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House of Commons
Session 2007 - 08
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General Committee Debates
Welsh Grand Committee Debates

The Committee consisted of the following Members:

Chairman: Mr. Martin Caton
Ainger, Nick (Carmarthen, West and South Pembrokeshire) (Lab)
Brennan, Kevin (Parliamentary Under-Secretary of State for Children, Schools and Families)
Bryant, Chris (Rhondda) (Lab)
Clwyd, Ann (Cynon Valley) (Lab)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
David, Mr. Wayne (Caerphilly) (Lab)
Davies, Mr. Dai (Blaenau Gwent) (Ind)
Davies, David T.C. (Monmouth) (Con)
Flynn, Paul (Newport, West) (Lab)
Francis, Dr. Hywel (Aberavon) (Lab)
Gillan, Mrs. Cheryl (Chesham and Amersham) (Con)
Griffith, Nia (Llanelli) (Lab)
Hain, Mr. Peter (Neath) (Lab)
Hanson, Mr. David (Minister of State, Ministry of Justice)
Havard, Mr. Dai (Merthyr Tydfil and Rhymney) (Lab)
Howells, Dr. Kim (Minister for the Middle East)
Irranca-Davies, Huw (Parliamentary Under-Secretary of State for Wales)
James, Mrs. Siân C. (Swansea, East) (Lab)
Jones, Mr. David (Clwyd, West) (Con)
Llwyd, Mr. Elfyn (Meirionnydd Nant Conwy) (PC)
Lucas, Ian (Wrexham) (Lab)
Michael, Alun (Cardiff, South and Penarth) (Lab/Co-op)
Moon, Mrs. Madeleine (Bridgend) (Lab)
Morden, Jessica (Newport, East) (Lab)
Morgan, Julie (Cardiff, North) (Lab)
Murphy, Mr. Paul (Secretary of State for Wales)
Öpik, Lembit (Montgomeryshire) (LD)
Owen, Albert (Ynys Môn) (Lab)
Price, Adam (Carmarthen, East and Dinefwr) (PC)
Pritchard, Mark (The Wrekin) (Con)
Ruane, Chris (Vale of Clwyd) (Lab)
Smith, John (Vale of Glamorgan) (Lab)
Tami, Mark (Alyn and Deeside) (Lab)
Touhig, Mr. Don (Islwyn) (Lab/Co-op)
Williams, Mr. Alan (Swansea, West) (Lab)
Williams, Mrs. Betty (Conwy) (Lab)
Williams, Hywel (Caernarfon) (PC)
Williams, Mark (Ceredigion) (LD)
Williams, Mr. Roger (Brecon and Radnorshire) (LD)
Willott, Jenny (Cardiff, Central) (LD)
Alan Sandall, Mick Hillyard, Committee Clerks
† attended the Committee

Welsh Grand Committee

Wednesday 26 March 2008


[Mr. martin Caton in the Chair]

Motion made, a nd Question proposed [this day],
That the Committee has considered the matter of the Budget Statement and its implications for Wales.—[Mr. Paul Murphy . ]
2 pm
Question again proposed.
Adam Price (Carmarthen, East and Dinefwr) (PC): Before the intermission I was talking about super-tax evasion by the super-rich. A number of mechanisms, apart from offshoring, are used by the mega-rich, particularly by the barons of the private equity industry. One simple mechanism is that because they are funded by debt many of them do not make any profit and therefore do not pay corporation tax. They make their money through the capital gain of the business when they eventually sell it. So on the corporate side, they pay no corporation tax. On the personal side, they have managed to convince the Treasury that their income is taken in the form of a profit share and they should therefore not pay income tax but capital gains tax, which is at 18 per cent. That is why I referred earlier to the iniquitous situation whereby the chief executive of a private equity firm pays 18 per cent. on what is effectively their income, but which, through a technicality—a loophole—is seen as a capital gain. The Government closed that loophole in 2003, but only for employee share ownership schemes, which was a good idea. They kept it open for the private equity industry. They were lobbied hard by the likes of Sir Ronald Cohen, the chair of Apax. He happens to be a big funder of the Labour party, but I am sure that that was a mere coincidence.
