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Mr. Llew Smith: How does the Barnett formula make things worse for people in Wales? What statistics does the hon. Gentleman have to prove that point?
Mr. Thomas: I shall send the hon. Gentleman a copy of our detailed proposals.
Mr. Smith: I should like an answer now.
Mr. Thomas: I shall give the hon. Gentleman an answer. The Barnett formula is consequential on spending in English Departments and does not take into account the additionality of European money under objective 5b and
objective 2. We have not received the money that we should have had, as Barnett has blocked it. That is why the Barnett formula has failed Wales.
The right hon. Member for Llanelli referred to Merseyside having been allocated £1.2 million under objective 1. Wales deserves 38 per cent. of the objective 1 package for the United Kingdom, but if we apply Barnett we get only 6 per cent. The right hon. Gentleman should put those arguments to the Chancellor, as we are putting them to the people of Wales and receiving their support.
Mr. Llwyd:
My hon. Friend should know that the Secretary of State recognises that and has agreed to take it up with his Cabinet colleagues.
Mr. Thomas:
I shall press on and turn to the picture in Wales now. Notwithstanding the comments that I made about the Labour party's honourable history and tradition in Wales, that hegemony has now been broken and we have to work within a different pattern of Welsh politics. It has been shattered, and no party now has a majority in Wales. Hon. Members have criticised the work of the Welsh Assembly, but they must recognise that the new century has ushered in a new type of politics.
The first two years under this Government have proved something of a revelation for many people in Wales. The Welsh electorate did not expect new Labour to follow Conservative spending plans for the first two years. After attacking such spending plans when in opposition, the Government now have a lot of explaining to do to the people of Wales.
Mr. Jon Owen Jones:
Leaving aside the merits or otherwise of following the Conservatives' budget plans for the first two years, does the hon. Gentleman accept that what he has just said is completely wrong, because when Labour fought the last election, we promised to do precisely that in order to overcome the huge debt that we inherited from the Tories? We told the electorate what we planned to do. Whether the hon. Gentleman agrees with it is another matter, but we told the electorate and they elected us.
Mr. Thomas:
I said that the electorate did not expect new Labour to do that. It may have been promised, but the election was fought on the basis of change, and change did not come.
It is time to reveal the real reason for those policies and the comprehensive adoption by new Labour of the right-wing orthodoxy that says internal markets bring efficiency savings and deliver services better than the public sector. A lack of faith in the public sector and the idea that the free market can be a tool for combating social exclusion and delivering economic development in deprived areas is Thatcherism by another name.
We need a reality check here. It cannot be denied that what is being delivered in Wales now is a widening gap between the rich and the poor. It is there in the statistics and the hon. Member for Blaenau Gwent (Mr. Smith) knows it well. There is continuing under-investment in our schools and our health services and a total disregard for the current farming crisis.
New Labour's attitude to public expenditure betrays a shift to the right. For Labour pioneers, spending on public services was seen as an essential tool for achieving social justice. It could pay for comprehensive education, council housing and the national health service. Now, however, new Labour regards public expenditure with great suspicion. We do not share that view. New expenditure has been ruled out and existing expenditure has to yield greater value. Nurses spend less time with patients in the name of efficiency, and teachers spend more time on administration. They do not have the opportunity to provide care. Council tax rises burden the local electorate because of the squeeze on national public expenditure. There is a new orthodoxy--I should like the Minister to deny it--that public expenditure should not rise above 40 per cent. of gross domestic product. The Government have stuck absolutely to that orthodoxy. There is no rhyme or reason for it: it is an article of faith. Public expenditure as a percentage of GDP--[Interruption.] Other European countries have a higher ratio of public expenditure to GDP.
Mr. Deputy Speaker (Sir Alan Haselhurst):
Order. May I tell the House that continued sedentary comment is extending speeches to the point that many, many hon. Members will be disappointed?
Mr. Thomas:
Public expenditure as a percentage of GDP has fallen since new Labour took office, and the new Labour plan is to continue the trend until the next general election.
