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4.23 pm

Mr. Alan W. Williams (East Carmarthen and Dinefwr): It is a pleasure to follow my hon. Friend the Member for Clwyd, West (Mr. Thomas). I agree with virtually everything that he said.

I hope that this annual debate continues after the establishment of the Assembly, because it gives us a free agenda to speak on any aspect of Welsh affairs, including constituency issues. I learn a lot every year from the contributions of my hon. Friends and, occasionally, from Opposition Members.

I should like to focus most of my remarks on constituency issues. There has been a generally gloomy feeling to the debate, with everyone describing the problems across Wales and in their areas. I shall start with the gloomiest aspect, but I hope that there will be some optimism in the second part of my speech.

The most difficult aspect of the Welsh economy is the crisis in agriculture. I do not know where its origins lie but, in the past year, farmers' incomes have dropped by about 40 per cent., having already suffered a 40 per cent. drop the previous year. There is deep despondency about the future.

I keep reassuring farmers that things will get better and that next year cannot be as bad as last year. One of the problems was that prices in September and October fell catastrophically. The problems in Russia and south-east Asia and the high pound may have been contributory factors, but the catastrophic drop has not been properly explained. During the past year, interest rates have fallen from 7.5 to 5.5 per cent. I am confident that, over the next three or four years, they will drop to 5, 4 or 3 per cent., and below, as we prepare to join the European single currency. With that will come a fall in the value of the pound, which will help to restore competitiveness, putting up the price of imported goods, enhancing our exports and creating more demand for agricultural products.

The other element of despondency in agriculture relates to the negotiations in Brussels on reform of the common agricultural policy. I have felt for 20 years and more that the CAP drastically needs reform. It does not deliver what it was constructed for. It is a wasteful policy, because three quarters of the resources go to the richest 25 per cent. of farmers. Rather than supporting small, poor farmers, it gives million-pound subsidies to millionaire farmers--the barley barons and others. I hope that the discussions in Brussels result in a fairer and better-targeted CAP, moving away from production support towards the environment, thereby moving away from supporting rich farmers to supporting small farmers. There is deep anxiety throughout rural communities about the results of the negotiations, which we await over the next few days.

I am pleased with the progress being made on unemployment. I see the hon. Member for Brecon and Radnorshire (Mr. Livsey) in his place. I am aware of the severe blow in Ystradgynlais, where 700 jobs will go because of the Lucas closure. There are odd black spots, but unemployment in Britain has dropped by 40 per cent. in the past two years. In my constituency, there were

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1,855 people out of work in December 1996 and 1,224 in December 1998. That is a one third reduction. We are making excellent progress on reducing unemployment. The useful research papers produced every month by the Library on unemployment in individual constituencies show that my constituency has the sixth lowest level of unemployment in south Wales and the lowest in south-west Wales. The figure is currently 4.3 per cent. I am reassured by the fact that it is half what it was 10 years ago, so we are making outstanding progress.

As my hon. Friend the Member for Islwyn (Mr. Touhig) said, thanks to the new deal, youth unemployment has halved and long-term unemployment has fallen by 57 per cent., so we are tackling unemployment head on.

The biggest problem in my area is low pay, something that is endemic in the Welsh economy, particularly in west Wales and Gwynedd, which have very low per capita incomes. The income per capita in Wales is 83 per cent. of that in Britain, but in west Wales and the valleys it is only 71 per cent. of that in Britain. That is partly due to low pay. The Government's legislation on the minimum wage, which will take effect in April, will provide a massive boost for my constituents as 15 per cent. of employees in Carmarthen, East and Dinefwr earn less than £3.50 an hour. The minimum wage of £3.60 an hour for people over 25 will directly benefit more than 3,000 people in my constituency--the poorest people in work. It will also provide a foundation for other wages. It is a wonderful, socially progressive measure providing for the redistribution of income and it will be a great monument to our Labour Government.

The other major topic of today's debate is objective 1 funding, which has been mentioned by many hon. Members. Objective 1 funding, if it is achieved, will provide a one-off opportunity, but for only six years. As my hon. Friend the Member for Cardiff, West (Mr. Morgan) said, it is sad that Wales is in a deep depression and that our income per capita is so low that we need to apply for objective 1 status. However, it will provide a once-in-a-generation opportunity to pull out of the bottom league, stop being the poorest region in Britain and start motoring ahead.