That loophole is absolutely unacceptable. The TUC has estimated that we lose £25 billion a year through the combined effect of these tax loopholes for the super-rich, £13 billion on the personal taxation side and £12 billion on the corporate. The argument that we should be thankful that non-doms are living here, and that the burden therefore has to fall on the rest of us otherwise they will go off to Monaco, does not stand up. The argument, that those people who work in the financial institutions in the City are extraordinarily clever and therefore deserve to be treated with largesse, may have sounded good in the good old days but we have now seen the difficulties that the economy is getting into because of the massive mistakes made by those same people. We now have to bail them out—the taxpayer has to bail them out—and yet they do not contribute as they should to the Exchequer. That has to change.
Mark Pritchard (The Wrekin) (Con): On that point, would the hon. Gentleman like to put on record what he thinks that higher tax band should be?
Adam Price: I can give a personal view, because we recently launched a tax commission within my party. If you are going to take evidence, Mr. Caton, I think that it will be wrong to give out the answer in advance. My personal view is that we should introduce a tax band at either £100,000 or £200,000. Certainly in Wales that is a substantial income, and it is reasonable to expect at that level a slightly higher proportion of tax paid. I am giving a personal view and it may not satisfy the hon. Gentleman. In discussing the detail of where that tax band should be there will be a range of views.
The important principle is this. For people who are on large, substantial salaries—and from the perspective of my constituency, that is most of us in this room—it should be acceptable, or expected, that those who can afford to pay more should do so as a proportion of their income. There should not be the situation where mega-rich millionaires, who can afford tax planning, or tax evasion in some cases, should pay less than people on very low incomes. That is unacceptable.
Mark Pritchard: It is refreshing to hear some free thinking in this place, and I thank the hon. Gentleman for his honesty and for being so candid. He mentioned his personal view that people earning over £100,000 could be a starting point for a tax band. Can he confirm, in the spirit of free thinking and transparency, what that tax rate would be? I ask for his personal view, I understand that it is not a party recommendation.
Adam Price: We are getting into levels of detail now. It would be wrong for me to pluck a figure about the rate of tax out of my head. I have been fair in stating the level where I think that a new tax band should kick in. We need degrees of progression built into the tax system. With the Conservative party, if we scratch a Cameronite, we find a Thatcherite. The basic disagreement is not about any rate or band that I could mention, but is that the Conservative party, even in its new clothes, does not agree in its heart of hearts with the principle of progressive taxation. In philosophical terms, that is an honourable position for the hon. Gentleman to take. It is the basis of conservatism, but is not something that I share. I believe that those of us who can afford to pay more should pay more as a proportion of income. That, for me, is the hallmark of a decent society.
Adam Price: I am familiar with the Laffer curve from my days studying economics. However, in terms of the Laffer effect—where at a lower rate of taxation, the level of tax take increases for the reasons suggested by the hon. Gentleman—the evidence is stronger in relation to business taxation than it is to personal taxation. With personal taxation the evidence is weak, other than at very punitive levels such as the 98 per cent. marginal rate of taxation that we had during the 1970s, where it is arguable that a lower rate would have resulted in more tax. I am not familiar with the evidence from the Baltic states, but I would be interested to see it.
David T.C. Davies (Monmouth) (Con): The hon. Gentleman seems to accept in his argument the premise that lower rates of taxation can lead to higher increases in revenue taken by the Treasury. The argument is about where that level should be. In principle, he would presumably agree with hon. Members on both sides of the Committee that setting levels of taxation at too high a level is likely to decrease the take to the Treasury.
Adam Price: Perhaps at the margins and in relation to business taxation. Economists disagree, but I have never seen any compelling evidence in relation to the Laffer effect and personal taxation. There is some evidence on both sides of the argument in relation to business taxation. In Ireland, for example, the rate of corporation tax was lowered from 50 per cent. down, over a period of years, to 10 per cent., and now up to 12.5 per cent. It saw a big expansion in its level of tax take, but that was because it was a small country that had very little headquartered corporate activity during the early 80s. Through lowering its corporate tax levels, it was able to engage in fiscal competition with larger jurisdictions that had higher rates. If Germany, a large country, had done the same, would it have had the same effect? That is unlikely because the effect would have been not to attract more companies into Germany, but that the companies already there would pay less. In certain circumstances, the Laffer effect can work. We are in the position when a relatively small number of people working in the hedge fund and private equity industry are abusing our tax regime. According to the TUC, they are punching a massive £25 billion black hole into tax receipts, and it is time that we closed it.