Let us consider some of the figures from the Conservative Government's last year in office. Although it pains me to say it, in that year, general Government expenditure was 40.4 per cent. of GDP. In the first year of the current Government, the figure fell below 40 per cent., to 39.4 per cent., and it is predicted to remain below 40 per cent. for the next two years. In 14 of the Tories' 18 years in office, public expenditure was about 40 per cent. of GDP. New Labour has promised and delivered a consistently lower level of public spending.
A particularly apposite question is where those figures leave the Prime Minister's promise to raise health spending as a proportion of GDP. Unless the overall threshold of public expenditure is raised above 40 per cent., his promise can be met only by taking away from other items in GDP. I hope that the Secretary of State and the Minister will work hard in government to break that closed circle, which does nothing to help the socially excluded or the poor and particularly disadvantages vulnerable children and pensioners.
In that context, and in the context of the problems that I see in my constituency, we have to remember that about half public expenditure is spent on individuals--on pensions, and on social security payments. Is it therefore any wonder that, as a new Member of Parliament, I am already deluged by complaints about disability living allowance being taken from people because of cash limits, not because of changes in their disability? Is it any wonder that the 75p pension increase is thought to be risible when, because of rural bank closures and cuts in rural services, people have to spend that much just to take a bus to a bank or a post office?
The amount of public expenditure devoted to those services demonstrates the extent to which a Government are prepared to redistribute wealth. Redistribution of
wealth is what it is about. It is perverse for any Government who talk about social equity to set themselves the target of reducing that part of public expenditure as a matter of principle, rather than as a consequence of economic development and the growth of opportunity.
Over the years, the overall 1 per cent. cut in public expenditure has amounted to about £9 billion per year--which is equal to the Welsh block grant. Any voter would be able to tell the Government how to spend that money: on the health service, education and the rural economy. In Wales, the consequence of the cut is that health, education, public transport and the rural economic infrastructure are still starved of the resources that they need. Is that really what people thought they were voting for in 1997?
Interest rate cuts are increasing the effect of the public expenditure cut. The Government, rather than increasing investment in public services, are allowing interest rates to rise. New Labour has bought all the Tory economic arguments. Consequently, the Welsh economy is being run on the guiding principles of low public expenditure, low income tax and low inflation. Interest rates are the only weapon being used to keep the economy on track and to combat economic overheating. The way the economy is being run is disadvantageous to many areas in Wales.
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney):
I should like to take the opportunity--it is the first that I have had--to congratulate the hon. Member for Ceredigion (Mr. Thomas) on his impressive victory in Ceredigion. I was fascinated by his observations. We saw in him a Jekyll and Hyde conflict--the socialist trying to reconcile himself with the nationalist. I tell him that they are not reconcilable, and his speech reflected that fact. When the socialist came out, he showed some conviction, but, when the nationalist came out, we saw that the two do not go together. He is also probably the only socialist on the Opposition Benches.
Mr. Rowlands:
I do not think that the hon. Gentleman is a socialist.
I hope that during this Parliament the hon. Member for Ceredigion reconciles the Jekyll and Hyde in him. I hope that we shall be able to convince him that the socialist path is the best, not the nationalist one.
The hon. Gentleman gave his first speech in a debate on Welsh affairs. This could be my last. I shall offer some advice to my right hon. Friend the Secretary of State on his post-devolution role. I understand and appreciate the role that he has had to play in recent months, acting as a go-between, trying to reconcile some of the problems that have broken out in Cardiff. I hope that that will not become the most significant part of his role. It is important to have a first-class, co-operative working relationship between Westminster and the National Assembly for Wales, but I hope that he will not see that as his central role.
One of my right hon. Friend the Prime Minister's favourite phrases is that we must not forget the big picture. I hope that my right hon. Friend the Secretary of State will look at the big picture in Wales and play his role in Whitehall and Westminster to ensure that the needs and wishes of the people whom we represent are met.
