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Mr. Michael Fabricant (Lichfield): Does not my hon. Friend find it ironic that a party that has claimed that it is in favour of proportional representation seems to believe in first past the post when it comes to the trade union block decision?

Dr. Fox: Nothing that the Labour party does would surprise me when it comes to rigging any form of electoral system. It seems that it has abandoned OMOV--one member, one vote--for OLOV: one leader, one veto. That seems to be the deciding system in the party.

That is a sad development because I am sure that many of the small proportion in Wales who voted for devolution believed that they would get a more democratic system and, as the Secretary of State said, a break from the old political taboos. The Labour party quickly returned to them when it thought that it was in its short-term interest to do so.

We leave the debate with a Secretary of State leading a party whose members did not want him. He leads his party into Welsh elections that his London headquartersare trying to manipulate. They are condescending, manipulative and cynical. They fail to understand the consequences of either their political or their constitutional actions. Economically, medically, educationally and in so many other ways, they have failed Wales.

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Mr. Deputy Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:

Social Security Contributions (Transfer of Functions, etc.) Act 1999.

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Welsh Affairs

Question again proposed, That this House do now adjourn.

1.48 pm

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): The hon. Member for Woodspring (Dr. Fox) began his speech by referring to the hope and aspiration that the Welsh day debate would continue. I also hope that that will happen. Let us briefly remember the origins of the Welsh day debate. It was a substitution for a Welsh Office and Secretary of State for Wales in the 1944 to 1948 period. It was offered as an alternative to the appointment of a Secretary of State and a Welsh Office.

If my memory serves me rightly, the first debate was replied to for the Government by the then President of the Board of Trade, Mr. Hugh Dalton. I was looking forward to the Secretary of State for Trade and Industry replying to the debate. I was particularly looking forward to the previous Secretary of State for Trade and Industry,my right hon. Friend the Member for Hartlepool (Mr. Mandelson), answering a Welsh day debate. Nevertheless, I hope that we will continue to have one. I hope that the business managers realise that it is wanted. It is only in the past 30-odd years that the Secretary of State for Wales has been present for such debates. Before that, they took place without one.

As we look forward to the future of the National Assembly and to a United Kingdom devolved, we should do so without carrying too many myths about the past, particularly the past performance of the British state. In many Welsh circles these days--not only in nationalist circles, but in wider ones--the British state is talked of pejoratively. I should like to make a case in defence of the British state's past performance, at various times, in serving the Welsh nation and the Welsh economy.

I am sorry that the hon. Member for Ceredigion (Mr. Dafis) is not in the Chamber. In the most recent Welsh local government finance debate, he made the case against the British state. He said that the parlous condition of the Welsh economy

If it had not been for that ridiculous over-dependence on heavy industry, the communities whom I represent--and whom my predecessors for the past 100 years or so represented--would barely have existed. They certainly would not have been able to develop their rich character, or to make the rich contribution that they have made to the whole idea of a Welsh identity. More important, however, was the hon. Gentleman's reference to

    "the failure to introduce a more varied industrial base".--[Official Report, 11 February 1999; Vol. 325, c. 502.]

As we embark on the new and exciting constitutional changes that the House has approved, let us remind ourselves that it was a British state and a British central Government who, in legislation from this place, created something that did not exist previously in Wales: a Welsh manufacturing and industrial society.

There was no Welsh manufacturing or Welsh industrial society until the late 1930s. Such a society barely existed until after the second world war. We were not a factory

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or manufacturing society. A complete absence of the skills necessary for that type of society was one of our major problems and one of the major causes of the depression and the problems of the inter-war years.

Welsh manufacturing society was initially created by a British state and a British Government, legislating from this place. Their redistribution of industry to Wales--not from other parts of the world, but from Birmingham, Coventry, Oxford and the Greater London area--created the Welsh manufacturing base. If nothing else, let us dispel some of the silly myths about the failure of the British state.

Of course, at various moments in history individual Governments have failed Wales. However, the British state created in Wales a fundamentally varied industrial base--as the hon. Member for Ceredigion used the term--that did not exist previously. Moreover, it achieved it by using the centralised powers of central Government, of the British state and of the House.

Mr. Wigley: Surely the hon. Gentleman is being incredibly complacent in his attitude. As a result of the cumulative policy of successive Governments since the post-war period, Wales has the lowest income per head of any country or region in Britain. An immense amount needs to be done. Surely that is not something of which we can boast.

