to quantify the problems.

The economies of disadvantaged areas of Wales must be addressed if Wales is to be successful within a United Kingdom and European context. According to 1995 figures, the weekly wage for males in Wales was £331: the figure for Powys was £278. As a result of work done by Bristol university, we know that in some areas of Powys, such as parts of Newtown and Cwmtwrch in my constituency, wages are as low as £159 and that in Ystradgynlais they are £188 per week. The average in Powys is £100 per week less than the UK average and that does not include figures for those who are not earning. These areas are really disadvantaged. According to Welsh Office reckoning, the whole of Wales must surely be disadvantaged, except the south-east and perhaps some corners of the north-east.

The economic disadvantage that exists already is worsened by the migration of educated young people. In mid-Wales, many young people leave at the start of their economically active life, as a result of which we cannot foster enough locally based entrepreneurs. I am glad that the document produced yesterday will address that problem.

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In rural areas, there are many people over the age of retirement--20 per cent. is a common figure in many parts of rural Wales. Large sectors of the population are not economically active enough and place a huge strain on local public services.

There is very little mention in the document of the agriculture crisis. We cannot blame that entirely on Welsh Office Ministers because Treasury policy on the strength of the pound has had a great impact on agriculture and on manufacturing industry, of which Wales has a higher percentage than any other part of Britain. It is difficult for anyone to export now. Last week, I visited a factory in Wrexham that produces JCB machines. I was astonished to find that most of the parts that it uses are imported from Turkey. Eighteen months ago, the factory obtained 20 per cent. of its parts from Britain, but it now imports 80 per cent. of its parts for transmissions. That is a big problem and is a result of Treasury rather than Welsh Office policy. It demonstrates how hamstrung we are.

The agriculture crisis is felt throughout the rural economy in support and service industries. We have a low-wage economy with low expectations. Urban areas of Wales face problems of higher unemployment. Many parts of rural Wales do not have such high unemployment, but that is partly because of the migration of many of our young people. There is a lack of job security in urban Wales with low-wage, low-skill jobs. Many social problems stem from that, as the document recognises. Bad housing, low educational achievement and so on must be put right, but it is a mammoth task.

The document, "Pathway to Prosperity", and the economic proposals were announced to the press yesterday, but not to Members of the House. I had to seek out the information from the press. The electronic revolution may be proceeding well in Wales, but nothing came through on my fax machine or e-mail to tell me about the announcement. I looked for it on Monday when it became obvious that there was a planted question, but we did not hear anything until the middle of yesterday afternoon. It was announced by an all-Wales electronic network known as Link-up, of which I heartily approve, but some hon. Members struggled to find the information yesterday.

I want to address specifically the issue of average earnings, which is a problem that is hanging round our necks. Many jobs in rural areas, particularly in Powys, are manual and are agriculture related. What targets does the Welsh Office have for manual workers, or are they not in the equation? The economic powerhouse must regenerate the whole of the Welsh economy, both urban and rural.

Money for home improvements--

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