The hon. Member for Ceredigion was right to point to the importance of public expenditure as an instrument of redistribution. It is one of the few left in the hands of the Government. However, I am astonished that his party intends to try to reconcile a policy of spending a greater proportion of GDP on public expenditure with a commitment to join economic and monetary union, accepting all the criteria and the straitjacket and imprisonment on public expenditure that go with that. I shall be interested to see how his party does that. I am baffled by the view that it would be a blow for freedom for the Welsh people to escape from some imperial British control only to become a prisoner of imperial European control. I believe that we should be governed as a part of Britain, but retain our distinctive policies and attitudes.
The first aspect of the big picture is public expenditure. My right hon. Friend the Member for Llanelli (Mr. Davies) pointed out that the £8 billion block grant represents only just over half of the total public expenditure in Wales. The other £7 billion that comes into Wales is outside the competence of the Assembly. More than £5 billion of that is accounted for by the social security budget. Marginal changes in overall totals of social security expenditure can have a disproportionate effect on our communities. My right hon. Friend the Secretary of State should spend some time ensuring that social security expenditure is shaped to meet the needs of our communities as well as those of the United Kingdom as a whole.
The other major area of public expenditure outside the control of the Assembly is £780 million of law and order and public protection spending. Those huge sums paid into Wales are spent on matters of considerable concern. I am glad that the Select Committee on Welsh Affairs has decided to deal with social exclusion. It will take evidence from Social Security Ministers because we recognise that they play an important role.
In last year's public expenditure budget, £116 million was spent on industry, employment and energy. Again, that was outside the budget of the National Assembly for Wales. Is that money achieving its purpose in Wales? Is there a role that my right hon. Friend can play in ensuring that that expenditure is geared to the needs of our nation?
The most important part of the big picture is employment and jobs. If one examines the instruments and expenditure available to Ministers to promote training and jobs in our communities, a large proportion of budgets and programmes are outside the competence of the Assembly. The work of the Chancellor of the Exchequer, which my right hon. Friend has passionately supported, on family tax credit, employment zones, and the new deal and its extension to the over-25s--all underpinned by the national minimum wage--is playing a major part in breaking through the fatalism and resignation to a life not on the dole but on benefit that has grown up in our communities over the past 18 to 20 years. That was not a society that we wanted to create but it is one that we have to tackle. The speech of the hon.
Member for Ceredigion was hopelessly over the top. The Government have done an enormous amount to address fatalism and resignation.
While I agree with the emphasis placed on developing entrepreneurial spirit and indigenous employment, in my area the majority of new job opportunities come from inward investment. Anyone who turns their back on inward investment is foolish. Fortunately, there are two projects in the pipeline in my constituency. One involves the St. Mary Meat Company from Cornwall; the other is One2One. Both will create an important number of jobs. Inward investment alongside the Chancellor's welfare- to-work programmes is vital to our needs and our future--United Kingdom policies working in and for Wales in every sense.
I hope that my right hon. Friend the Secretary of State will say a cautionary word to the Chancellor about the curious, superficial Treasury view that has emerged in the last few days of the mismatch between 1 million or more job vacancies and unemployment. We must not become bedazzled, as though just tapping those vacancies will solve unemployment. Because there has been so much interest in that claimed level of job vacancies, I checked on job vacancies in Merthyr yesterday and the day before. I hasten to add that I am not looking for a job myself but wanted to check what was available.
Sadly, I found that most of the 115 vacancies available in the past 24 hours were for cooks, cleaners, bar staff, bouncers and security officers. There were also vacancies for a butcher and bailiff, a few mechanics, a hairdresser and sales staff. All those jobs are useful and will supplement incomes in some cases, but many are part-time and some are temporary. Together, they do not add up to the stuff of a major new initiative in the communities I represent.
More interesting was what my analysis of the job vacancies available at the Merthyr jobcentre revealed about the nature of our economy and the valley economy catch-22 situation. The range of jobs available at our jobcentre, apart from those with the major inward investors, do not create or offer the skills and training opportunities that conventional wisdom says is a basis for the modern economy. Those job vacancies will not create the skilled training opportunities that we think are crucial to a 21st century economy. The catch-22 is that as we do not have the job vacancies to create the NVQ 3s and 4s that we are so short of, we do not have the training opportunities. Training means work-based training, so the employment must create the NVQ 3s and 4s that I am told are essential to a 21st century economy.
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