Secondly, we need to look carefully at economic inactivity. There is a problem with much of the Government’s policy at the moment, which suggests that it is purely a supply side difficulty and that the reason why people are inactive is purely to do with their level of skills and so on. It is not always that simple. Demand side issues also compel some people into inactivity. We need to be careful that we do not go fully down the American workfare route because the experience there has not been positive. We must remember that the United States of America has the worst level of inequality in the developed world. It is often said in relation to workfare in the United States that only 11 per cent. of people in Detroit are now on benefits, whereas it was much higher a few decades ago. I wonder why that figure is now so low. Is it because mortality rates are increasing in America? Are more people dying and thus reducing the number of people on benefits? Is it because of people in prison? The United States has the highest prison population in the world. One way in which to get people off benefits is to lock them up. People are homeless in Detroit because there is not the universal right to housing that once existed. We have to be careful about going down the American workfare route because there is a lack of effective demand for the sort of jobs that would be attractive or amenable to the population.
Lastly, we need to do several things about low pay. We must maintain the value of the national minimum wage at least with average earnings, and increase it above that. Over the past 10 years, the national minimum wage has increased by 50 per cent., which is above the rate of the increase in average earnings. We need to accelerate that process so that we can turn the national minimum wage into a living wage that will enable people to have a decent standard of living.
Albert Owen (Ynys Môn) (Lab): The hon. Gentleman is giving good advice about the minimum wage and saying how he believes that it should move faster than indexation. However, as for welfare to work and getting people off economic inactivity and into work, I did not hear an answer, only advice to the Government to be careful. Is his party advocating more stick or carrot, or both?
Adam Price: There are no easy answers. Economic inactivity is a deeply intractable problem. It would be wrong for anyone to pretend otherwise. In short, I believe in more carrot and less stick. If we want to look to the most effective models in the OECD area, the Nordic countries have had active labour market policies for 15 to 20 years. They are far more successful than the American models but, for some reason, do not receive the same coverage.
Hywel Williams (Caernarfon) (PC): The Government’s own research, commissioned by the Department for Work and Pensions, shows that sanctions are less effective than work support, especially for groups such as single parents who value, for example, the £40 per week, which will be taking effect in April. That will be very valuable indeed, providing stable employment for extended periods. Sanctions will not work that well.
Adam Price: It is important that we stress the long-term support element, rather than the sanctions which, as my hon. Friend says, have not been as effective. From other examples, that would appear to be so.
2.17 pm
Albert Owen: It is always a pleasure to follow the hon. Member for Carmarthen, East and Dinefwr, who gave a thoughtful and detailed speech. He said that he did not want to go into detail—he did not towards the end, but, at the beginning, he went into an awful lot of interesting detail. Government has changed and tempered some of his language. He started off being more new Labour than me, but ended by reverting to type and having a couple of knocks at the Government, which was fair comment. His analysis of the Labour 10 years was pretty accurate: a lot done and a lot more to do. I can remember standing on that slogan in the general election. Perhaps our parties are getting much closer than many people say. I welcome people changing and tempering their language towards the Labour party, so I make no apology for that.
The Budget was tough for many reasons. I agreed with the hon. Member for Carmarthen, East and Dinefwr that it was also fair. The climate was difficult for delivering a populist Budget. It was set against the difficult global background of the rise in oil prices and the credit crunch, which has affected every community in Wales. No one has been exempt from those international conditions. The Budget was right for the time and contained a lot of good things. The Secretary of State was right to put it in its proper context.
My right hon. Friend was also right to remind the Committee that, over 10 years, we have had stability and economic growth year on year. We tailored the Budgets to meet the conditions at the time, while looking to the future so that we could cope with the difficulties that each economy in the world is facing. I do not want to return to the ’80s and ’90s, when we had instability and the high interest rates of 15 per cent. plus. As someone taking out a first mortgage, I recall that it was difficult.
The economy in Wales is strong. It has low unemployment and high employment. Much remains to be done, which is why I was teasing out matters about welfare to work—there is an awful lot of work to be done on the economically inactive. However, the priorities of the Government are right, concentrating on areas of high unemployment and getting unemployment down, in the first instance through welfare to work and targeting groups such as the under-25s and the over-50s. In my constituency, the claimant count has decreased by some 58 per cent. since 1997 and last month’s statistics show 1,725 fewer claimants. So the Government’s policies to get people into work are working, and there is much progress to be made on that in difficult areas.
Hon. Members talked earlier about the skills base, and we need to look at that. The Secretary of State mentioned an economy fit for the 21st century, and we need to get the skills base for that right. On several occasions, I have called for local government, business communities, the Welsh Assembly Government and the Westminster Government to have a proper skills audit at local and national level, which would look at what skills were available and provide the correct training. We need to have the foresight to say what kind of economies we want—what sectors we want in certain areas—and gauge from that, linking up with universities, colleges and schools. There needs to be more joined-up thinking.
