Pre-Budget Statement (Implications for Wales)

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Lembit Öpik: I am sorry to intervene again and I am grateful for the hon. Gentleman's patience, but I asked a yes or no question. He said that he supported a gradualist approach, and I asked towards what. In the long term, is it the hon. Gentleman's goal to create for Wales financial independence from the rest of the United Kingdom? That is an important yes or no question.

Adam Price: I would be more interested in dialogue with the hon. Gentleman if I knew the Liberal Democrat position on the issue. We advocate tax-varying powers similar to those in Scotland. That is our constitutional position. Our long-term constitutional objective is also absolutely clear. We had a huge debate on it at our annual conference and we have just had a special constitutional conference. How much clearer can we make it? I realise that the constitutional position of Plaid Cymru is the most interesting topic for debate this morning, but I should move on.

Mr. Chris Bryant (Rhondda): Will the hon. Gentleman give way?

Adam Price: No, I should like to move on to the vital issue which our constituents expect us to discuss this morning. The real issues facing small businesses and communities across the length and breadth of Wales are important. The biggest disappointment in the pre-Budget report was that we gained virtually nothing in response to the National Assembly for Wales' submission of an action plan on investment, published this Monday. I had assumed a degree of co-ordination between the office of the Secretary of State for Wales and the Welsh Assembly. The Secretary of State referred to working in partnership; if this is evidence of partnership, I am afraid that its success has been weakened.

The Assembly published an action plan demanding eight separate tax incentives, which are allowed under derogations of the European Commission for objective 1 areas, but there has been no delivery. That is bad news for many of our communities in west Wales and the valleys. The PricewaterhouseCoopers report, commissioned earlier this year and also published on Monday, states:

    ``If Wales is to tackle its very real structural problems it must maximise the opportunities afforded it under the Objective 1 status. This requires a radical rethinking of incentives.''

The derogations under objective 1 status provided a real opportunity to shift the focus of support to indigenous businesses and a package of regionally enhanced incentives for communities in west Wales and the valleys. On Monday, the First Minister said:

    ``Wales has greater needs for enhanced tax incentives than most other parts of Britain. That is why we have been pushing hard for the Chancellor to include them in his pre-Budget Report.''

Either the First Minister was not pushing hard enough, or the Chancellor has been obdurate in his response. I have been asked several times whether National Assembly and Treasury Ministers have meetings. It was made clear in the National Assembly on 22 November that they do not.

Mr. David: Does not the hon. Gentleman recognise and welcome the fact that enterprise and small businesses in Wales will benefit from the measures that the Chancellor will introduce?

Adam Price: I will come on to that. As the First Minister said, Wales has greater needs for enhanced tax incentives. We are a special case because of our social and economic circumstances. The European Commission recognised that when it awarded us objective 1 status. It is a great shame that the Government are not prepared to recognise that—[Interruption.] I can understand why hon. Members are angry if they share my anger at the Chancellor's failure to address the issue. This could have been a real chance to improve the offer that we could provide, and not only to inward investors in indigenous companies.

We are two years into the programme, and we have wasted the opportunity. That is incredibly sad for all of us in the House. There has been a wave of job losses throughout industrial areas. We also have the lowest rate of business start-ups, and little research and development.

Mr. John Smith: Does the hon. Gentleman agree, despite all his doom and gloom, that Wales is now seen as having a buoyant economy and a positive outlook? A certain Dafydd Wigley said that just the other week. I wish that the hon. Gentleman would adopt the same approach and stop talking Wales down.

Adam Price: I am interested to hear what the hon. Gentleman has to say. I have worked all my life in economic development and no one is more committed to building a more successful economy and reversing decades of economic decline in Wales. I hope that he will accept and appreciate that.

Mr. Smith: Who is Dafydd Wigley?

Adam Price: Dafydd Wigley is one of my friends in politics, as the hon. Gentleman knows. There are points of light in the Welsh economy, but the overwhelming impression is appalling. Welsh GDP growth has collapsed since 1995. We must consider some serious issues. The UK regional index of competitiveness was published last week. It showed that the divide between Wales and London with regard to competitiveness increased by more than 30 per cent between 1998 and last year. That shows that the economic performance of Wales has fallen off incredibly in a short time.