Mr. Rowlands: The right hon. Gentleman takes a selective view of Welsh history. He should recall the state of the Welsh economy after the collapse of our basic industries--coal and iron--in the 1920s and 1930s, and how the economy was reconstructed. I am saying only that the British state made a major contribution to that reconstruction.

I accept that at various times the British state has not been able to match that achievement, and I shall deal with the current situation later in my speech. At times, Governments have of course failed us and failed Wales. However, if the right hon. Gentleman asks where Welsh manufacturing industrial society began, the answer is that it began in a deliberate policy established by British Governments and passed in legislation by the House.

There would not have been a Welsh manufacturing base were it not for central Government exercising power in redistributing industry and in using the other redistributive instrument available to them--public expenditure. Those two elements have played an important role. They were the core of the practical, centralised socialism that was an example of the joined-up government that it is now popular to talk about. As a signed-up member of the process for the past 40 years, I am not prepared to hear it rubbished, as it now is, from a variety of quarters.

Dr. Fox: Does the hon. Gentleman also think it worth pointing out to those who seek to break up the United Kingdom that it is because that Welsh heavy industrial base was allied to other manufacturing and defence capabilities in the United Kingdom, not least an allied defence force, that all parts of the United Kingdom are free today?

Mr. Rowlands: We have made a fantastic contribution to rearmament programmes at various times through the

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steel and iron industry. I hope that the hon. Gentleman will read my book when it comes out. He will find, however, that Whitehall had an enormously bilious view of the capacity of Wales to assist in the wartime effort. War, not the Government of the day, revalued our greatest resource--our people and their skills.

I have common ground with the right hon. Member for Caernarfon (Mr. Wigley) in that considerable damage has been done to the rebuilt Welsh economy in the past 20 years by deindustrialisation and the erosion and collapse not of our coal and steel industries--although that happened as well--but of the manufacturing base that had been created by post-war Governments. The charge against the Conservative party relates to the decade or more when the number of people in employment fell in Wales while it was growing elsewhere. That led to the serious problems that we now face, with the remorseless increase in the number of workless households and the serious social consequences that have flowed from that. Those consequences are reflected in the recent survey that revealed the deprivation in communities.

My worry and horror is that deindustrialisation is not yet complete and we may be in for another bout of it. The Minister, my hon. Friend the Member for Neath (Mr. Hain), has a particular concern about Ystradgynlais. Anyone who represents communities such as mine will be desperately worried about the impact of the closures that such places are facing. Anyone who knows about the problems of the European or global steel industry will be deeply concerned about the potential impact on our society.

Many interesting things are going on in our economy. In the past two years we have created more than 15,400 new manufacturing jobs, but we have lost about 17,600. The number of people in employment has stalled. That is a challenge to current policies and it will certainly be a challenge to our new National Assembly and economic powerhouse.

The challenge to our existing policies comes because we depend so heavily on the new supply side of the economy that we have devised--training and education. My hon. Friend the Minister knows how much I support our efforts, locally and beyond, on the new deal, training and education to create a better educated, more talented and more highly skilled society, because we believe that that will make people more employable. If we depend heavily on that, we must get our policies right. I am worried that we are likely to produce a large number of educated but unemployable people. I hope that my hon. Friend will take another hard look at the education and training advisory group report, which got the priorities and the balance of the training and education programme wrong. We must ensure that our training and education programmes meet the needs and demands of the Welsh economy in the near future.

My second point relates to the broader macro-economic scene. Historically, the communities that I represent have been far less worried about inflation than about deflation. Deflation has been their curse as it creates unemployment. Banks and bankers have been major contributors to deflationary policy. That is why during the past 18 months to two years I have not shared the Government's enthusiasm for creating an independent Bank of England. I was even less enthusiastic about the creation of an independent European bank that might hold our destiny in its hands.

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Welsh economic history shows that Wales is not saved from our British bank, nor does its salvation--despite the usefulness and importance of objective 1 status--rest in Europe. Wales requires a macro-economic policy based on growth and expansion. Jobs and employment need to be at the centre, not at the periphery of economic policy. That is one of the lessons of Welsh history.

At present, the great danger and threat to our economy and to jobs in Wales is not inflation or price stability. Price stability means that small manufacturers and enterprises in my community are not making surplus profits and capital to refinance and invest. We already have price stability and so has Japan, but it has been demonstrated that price stability does not create growth or jobs. The last thing that we need is deflation or deflationary policies of any kind or character. That is the bitter understanding and memory of the communities that we represent.

We welcome the new National Assembly and its economic powerhouse. We have had the slogan "education, education, education". I offer the new Assembly the slogan, "jobs, jobs, jobs".

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