Rather than just getting high level graduates, we need to look at non-graduates and a mix of engineering skills, for example. Yesterday the Secretary of State, the Under-Secretary and I met people who want to invest in my constituency, and they expressed concerns about the skills base. There is good progress however, and the Budget referred to up-skilling people. The nuclear industry, which is important to my constituency, set up a nuclear academy in Staffordshire university with links to various communities to fill a gap in that sector and help it grow.
It is also right to reflect on the Budget with regard to help and benefits for small and medium-sized enterprises. Tax relief from capital gains has been mentioned, but there is also tax simplification. I agree that there has been a lot of gold-plating, which hampers some businesses, and the Chancellor was right to consider how we can simplify the tax system. It has been built up over many years, and simplification will need cross-party support. Small businesses are frightened of the tax implications.
It is right to reward enterprise, and the Budget gives Wales an extra £5 million on top of the record amount that the Welsh Assembly Government have to spend. Its budget has doubled since 1997 and that kind of investment needs to be applauded. The Welsh Assembly Government have welcomed the Budget and the extra £5 million. I would like to see that extra money—although we cannot dictate to the National Assembly or the Welsh Assembly Government how to use it—going into skills and focusing on the need for economic growth through a highly skilled work force.
The Government are also right to concentrate on child and pensioner poverty. The hon. Member for Carmarthen, East and Dinefwr was right that we did that deliberately, and we have helped the poorest and most vulnerable—children and pensioners—over the past 10 years. There have been good results. The focus is on the 2010 target and I am pleased that we have a target, but I am even more pleased when I go round my constituency and see the practical help that has been given to constituents. I am sure that all hon. Members feel the same. That help is important. It is not just about statistics and targets, but about alleviating poverty in families throughout Wales. We have done a good job. The Chancellor was right to concentrate on that and to lift more families out of poverty. Some 360,000 families will benefit from the rise in child benefit that was announced. Child tax credits will increase above indexation and that will benefit a further 200,000 families. The priority is right and the mixture of targeted and universal benefits is the best way in which to—hopefully—meet those targets.
The knock-on effect of the high oil prices has a huge impact on utilities and on the bills that every household in Wales and the United Kingdom pays. Reports that bills are rising even higher in Wales need further examination, because it would be wrong for a company that is based, for example, in Scotland, and has a wide coverage—as Scottish Power does—to target the Welsh population and increase its bills. I welcome the fact that the Government have asked the regulator to look into the matter, but the regulator usually takes two to three years to carry out a comprehensive inquiry before coming up with recommendations. In that time, the utility companies make huge profits and hurt many families in Wales and throughout the United Kingdom.
I am sympathetic to the idea of windfall tax on the utilities. In the Budget, the Chancellor talked about a voluntary organisation that has been set up to help people, and I know that some utility companies do that, putting their profits back into smart metering and other methods of energy efficiency. In the current climate, the effect of the high price of oil is felt immediately, although we do not see a reduction when the price of oil goes down. Something needs to be done and I favour some form of windfall tax.
Before the Budget, I lobbied the Chancellor and Ministers about utilities and help for pensioners. I am pleased that pensioner households will receive a one-off extra payment. In the past, Opposition parties have criticised that as just a gimmick, but I emphasise to the Committee that the people who receive it are the most vulnerable in our society. They get that payment every year and do not see it as a gimmick but as a necessary tool to help them through the cold winters. It is a good way of getting those benefits immediately to vulnerable households, particularly the over-80s who will receive an extra £100. [ Interruption. ] Does the hon. Lady want to intervene? She does not want to bother. Most members of the Committee are bothered about the fuel-poor in this country.
Mrs. Cheryl Gillan (Chesham and Amersham) (Con): Will the hon. Gentleman give way?
Albert Owen: I will make some progress; I offered the hon. Lady the chance to speak.
Mrs. Gillan: Will the hon. Gentleman give way?
Albert Owen: No—[Interruption.]
The Chairman: Order. The hon. Gentleman is not giving way.
Mrs. Gillan: On a point of order, Mr. Caton. I am sorry if I was mumbling from a sedentary position. I would like your advice about whether I can do so, particularly since the hon. Gentleman was saying that something was targeted towards the poorest households, when even the richest households in the land receive the fuel benefit.
The Chairman: That is not a point of order, but, since the hon. Lady asks, I deprecate sedentary mumbling.
