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11 Apr 2003 : Column 536—continued
Geraint Davies: Does the hon. Gentleman accept that Britain is well within the stability pact, unlike France and Germany? In fact, our debt is so low that it would not matter if we breached the stability pact anyway.
Sir Michael Spicer: If the hon. Gentleman believes that it would not matter, that raises a different question, which I shall come on to in a few moments.
The GDP forecasts on which the Budget is based are pretty dodgy in my view and several other people's views. How silly the Chancellor looks for having tried, in front of countless Treasury Committee meetings that I have attended, to argue that taxes were not rising. It was always clear that they were rising from the moment that the Government abandoned the sound policies that they inherited from the Conservatives. That is one reason why the rate of productivity has declined ever since this Government took office and one reason, therefore, why they have airbrushed productivity tables out of the relevant official publications.
The rise in spending, debt and taxes is, of course, desperately unfortunate. It will contribute towards the breakdown of the economy that has already been anticipated by the crash of the stock market. However, to come to the point that was raised by the hon. Member for Croydon, Central (Geraint Davies), so long as we
are outside the euro, all such matters are the subject of legitimate debate, in the sense that the electorate can take a view on them. When the electorate rumbles the Government's mismanagement of the public finances, they can, and no doubt will, choose to throw them out. That is what happens to sovereign Governments who bungle things in a democracy—policy, to that extent, is governed by the wishes of the electorate. However, it is not what happens under the rules governing membership of the European single currency. In that case, economic policy is run by the regulations and directions of bodies that are not accountable to the electorate.The Government's financial policies, as outlined in the Budget and the accompanying Red Book, raise wider cost questions than those surrounding the Government's profligacy—serious though that is. They have a wider bearing on the nature of any proposed relationship with the European single currency and the accompanying monetary union.
Perhaps an even more fundamental euro question that arises from the Budget, and indeed the debate, relates to another euro test: convergence. When the Government publish the results of that test, it will be of critical importance that they define what they mean by convergence. For instance, it is more than probable that through a combination of rising taxes—taxes are rising by £8 billion in this year alone—and the strangulation of industry through the imposition of ever more regulations, most topically perhaps the Higgs recommendations, and their effect on small businesses, Britain's economy will begin to run down to the level experienced in continental European countries.
In particular, it is more than probable that unemployment rates in this country will begin to rise and that the gap between the British unemployment rate, currently about 5 per cent., and the continental rate, which is currently about 9 per cent., will narrow. If the conclusion drawn from that was that we had met the convergence test, it would be bizarre.
That is one example, and there are likely to be many more, of the subjective nature of the tests. As the Budget judgment has itself shown, the future is unpredictable. Who knows whether convergence will be sustainable; whether there will be sufficient flexibility in the British economy to cope with economic change; whether investment will be affected one way or the other; or what will be the impact on financial services or employment?
What we do know, however, is that, outside the euro, the British economy has been far more robust than that of most countries that are inside the euro. Furthermore, we know that membership of the euro inevitably creates for each country the wrong exchange rate, the wrong interest rate and higher taxes. There is no correct rate of exchange other than that determined by the comparative performance of one economy against another. A permanent exchange rate is wrong by definition, as the correct rate will vary from moment to moment, depending on market forces at any particular time. Presumably, that is why, when the Governor of the Bank of England was asked recently what the correct rate for British entry to the European single currency was, he answered, "Heaven knows".
Much the same point, as has been argued so often, applies to a single interest rate, which would be correct for all countries of the union only if they were on identical business cycles. That is manifestly not the case, as is shown by the relative economic performances of Eire and Germany.
Mr. Love: As manufacturing industry is currently in recession and there has been a significant loss of manufacturing jobs in recent years, does the hon. Gentleman agree that to have a competitive exchange rate would need substantial devaluation?
Sir Michael Spicer: What really counts is to have a competitive economy. One of the problems in this country has been that our competitiveness has declined constantly since the Labour Government took over—for reasons that I have mentioned already and do not have time to repeat. A competitive economy is crucial.
Taxes are important in that regard. In a European monetary union, taxes will rise not merely due to the burgeoning bureaucracy that would be involved but also because of the need, within a single price structure, to compensate countries that experience relatively low wages.
