Pre-Budget Statement (Implications for Wales)

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Adam Price: I am pleased to follow the hon. Member for Newport, West (Paul Flynn), and I hope that his will not be the only constructively critical voice from the Government Benches. I am also pleased to be the first Opposition speaker in this debate. It would be churlish of me not to begin by welcoming some items in the pre-Budget statement, although in that respect I shall be a little briefer than the hon. Member for Montgomeryshire (Lembit Öpik).

A number of announcements were indeed very welcome. Reference has been made to the simplification of VAT rules for small businesses, and the attempt to create a level playing field for the domestic haulage sector is particularly welcome, not least in my constituency. Moves to strengthen community amateur sports clubs will prove very valuable throughout Wales, as will the reduction in duty on beer produced by smaller brewers. As a member of the interparliamentary beer group, my hon. Friend the Member for Meirionnydd Nant Conwy, who is not in his place, would doubtless welcome that development. [Laughter.] Are they open already?

As my hon. Friend the Member for Ceredigion said, the problem with the pre-Budget report is that many of its proposals were announced in exactly the same way at the time of the spring Budget, or have merely been put out for consultation. In other words, they will be announced again and we will have the same conversation during the next debate on these matters. The Chancellor's statement was not so much pre-Budget as re-Budget: a rehashing of proposals that we have already heard about.

One genuinely new item was the announcement of an extra £1 billion for health. We all heartily welcome any extra investment in our beleaguered health service, but according to the Government's figures, this year they have underspent on health by £0.5 billion, and on education by £1.4 billion. No wonder they can afford to spend an extra £1 billion on health next year. If they continue at their current rate, this year they will underspend by £11.4 billion. Given that current underspend is some £6 billion, the Chancellor had even more room to add to that figure.

Fundamental to investment in public services is the need to call a halt to the Treasury's confidence trick, which has persuaded us—

Mr. Murphy: The hon. Gentleman makes a valid point. It is important that we do not underspend, but that applies to the devolved Administrations as well as to the Government. He understands that the Government changed the rules so that they do not have to spend everything in one year and can roll over funds for three years.

Adam Price: Yes, I am aware of that. I will come to the departmental expenditure limit and annually managed expenditure later.

I was referring to the level of spending on public services. Hon. Members will be aware that UK education spending as a proportion of GDP last year was at a 14-year low. That was meant to be the threefold priority of the Government's first term. Hon. Members will also be aware that the Institute for Fiscal Studies report at the end of last month showed that the Government had reached a 25-year low in the level of public investment as a proportion of GDP. It was down to 1.7 per cent. of GDP compared with 8.9 per cent. in 1975.

Mrs. Lawrence: Is that not a reflection on increasing GDP in this country, rather than education spend?

Adam Price: I hate to point this out, but I was referring to a percentage.

Mrs. Lawrence: That is the point.

Adam Price: We can have an elementary lesson in mathematics outside the Committee. I am not talking about the absolute amount, but about the proportion. The proportion of GDP that we are spending on public investment has collapsed by 7.2 per cent. since the Wilson Government.

Mr. Murphy: One of the reasons for that is that now much less is spent on paying unemployment benefits.

Adam Price: I do not want to detain the Committee, but I was making a specific point. Government investment as a proportion of GDP has collapsed to its lowest level in 25 years—[Interruption.] There is clearly a lot of interest in this issue and I will happily copy the report to hon. Members. Government investment in housing in 2000 was negative for the first time on record. Public investment in health collapsed from 0.3 per cent. of GDP in 1991 to 0.01 per cent. last year.

Mr. John Smith: It is clearly a trick and one that we have heard before from the hon. Member for Meirionnydd Nant Conwy, who had to apologise to the House when he tried to imply that percentages of GDP being invested in Wales had fallen. The implication is that spending has not gone up, but it has risen dramatically as a direct result of the growth of the economy in the past four years brought about by such a successful Government. I wish that the hon. Gentleman would not knock investment in public spending.

Adam Price: I know that the hon. Gentleman is not suggesting that I am trying to mislead the Committee, but are not we all agreed that if there is growth in the economy it should be reflected in investment in health and education? The public sector needs to be adequately supported in line with economic growth.