Albert Owen: I will not be put off, but if the hon. Lady had listened, she would have heard me say that I agree with a mixture of universal and targeted benefits, and that I felt that the winter fuel payment was welcomed by the people of Wales. Then the mumbling started, which I think was just rude.
Mark Pritchard: Will the hon. Gentleman give way?
Albert Owen: I will move on. I also lobbied Ministers about fuel tax. I welcomed the Chancellor’s decision not to introduce the 2p increase in April as that would hurt vulnerable communities, especially in rural areas.
Mark Pritchard rose—
Albert Owen: I will take an intervention as the hon. Gentleman is very keen to speak.
Mark Pritchard: On the earlier point about the rise in the cost of fuel, the hon. Gentleman is absolutely right. Does he agree that any decreases in wholesale energy prices should be passed on to end users far more quickly than they currently are? Furthermore, does he share my concern that, despite the small increase in benefits for pensioners, 25,000 pensioners still die every year in the UK as a result of not having their homes properly heated?
Albert Owen: Insulation is a matter of energy efficiency and I am working with local groups and the Welsh Assembly Government to try to alleviate that problem. I do not accept the argument that the winter fuel payment is somehow a very small amount. For the household of someone who is over 80, an extra £100 is a real benefit. It is not a small amount and the Government were right to do what they did.
On the point about fuel tax, there is some agreement. In west and north-west Wales, the price at the pump is already higher than in most of the UK. There are difficulties not only for families who need the fuel for essential transport, but for businesses and public transport. There are real knock-on effects and we must examine the matter. I would like the Secretary of State to lobby the Chancellor and encourage him not to increase the price in October, because it hurts businesses in my constituency and many other constituencies throughout Wales.
There is a difficult balance to strike between green taxes and economic growth in rural areas. The Conservative response was the fuel tax escalator. That was totally wrong. The Labour party has since abandoned that and the increases have been slower. More needs to be done to help businesses in rural areas. A mechanism is needed that gives rural areas some sort of Government levy to help businesses.
Mr. Roger Williams (Brecon and Radnorshire) (LD): I always listen to the hon. Gentleman with great attention, but he seems to be reaching the Liberal Democrat view that there should be a derogation to reduce fuel tax in rural areas, as is exercised by several members of the European Union such as France.
Albert Owen: I think it is totally unfair that we already pay higher prices at the pump and then receive the same increases in the Budget. I do not know the answer. Perhaps our parties could come closer together. I do not always believe that the Liberal Democrats have the answer, but, where there is consensus, we can work on it. We are considering a serious issue and we need to work on it. I am glad that I took that intervention, because I am about to consider fuel taxes and green taxes in the Budget.
In an earlier intervention, the hon. Member for Brecon and Radnorshire talked about car manufacturers playing their part. That is essential. There is consensus across the parties about dealing with climate change and CO2 emissions. It should not just be down to the drivers of vehicles or businesses or train operators; manufacturers should play a strong part too.
Mark Pritchard: The hon. Gentleman is making some important points on the environment. Does he share my concern that biofuels, which the Prime Minister mentioned again in the last couple of weeks and the Chancellor mentioned in his statement on renewables and sustainable fuels, add to the problem of climate change? They cause soil erosion and deforestation, and the world’s poor will suffer the most because farm food prices will go up. They are not the magic cash crop that many people believe them to be for places such as Africa. They are certainly not the silver bullet for climate change.
Albert Owen: In a general context, the hon. Gentleman is absolutely right. There is not one solution to the problem. Biofuels in certain areas can play a part. Encouraging farmers in rural Wales to grow those crops and perhaps having small, localised fuel facilities would be one solution, but, generally, I agree with him. We need a proper, balanced energy policy with many renewables, but we should not put all our eggs in one basket. It would be dangerous to invest too much time and attention in that form of renewable energy.
Lembit Öpik (Montgomeryshire) (LD): I hope to catch your eye, Mr. Caton, to talk more about the subject later. Does not the hon. Gentleman accept that biofuels technology is still in its infancy? Does not he share my optimism that, as we invest considerably greater sums in biofuel research, we could find ways that are both profitable for Welsh farmers and effective at reducing the carbon footprint of our transport and other energy needs?
Albert Owen: Yes, I think there will be benefits from research into the matter that will help farming communities on a micro level. That is a positive way forward. However, I agree with the hon. Member for The Wrekin about the international aspect and putting too much emphasis on biofuels. The car manufacturing point that I was making, and which the hon. Member for Brecon and Radnorshire mentioned this morning, should be used as a model, not just for road transport but for aviation and sea transport. That is important.