I should like to pay tribute to my right hon. Friend the Member for Caerphilly (Mr. Davies), the previous Secretary of State, and to the Under-Secretary, my hon. Friend the Member for Neath (Mr. Hain), who is not in his place. I should also mention my hon. Friend the Member for Bridgend (Mr. Griffiths). During the past 12 to 18 months, the Front-Bench team has done a great deal of hard work putting together the statistics and presenting the case, not ranting passionately like the right hon. Member for Caernarfon (Mr. Wigley), but in a cool, rational and diplomatic fashion, using the force of argument rather than the argument of force. We are grateful to the Front-Bench team for all its good work so far and we hope that, in March, we shall finally achieve objective 1 status.

I wish that there were more reports of the work of the task force under Hywel Ceri Jones, which was an imaginative and forward-looking idea. It involves about 160 working parties in different parts of Wales. Over the next 12 months to five years, they will have the enormous

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responsibility of drawing up hundreds of schemes involving the infrastructure, businesses and skills and training to equip us for long-term economic advancement.

Mr. Evans: Is the hon. Gentleman aware of the inconsistency of his argument? He began his speech by saying how wonderful Wales was doing and how great things were, but he then said that it needed objective 1 status as things were so bad. The hon. Gentleman cannot have it both ways. Is Wales doing well or is it not?

Mr. Williams: I am not surprised by the hon. Gentleman's intervention. It is an example of the superficiality of most of his remarks from the Opposition Front Bench. Let me explain my analysis. Eighteen years of Conservative Government left Wales in a desperate plight at the bottom of the regional league. My own area has only 71 per cent. of the income per capita of Britain. After 18 months under Labour, we have moved forward. As I said, unemployment has fallen by a third in my area and the new deal has given new hope for young people and the long-term unemployed. The minimum wage will also help, as will forthcoming measures involving child benefit, education and health. The picture is changing, but we cannot repair 18 years of damage in 18 months.

We need objective 1 support to regenerate the Welsh economy. I am very hopeful that we will achieve that. I mentioned some of the projects that we need. However, there appears to be a misconception, especially in rural areas, about objective 1 funding. In some farming communities, it is said that when Ireland achieved objective 1 status there were suddenly great times and that the money was there to be enjoyed--that it was money for nothing going directly into people's pockets. That is not the purpose of objective 1 funding. It is money not for today, but for long-term investment in the infrastructure to provide roads, industrial estates, water supplies, sewerage, gas and so on. It is to help businesses finance research and development and innovation.

Let me quote one example. The Science and Technology Committee has been looking at innovation in engineering and physical sciences--a sector in which Britain does not stand comparison with Germany, Japan and the United States. Newer ideas include science parks and technology transfer in an attempt to provide a middle tier between universities and industry. Objective 1 money could be used to further that. Wales has some notable academic institutions with excellent departments. We need to expand research and development and innovation. It is important also to provide skills training for those who are out of work or between jobs and further and higher education for young people. We need a multiplicity of courses to provide the skills for tomorrow's industries.

Mention has been made of matching plans and where they should come from. My feeling is that, if 75 per cent. of the money comes from Europe under objective 1, it is nothing to find the other 25 per cent. For instance, if I wanted to spend £20,000 on my house--not that I want an extension--and I was told that I could get £15,000 free of charge from the local authority, or wherever, and that I had to spend only £5,000 of my own money, I would soon find a way of raising £5,000. It does not make much difference whether the money comes from the Treasury, the Welsh Office or local authorities as it is all taxpayers' money and we are all taxpayers.

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The Secretary of State will have to put the case tothe Treasury. As my hon. Friend the Member for Clwyd, West (Mr. Thomas) said, we must not put the cart before the horse. First, we must get objective 1 status and then we must open negotiations with the Treasury on how it can help us--in addition to the Barnett formula--to raise those matching funds.

If the Treasury will not help, the Welsh Office block grant will be under pressure. We want money to improve the health service, education and other services. I am reluctant for the Welsh Office to be squeezed for the extra £100 million, or whatever the sum may be. I would rather that the funding came from local authorities. Our manifesto said that we would get rid of council tax capping and allow local government to set its own budget, restoring a freedom that exists in virtually every other part of the world.

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