Whatever the economic tests show, the decision to enter the single European currency will be political. That has always been recognised by continental European countries. The question as to whether it is desirable to sacrifice—irrevocably, if one enters the single currency—ultimate control over one's economic policy is purely political and, likewise, whether a country should be accountable to its electorate and indeed whether there should be democracy at all.
I know my answers to those questions. I think I know what the British people's answers will be if they are faced with those questions in a referendum. I think the Government know what the British people's answers will be; and it is because of that, and not because of the economic tests promised again in the Chancellor's speech, that whatever nods and winks the Budget has made in the direction of Europe and whatever commitments are made in June to "wait and see", there will be no referendum in this Parliament.
11.24 am
Albert Owen (Ynys Môn): I welcome many of the measures set out in the Chancellor's Budget statement. The Budget has been well received by pensioners and families in my constituency. It was also well received by the business community in Wales and indeed by the CBI and the TUC.
Since my election, I have worked closely with the business community and trade unions in my constituency and within the wider region of Wales. It may surprise many hon. Members to learn that, despite the natural vested interests of their members, trade unions and the business sector often share the same objectives, which include investment in education and skills training.
Although some hon. Members may be surprised that labour and capital have shared interests and views, it is in fact a measure of a mature society. The mantra, "Education, education, education" must be matched by that of "Jobs, jobs, jobs". Both sectors realise that.
I must confess, however, that I was a little surprised to read the responses to the Chancellor's Budget statement in the Welsh press yesterday. The Welsh TUC, CBI Wales and, even more surprising, the Federation of Small Businesses all welcomed the Chancellor's statement. They were in unison in agreeing about the importance of my right hon. Friend's measures to assist innovation in small businesses and the extension of research and development tax credits. They attached particular importance to the one-year extension of the 100 per cent. first year information and communications technology capital allowances, which will potentially assist 155,000 small businesses in Wales until March next year. They also acknowledged the real incentive provided by raising the VAT exemptions to turnovers of £56,000 or less and the cutting of red tape. Despite the Opposition's constant complaint that there is too much red tape and that the Government do not take notice, those organisations acknowledge that that is not the case.
It is vital that we produce the conditions for growth and investment. To build a Britain with a strong economy, which gives social justice, requires investment in our most important asset: our people. We need skills training. The Chancellor was right to point out that it is in the national economic interest that every adult has basic skills and qualifications to level 2. My right hon. Friend the Secretary of State for Education and Skills endorsed that in his opening speech.
The business community in my constituency tells me that it is difficult to match vacancies with the right skills, even in areas of high unemployment like mine that has suffered from two decades of under-investment. In February 1997, almost 3,000 claimants in my constituency were seeking work. Although the number is now 1,300, a reduction of about 45 per cent., that is still twice the national UK and the Welsh average. There is a high percentage of long-term unemployed people, many of whom are over 50. Through no fault of their own, it is difficult for them to find work in the locality.
The one-size-fits-all employment policy has not succeeded in stimulating and innovating even economic development throughout Wales or the UK, so I welcome the Chancellor's proposal to give local jobcentres discretionary powers to be flexible so as to target the long-term unemployed and match their skills and needs to local employment opportunities. There is an onus on local training providers. Skills audits are important, but they need to take seriously the needs of business and, more important in underdeveloped areas such as mine, to get their economic plans right. Economic developers, training providers and schools must work in partnership.
I also welcome local discretion for jobcentres to award grants for travel to interviews and for bridging the transition to work. Working Link, which was mentioned by my hon. Friend the Member for Caerphilly (Mr. David), has a certain degree of flexibility, but unfortunately it does not have the correct discretionary powers to enable it to do its job fully.
During my time as a welfare benefits adviser, I was aware of the problems for many long-term unemployed people who were moving into work. That is why I welcome housing benefit reform, which will have practical benefits for many people. The housing benefit system can be a great disincentive to people who are
moving into work because of the time taken to reassess their claims during those important first weeks of work. The decision to simplify the system is welcome.I have concerns, however, about widening areas of job search for those who are unemployed for 13 weeks or more if no support is available for those with transport needs: in rural areas such as mine, people moving into work or looking for jobs find that they have a heavy petrol bill and are financially unable to meet the jobcentre's requirements. Skills and training is the route to full employment. The right to lifelong learning is essential if we are to move into a highly skilled, highly competitive economy. I am pleased that my right hon. Friend the Secretary of State for Education and Skills dispelled the myth this morning that vocational qualifications are in some way second-class qualifications.