This Budget, like all those since 1997, responds to internal and external factors. It is fair and it calls for stability. I do not want us to return to a period of instability, with high unemployment, low employment opportunities and high interest rates such as we had before 1997. I therefore support the Budget. I accept that it is tough in the current climate, but it allows us to build for the future and will bring many benefits and opportunities for Wales.
2.35 pm
Lembit Öpik: I welcome the Secretary of State back to the Welsh Grand Committee. It is probably his first sitting since his surprise appointment earlier this year.
Hywel Williams: Cheeky.
Lembit Öpik: I am not sure that that is parliamentary language, but I shall ignore it on this occasion.
I put on record my sadness at the demise of the Secretary of State’s predecessor whom I feel was harshly treated under the circumstances. In my view, he behaved in an honourable fashion and paid the price for it. I hope that he will be back in a senior governmental position in the near future.
The Budget has been described as tough, but I would describe it as extremely cautious. Some people have sought to condemn it as boring. However, Budgets are not designed for the media, but for the country. To that extent, the accusation that it was not interesting enough is rather fatuous. Having said that, it seems most likely that the Chancellor is attempting to do as little as possible at this stage and to keep his powder dry in the event of significant signs of recession. Obviously, he has not said that to me, but I think that it is fairly obvious that he wants sufficient resources in his Treasury armoury to be able to act quickly if it looks as though we are heading towards what used, euphemistically, to be called negative growth, but what I would call the contraction of the economy. That being the case, today is not the occasion to discuss any great radical policies contained in the Budget.
I understand and, to a large extent, agree with, the Secretary of State’s observations on inflation, unemployment and growth. The Government have successfully presided over a period of substantial economic stability, and they are to be congratulated on that. It would be churlish to take away the deserved credit of the current Prime Minister, the former Chancellor, for having put in place measures that have secured the long-term viability of the British economy for many businesses. Wales has had a proportional benefit from that, but, as has been pointed out by other hon. Members, we still lag behind the rest of the United Kingdom in some key measures.
My hon. Friend the Member for Twickenham (Dr. Cable) was, with prophetic accuracy, the forecaster of problems ahead some years ago. The Northern Rock bank crisis took the Government by surprise, but not my hon. Friend. He not only said in a modest way, “I told you so”, but pointed out that it would be absolutely essential to nationalise the bank to prevent the further decline and fall of that bank in particular and the banking sector as a whole. The Government resisted such action initially, but were forced eventually to see sense by the expedience of the moment and they did the right thing.
The Liberal Democrats have not crowed about the fact that we were there before anyone else, but we are willing to provide further assistance. If the Secretary of State would like to pass on to the Prime Minister the fact that my hon. Friend the Member for Twickenham might be an appropriate next Chancellor of the Exchequer, I am sure that no reasonable offer will be refused.
Chris Ruane (Vale of Clwyd) (Lab): Only if he re-rats.
Lembit Öpik: It takes a statesman to re-rat, although my hon. Friend is indeed a statesman.
The debt problem can be dealt with more proactively than it has been, but it ties into house prices. Today might not be the best time to go into a detailed analysis of the best housing policy for the country, but it is obvious that underpinning personal debt is both the cost of mortgage and rents in many area of the country, and the fact that the debt is secured on housing. We all remember the dark days of negative equity 15 years ago when many house repossessions added further to the recession that was presided over by the Conservative Government. My advice to the Government is that, as the Treasury analyses the Budget and the further steps that it might need to take to prevent a recession, they should put in place some support whereby individuals do not end up paying as much as three quarters of their entire income on their accommodation. We are overstretched in respect of our debts as individuals in this country, and the Government ignore that at their peril.
I referred earlier to salary levels. In Montgomeryshire, employment levels are extremely high, but the salary levels are about 25 per cent. below the national average. Although some local living costs are also proportionately lower, we cannot pretend that everything is cheaper, so it is logical to logically surmise that the standard of living in Montgomery is suppressed to a degree by the suppressed wage rates. For a long time, mid-Wales has suffered such disadvantage. It was an utter tragedy of statistical circumstances that Montgomeryshire and, indeed, Brecon and Radnor missed out by the tiniest fraction of a percentage from objective 1 funding. In fact, by the time that objective 1 was implemented, we would have fulfilled the criteria for that funding. Our disadvantage was exacerbated further by observing other disadvantaged parts of mid and west Wales receiving substantial amounts of European funding while we watched on helplessly.