During that three-year period, of the 22 local authorities in Wales, only Monmouthshire is performing above the UK average in terms of competitiveness. The competitive performance of 18 of the 22 local authorities has fallen. It is gratifying to note that of the four improving areas, two—Gwynedd and Rhondda Cynon Taff—are Plaid Cymru local authorities that have been widely praised for their innovative economic development strategies.

Mr. Bryant: Is the hon. Gentleman aware that during the past year, underspend in Rhondda Cynon Taff has been worse than in any other local authority in Wales?

Adam Price: I recall that certain financial problems had to be dealt with. To be fair, that was before the hon. Gentleman's time. I regret to inform the Secretary of State that the biggest fall in competitive performance in the index of local competitiveness was in the constituency of Torfaen. Out of 173 local authorities in the United Kingdom, six of the bottom 10 are in Wales and they are all represented by Labour Members. I regret to say that the most uncompetitive of all is Merthyr Tydfil.

Kevin Brennan (Cardiff, West)

: Is not the hon. Gentleman deliberately exaggerating and misleading us with his use of statistics? He talked about the Welsh GDP having collapsed in recent years. The GDP of Wales has been growing and he knows it but he is trying to suggest it is collapsing by comparing it with other regions.

Would he agree with the conclusion in the ``Productivity in the UK'' report issued by the Treasury and the Department of Trade and Industry this week that the size of differentials and the relative ranking of regions in the United Kingdom have been consistent since the 1920s?

We need the Assembly and local authorities to work effectively. The hon. Gentleman abuses statistics by taking a single local authority over a short period of time. The figures might be due to one local factor. That is an absolute misuse of statistics.

Adam Price: I have to say to the hon. Gentleman that it is high time that we realised the gravity of the economic situation in Wales. It is not me saying this. I have regular conversations with academic economists throughout the university of Wales. He mentions the 1920s and he is quite right to do so because this is the worst five-year period in terms of GDP growth since then.

Kevin Brennan: That is absolute nonsense. How can he describe the last five years of GDP growth in Wales as the worst since the 1920s? Will he now withdraw that statement?

Adam Price: Absolutely not. I have no idea what figures the hon. Member for Cardiff, West is looking at for GDP growth. Yes, GDP is growing but the rate of growth has collapsed. The rate of GDP growth is far lower now than it was.

Mr. Bryant:No, it is not.

Adam Price: I beg to differ. [Interruption.] I will be happy to have a conversation with the Minister about economic statistics at some other time. The prosperity gap between Wales and the south-east of England is growing. Unless that fundamental factor is realised, we will not have the debate that we need.

How will we address the growing chasm between the regions in the northern half of the United Kingdom and those in the prosperous south-east? The business proposals of the pre-Budget report are aimed at the knowledge economy of the south-east of England.

I will give a few examples. We got research and development tax credits for large businesses. Where are those large business? We will look with interest in years to come to ascertain the areas that benefited most from the tax credits. Of course, they will be the regions that are already doing well. That applies to the proposals on intellectual property. The research and development tax credit is volume-based, not incremental, and it will also help large businesses and widen the gulf between Wales and the south-east of England.

The tax credits are universally available, but we need a regional policy whereby tax incentives are targeted at areas of greatest need. The Government claim that they are targeting them in their welfare policies. In the context of welfare benefits, tax credits are aimed at the most needy, but when it comes to business, the opposite applies. We get universal tax credits that are available throughout the United Kingdom, instead of targeting areas for operating aid as my party, the National Assembly for Wales and the First Minister demanded. In economic terms, this was a Budget for the south-east of England. [Interruption.] That is a fact.

We listened with interest to the Chancellor's comments on a new regional policy. Some of us were initially heartened because we had been calling for its revival for many years. However, when we looked at the details, we realised that it was only a review. A taskforce will probably be set up and a superannuated banker will issue a report and tell us that the north-south divide is disappearing.

Last night, I did some research in the Library on the levels of regional assistance under this Government. Taking regional selective assistance, regional enterprise and innovation grants together, the total spend on regional policy in Wales almost halved between 1998–99 and last year; it went down from £83,276,000 to £48,358,000 in one year. That is a 45 per cent. cut in regional assistance available to Welsh companies. However, at the same time, regional selective assistance for the south-east of England increased by 35 per cent. The new regional policy favours the already prosperous regions of the UK. It is not a regional, but an anti-regional policy.

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Prepared 28 November 2001