Obviously, we are grateful for the Government's change of heart following the Wanless report. France spends 3 per cent more of GDP on health than Britain. That is a staggering amount. Germany spends 50 per cent. more on health and has twice as many doctors. It goes far wider than that. Britain's European partners spend two to three times more on railways. State pensions are generally twice the level of those in the United Kingdom. I am as keen as any hon. Member to develop an all-party consensus. We need to spend more and address progressive taxation. We have made proposals to abolish the upper limit on national insurance contributions—that would raise £5 billion a year—and to introduce a new rate of tax for higher earnings.

Those steps would have been welcome in the pre-Budget report, which could also have included other measures that would have been useful to Wales. For instance, the Treasury might have abandoned its rules on public investment, which lump together real investment in hospitals, homes and transport. That unfortunately represents a small proportion of GDP, with cyclical borrowing. It has a real impact on the Assembly, as the Minister for Finance, Local Government and Communities conceded only last week.

We have had many debates on the Barnett formula and I do not intend to go into detail on that now. However, we need a serious debate on it because, in the next 10 years, the Barnett squeeze—a term coined by economists—will lead to the increase in the rate of funding for health and education in Wales being less than that in England. We must debate a needs-based formula for Wales. I would have liked the Chancellor to announce that he would scrap PFIs and PPPs because they are expensive and unnecessary.

Hywel Williams (Caernarfon): Will my hon. Friend comment on the contrast between the Government's obsession with PPPs and the announcement that a hospital funded entirely from the public purse is to be built on the border of my constituency and that of my hon. Friend the Member for Meirionnydd Nant Conwy?

Adam Price: I am non-sectarian by nature. In the Assembly, I support Labour when it does things that I agree with. I would like that kind of open-mindedness to develop on the Labour Benches in Westminster.

Mr. Jon Owen Jones: The hon. Gentleman has asked difficult questions and I have one for him on Plaid Cymru's position. Plaid Cymru has often reiterated that the problems affecting public services will be solved when we persuade England to give us more money. How is that consistent with its argument that the problems of Wales will be solved by independence—or a status similar to independence? Both arguments are independently reasonable, but it is ridiculous to make them together.

Adam Price: We are all aware of the legacy in our communities that is due to neglect by successive Labour and Conservative Governments—[Interruption.] Hon. Members should come to my constituency and see the damage. The Labour Government have closed more mines in my constituency than the Conservatives ever did. Economic and social neglect will not be repaired overnight, which is why our party has always been gradualist in its constitutional demands. Wales needs a constitutional settlement that will allow us to address those problems and grant us primary law-making and tax-varying powers, not least in relation to operating aids.

Mrs. Lawrence: Will the hon. Gentleman give way?

Adam Price: I have been very generous. I will take further interventions later.

Mrs. Lawrence: On a point of clarification—

Adam Price: I am sure that the hon. Lady will get an opportunity to intervene later.

To cite the Chancellor, the Assembly must have the right to borrow to invest. Before the general election, several English cities asked for the right to borrow via a regional bond. It was announced at the Labour party conference that local authorities will be allowed to borrow. Local authorities in England will soon have tax-raising powers and the right to borrow, whereas the National Assembly for Wales—the democratic body that represents the Welsh nation—will have none of those powers. If we are to empower the Assembly to deal with the social and economic problems of Wales, we must grant it similar discretionary powers.

Lembit Öpik: I have been thinking about the hon. Gentleman's response to the hon. Member for Cardiff, Central and I have one question in the context of the pre-Budget statement. The hon. Gentleman described a gradualist approach, but towards what? Is he arguing that, ideally, today's debate is unnecessary because Wales should be financially independent from the rest of the United Kingdom?

Adam Price: We made our position clear in an earlier response. We want a needs assessment across the whole of England and Wales that reflects the real circumstances of Welsh society. I would be happy to have a full debate on constitutional issues in the Welsh Grand Committee. We are not advocating financial autonomy for Wales tomorrow: in terms of economic development we are not yet in a position to do that.

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Prepared 28 November 2001