Chris Ruane: What action did the hon. Gentleman and his party take to make representations to the then Wales Office in 1998-99 to secure objective 1 for his area? I inform him that Labour Members in north Wales and the hon. Member for Meirionnydd Nant Conwy made representations, commissioned research at the House of Commons Library and managed to get Denbighshire and Conwy in on the objective 1 bid at the eleventh hour. That was against the advice of civil servants and politicians from all parties but, by pressing, we did it. What action did the hon. Gentleman take?
Lembit Öpik: The hon. Gentleman has given me a chance to bellyache briefly in an uncharacteristically partisan way. I and my hon. Friend the then hon. Member for Brecon and Radnorshire, now Lord Livsey of Talgarth, stretched every sinew and met every individual whom we thought was involved in the decision-making process in order to alter the circumstances so that we could include the county of Powys in the objective 1 area. I cannot recall whether the right hon. Member for Torfaen was Secretary of State at the time, but those who were Ministers at that time will remember that we met the Wales Office, lobbied Parliament and made as much play of the matter as we could to prevent what we considered was an economic and ultimately a social injustice from being metered out on Powys. Unfortunately, while the Labour constituencies that the hon. Gentleman—
Chris Ruane: And the nationalists.
Lembit Öpik: And the nationalists. Well, that is a precursor for a coalition in Cardiff. While those constituencies won through, Powys was excluded, and we have borne the economic and social consequences of that decision.
Mr. Roger Williams: That disadvantage continues, because a business in my constituency, Mangar, which makes appliances for the disabled, is unable to get the financial support to expand. It is expanding in the Rhondda, which is good news for Wales, but not such good news for Mangar and the people who generated the business in the first place.
Lembit Öpik: My hon. Friend illustrates the heart of the problem in our area. We seem to be unable to raise salaries without external assistance. We have near-full employment, and one would normally expect that to increase salary levels, but Polish workers, who work extremely hard and are welcome in Montgomeryshire, come to work there, so we do not seem to have any positive inflationary pressure on salaries in our area. That makes it an attractive place for companies looking for cheap labour, but not for those who want a salary in line with the national average.
It would have been nice to see something in the Budget that took account of the issues in Montgomeryshire and mid-Wales as a whole that have been caused by our exclusion from objective 1 funding in the past and by the continuing disadvantages that my hon. Friend the Member for Brecon and Radnorshire has described.
There were many warm words in the Budget about the environment and sustainability, but those warm words will add to climate change rather than taking away from it. I do not believe that the Government are being sufficiently courageous in regarding climate change as an opportunity for Wales rather than as a hassle that needs to be addressed in line with other third-world—I mean, other first-world countries. I will have to check Hansard to ensure that that is accurately reported.
Climate change is a global responsibility and other Members rightly mentioned the collective interest in doing the right thing in that regard, but I also think that it is an economic opportunity for mid-Wales.
Mr. Roger Williams: My hon. Friend might have had a slip of the tongue, but it could be used to describe one of our problems. A constituent of mine compared the provision of broadband in mid-Wales as being poorer than it is in Madagascar. She has great difficulty in carrying on her business because the provision of broadband is so poor, and that is another disadvantage from which we suffer.
Lembit Öpik: Indeed, that is exactly the example that was on my mind when I made my brief slip a few moments ago. Many people also feel that our farmers deserve a fair trade arrangement with those purchasing their products. Those farmers are continuously frustrated by high prices in the supermarkets and low prices at the farm gate, and many of them feel that they are effectively living in a second-world environment.
Mark Pritchard: I know that the hon. Gentleman did not say that Wales was a third-world country, because that would have been inaccurate and unfair. Does he support me in seeking for BT to be more candid with the people who pay its bills? It has claimed that there is universal coverage in England and Wales for broadband services, but the example given by the hon. Member for Brecon and Radnorshire shows that that is clearly not the case. It is also not the case in Shropshire. However, we are being asked by the Secretary of State to support small and medium-sized enterprises and to ask people to diversify to help the environment, perhaps by doing more home working. Many people cannot work from home because they do not have access to broadband services, so will the hon. Member for Montgomeryshire support me in saying to BT, through Hansard, that it needs to get its act together?