Our further education colleges and universities must be seen as incubators for industry serving their local communities as well as the national interest. That is especially true in areas on the periphery of the United Kingdom. For example, Bangor university, in my area, has an excellent school of oceanology, and is at the cutting edge of research and development in maritime studies. In spite of that success, however, and innovations announced by the Welsh Assembly Government, the area has poor ICT infrastructure, and is having difficulty in attracting industries that would benefit from the spin-off of the university's research and development. If we are to spread wealth throughout Wales and the United Kingdom, we need to roll out broadband, which is currently demand-led, suppressing business start-ups in new technologies in areas such as mine.
The irony is that many young people who leave the area and get qualifications, particularly in ICT, do not return to it because of lack of infrastructure and lack of opportunity to start their business. That is why I welcome the announcement about relocation of public sector jobs in the Chancellor's Budget statement. Highly skilled and qualified jobs in the public sector are often concentrated around the south-west of Wales. Indeed, it is true that Wales is very Cardiff-centric, and the benefits to the south-west of Wales are a long way from the north-west. Over-centralisation of the civil service and non-governmental bodies creates problems of overheating in the housing market in some areas, while areas in the north-west and north-east of Wales, for instance, are deserts in terms of such public sector investment. The desire to redistribute the key jobs to the regions and nations of the United Kingdom will create a one-nation economy. I am certain that my right hon. Friend the Secretary of State for Wales will fight hard to get Wales its fair share, and I shall certainly fight my corner to get north-west Wales its fair share.
There was good news for Pembroke recently when the Department for Work and Pensions announced the relocation of 200 jobs there. I am certain that the review to relocate a further 20,000 jobs will see advantages in the choice of areas such as north-west Wales. Again, however, skills training is needed to meet the requirements of such public sector jobs, which requires a strategic approach involving schools, colleges and training providers.
On the Chancellor's announcement in relation to employment areas, in the short term, steps to boost enterprise with 2000 enterprise areas across the United Kingdom and the exemptions from stamp duty for certain transactions as from yesterday will help. That will affect around 350 wards in Wales. Sadly, some 22—more than half—of the 40 wards in my constituency qualify as being deprived, so it is important that we get high-paid jobs into such areas so that new businesses can work alongside.
I am optimistic that the sustained investment of an extra £1.2 billion for 2005–06 compared with 2002–03 for the Assembly to spend on education, training, health and other public services will benefit Wales. Underlying that, however, must be the economic stability that the Chancellor has provided. Despite the doom and gloom spread by many opposition parties in Wales, we are already seeing results of the extra investment since 1999. The Labour-led Assembly, working with the Westminster Government, is bringing benefits in terms of public services and health to north-west Wales in particular.
According to The Sunday Times "Good Hospital Guide" analysis, the North West Wales NHS trust has been making excellent progress since 2001 towards meeting its targets for in-patient waiting lists, and is now the top-performing trust in Wales, with an improvement of some 11 per cent. While the ratio of doctors to beds remains low, the signs are that sustainable investment by the Government is producing results and that training of doctors and nurses is seeing results. That, too, is important training for high-skilled jobs. Public services are big employers in my area and major contributors to the economy, so the importance of linking training, jobs and services cannot be underestimated. A new initiative involving the university of Wales and schools, with students and health professionals acting as mentors to school pupils interested in medicine, is showing good results, and recruitment and retention is vital.
I take good heart from the Chancellor's Budget statement. It is not only a good Budget for pensioners and children throughout Wales and the United Kingdom but for small businesses, and for economic development in the regions and nations of the UK. It sets the groundwork for even development and for full employment. It sets out a road map for training providers to meet the needs of the business community and to plan for future economic growth. It gives hope to the unskilled and the unemployed that they, too, can be part of a strong British economy that has at its core real social justice. On 1 May, the people of Wales can enhance those measures by returning a majority Labour Government in Cardiff, which, in partnership with the Westminster Government, can deliver a better educated and more prosperous Wales.
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