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Mr. Chris Ruane (Vale of Clwyd): The hon. Gentleman mentioned the need for incoming companies to be attracted to Wales. What does he think of the comment made by Seimon Glyn, a Plaid Cymru councillor, who said that the English are a drain on Welsh resources? Does he think that that comment will attract or repel inward investors?

Mr. Llwyd: Before I answer that question, I refer the hon. Gentleman to remarks made by the hon. Member for Clwyd, West (Mr. Thomas), who said:

"One particular area of concern I have brought to the attention of the Committee is the way in which some landlords are able to play the system and bring in large numbers of people from outside the area to live in substandard accommodation."

He pointed out that the cost was placed on local government. Worse still--I am quoting a publication of which the hon. Gentleman is aware--he said:

"The police do recognise there are problems in Colwyn Bay. There are those with little or no stake in the community who are known to be criminally active."

Before the hon. Gentleman or any other Labour Member throws any brickbats, let me say that I know the councillor to whom he referred, and I am not sure what he said, but he has since apologised.

Perhaps Labour Members should look a bit nearer home. A serving Member of the House has been terribly abusive to incomers to north Wales, so let us not start insulting each other across the House on that subject--there is nothing in it for the Labour party.

Mr. Ruane: Will the hon. Gentleman give way again?

Mr. Llwyd: No, I will not. The hon. Gentleman should sit down.

According to a recent report published by Robert Higgins of the centre for advanced studies at Cardiff university, entitled "An Index of Competitiveness in

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the UK: Local, regional and global analysis", Wales ranks last but one in the UK regional competitiveness index. Higgins notes:

"The index makes it abundantly clear it is the southern regions of England that are driving economic growth in the UK."

Good luck to them. I am saying that there should be a different approach in other parts of the UK. Higgins goes on to say:

"It is these regions that are home to the highest density of firms, the most knowledge-intensive firms, the highest level of economic activity, which in turn gives firms based in the areas a higher level of productivity".

He asks:

"Should we not be pushing for stronger incentives to help make the uncompetitive areas more competitive?"

That is my point.

Mr. Alan W. Williams (East Carmarthen and Dinefwr): The hon. Gentleman's main theory about the economy is that Wales is being treated unfavourably and is at the bottom of various league tables. I understand his argument, but will he concede that in his constituency unemployment has fallen by a third from 1,640 in December 1996 to 1,051 at present and that there have been parallel falls in unemployment throughout Wales? Despite the picture of doom and gloom that he is painting, the job situation in Wales, including in traditional industries, the rural economy and south Wales, is pretty good.

Mr. Llwyd: Modesty prevents me from saying why unemployment has fallen in Meirionnydd Nant Conwy, but I can assure the hon. Gentleman that the constituency has an effective Member of Parliament. If he were to listen to my contribution, he would realise that I am not whingeing but talking about what could be done to improve various areas of the UK. I say good luck to the south-east, but this is not a one-size-fits-all situation, as the Department of Trade and Industry appears to believe. I give due credit to the Government because unemployment has fallen, and of course I am pleased about that. However, manufacturing jobs have been lost, and we need to take our eye off one ball and keep it on another. We must ensure that we have a comprehensive regional approach to the problem, and that is what I am developing. I agree with the hon. Gentleman about the figures that he quoted.

The Welsh Affairs Committee made a recommendation about regional variations in tax, and I hope that the Government will respond in due course. Happily, Plaid Cymru policy accords with that recommendation.

Mr. Dafydd Wigley (Caernarfon): That is because Meirionnydd has a good MP.

Mr. Llwyd: I will not overdo the self-congratulation.

The Select Committee also made an important point about pensions. It said that it will

"watch the combination of the Pension Credit proposals and the Minimum Income Guarantee take-up campaign"

to ensure that pensioners are not left in poverty in future. It concluded that if those proposals do not work, the basic state pension will have to be linked once more to average earnings. That mirrors a recommendation by the Scottish Affairs Committee, and it is long overdue. That argument has long been raging in this place, and I am sure that we

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will revisit the matter. Suffice it to say that pensioners require a better deal than they are receiving at present. Few people, inside or outside the Chamber, can forget the 75p debacle.

On benefits, the Select Committee took the view that the Government should

"conduct a comprehensive national benefit take-up campaign".

It said that

"the benefits system allows people to survive, but does not lift them out of poverty."

It rightly concluded:

"Lifting the level of benefits is central to tackling social exclusion."

The Committee also examined the poverty trap, which acts as a disincentive to re-entering work. To be fair, the working families tax credit should assist. However, a substantial disincentive remains for childless people. In my view, and in that of many commentators and others who gave evidence to the Committee, there should be a transitional or tapering benefit for the first three to six months of new employment to attempt to deal with that damaging disincentive.

The Secretary of State for Wales and I have fallen out drastically about what he said or did not say in answer to a question that I asked or did not ask about the vexed matter of the Barnett formula. The Committee concludes that the Barnett formula needs reconsidering and to be made more needs based. Lord Barnett said:

"I had always assumed its use would be temporary until a more sophisticated method that took account of needs could be devised."

"Temporary" in that context is as temporary as the old traffic lights at Drws-y-nant in Rhydymain. It meant 23 years in that case; the Barnett formula is doing even better. We appreciate that such matters need to be reconsidered from time to time because they are important to the governance of Wales.

A preliminary glance at the figures shows that Wales has nothing to fear from a needs-based assessment as long as it is impartially conducted. Wales does not have to depend on the Barnett formula in its current form and would do better from a fairly calculated Barnett mark 2. We hope that the Government will take the initiative and develop a new formula after the next general election. There will be increasing pressure to reconsider an outmoded mechanism, which has worked well in the past, but should be re-examined after such a long time.

The Barnett formula constitutes a mechanistic approach and does not take account of the changing or current needs of Wales. The National Assembly has had much to say about that. It behoves us as Members of Parliament of all parties to chip in on the debate, further it, discuss it with our Assembly colleagues and try to devise a formula that is more needs based. I am therefore happy to endorse the Select Committee's recommendation that the Barnett formula should be reviewed or replaced by a needs-based system. Indeed, that is self-evident, given the huge disparity in GDP between England and Wales.

I know that several hon. Members want to speak in the debate, and I shall not take up much more time.

Mr. Paul Flynn (Newport, West): Before the hon. Gentleman concludes his jocular remarks, will he explain

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the reason for his belief that there is growing poverty in Wales? He said that 20,000 jobs had been lost, but that 40,000 jobs had come to Wales, including 500 today to Bridgend and 500 two days ago to Rogerstone.

The hon. Gentleman said that pensioners had a raw deal last year. Will he acknowledge that they had the biggest increase in 25 years this year? They will get rises beyond the level of earnings and that of inflation. When will he produce the evidence to support his case that there is growing poverty in Wales?

Mr. Llwyd: I do not have to look far: the GDP of Wales is decreasing. Sometimes the hon. Gentleman is beset by prejudice. He described my remarks as jocular. They are not. He might find the subject funny, but I do not. It is serious, and other Select Committee members are fully aware of the evidence that was taken in the past 12 months. We know that poverty in Wales is increasing. Yes, the Government are attempting to address the problem, but GDP in Wales goes ever downward. Let us not beat about that bush.

When the Government were elected, the cry of "Things can only get better" was uttered ad nauseam. Things have not got better for students, schools, people on benefits--such as those who have been taken off invalidity benefit--coal miners, members of the farming community, rural dwellers or Welsh steelmakers. Things have, however, got even better for the well off. That is a grave indictment of the new Labour Government and their priorities.

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