Lembit Öpik: The hon. Gentleman makes an erudite and insightful point and speaks for us all, as that problem causes great frustration for those who want to work from home and do high-value jobs in the countryside in mid-Wales but are unable to do so because of the lack of access to broadband services. I hope that BT will consider his point and recognise it as a cross-party plea, so that people can work from home, thereby reducing the carbon footprint of travel and increasing the economic wealth of remote and outlying areas such as my own and some parts of other constituencies.
Hywel Williams: I am concerned about the hon. Gentleman’s use of the word “remote”. The community of Rhiwlas, in my constituency, is near Bangor and the fibre-optic cable but, despite my best efforts, BT seems unable to connect it.
Lembit Öpik: I hope that BT takes note. Perhaps it is pay-back time for the hon. Gentleman’s area getting objective 1 funding when we did not, but who knows.
What can we do about all this? There is a self-evident strategy available for the Chancellor and the Treasury to give mid-Wales a kick-start. First, on debt, shared ownership schemes make a lot of sense. They open up a number of vacant properties, which for reasons that I will not go into in detail are not used as housing because the financial arrangements—the Treasury’s tax conditions—make that uneconomic. Such schemes are one way of beginning to stabilise an overwhelming problem in this country.
Secondly, I would like the Treasury to consider the social consequences of some of its decisions. I have highlighted how the cost of the Post Office could be managed in a more constructive way: the universal service obligation should cause a surcharge to be levied on private competitors; the access headroom that the Royal Mail has to pay to deliver its competitors’ post is an anachronism; and we could re-evaluate the price of stamps. That could provide enough of a cross-subsidy to make the existing postal service and post office network viable—there is an economic connection between such services and other aspects of our local economy. I hope that the post offices in Abermule, Castell Caereinion and Llanbrynmair are saved, because they play an important part in making those settlements attractive to potential business people. Also, the farming community deserves an investigation and action by the Treasury to ensure that supermarkets cannot basically rip the community off and make huge profits, which the suppliers—mainly the farmers—are powerless to affect.
Thirdly, on sustainability, I am sure that Montgomeryshire and mid-Wales are ready to help export the expertise in the Centre for Alternative Technology, in Coed Cymru, which is doing outstanding work in creating sustainable solutions using indigenous forestry, in recycling schemes such as Phoenix, which collects furniture in Newtown, and in Cae Glas and many others. They are just waiting for support from the Government to do good work. They have one specific request—for the Minister to intervene on the waste electrical and electronic equipment directive. At the moment, the directive disadvantages at least one company in my area, which is run by Benji who wants to rehabilitate broken equipment that does not need to be recycled, just fixed, but is classified as waste. I will not go through the details now, but I seek the assurance of the Minister that he can help with that issue.
As far as I understand it, there is no resistance to what I am asking the Government to do, just the inertia of implementing the specific proposals. Benji is completely clear about what he needs, and he speaks for an entire sector, which must grow if we are to be more responsible about reusing rather than recycling damaged goods.
In conclusion, I think that the Budget was cautious and I understand why. I do not condemn the Chancellor for that, but I would have liked to have seen more for outlying and remote areas such as Montgomeryshire. The environmental opportunity is huge, right through to the derogation that my hon. Friend the Member for Brecon and Radnorshire and the hon. Member for Ynys Môn highlighted about fuel. There are things that do not cost the Treasury a lot but that would benefit those areas a great deal. We are in the foothills of biofuels—we have a lot to learn. Virgin’s experiment with biofuels recently shows that the technology can be evolved to preserve something of our way of life without the carbon footprint. Wales can profit from that.
I am not the kind of person to condemn other parties gratuitously. The Budget is not to be condemned. However, I make a plea to the Secretary of State to highlight the issues that I, and many other MPs with constituencies in rural areas, have raised and continue to raise. Give us the tools, and we will look after our own economies and help build them up. Whatever happens, I hope that the Government will not allow those areas to fall further behind in the way that many of the citizens in Montgomeryshire whom I represent think that they have.
2.55 pm
Nia Griffith (Llanelli) (Lab): I very much welcome this Budget; it is good news for Wales. I should like to highlight three particular aspects linked to contributing to creating a fairer and more caring society. First, we are all aware of the vulnerability of the elderly during the winter months, and I welcome the extra money of the winter fuel payments for pensioner households. That will benefit over 17,000 pensioners in my constituency, and nearly 500,000 across Wales. That is in addition to the many pensioners who have already benefited from the home energy efficiency scheme, through the installation of more efficient heating systems, or cavity wall or loft insulations. Where there are pensioners who have not taken up those opportunities, I urge all hon. Members to ensure that their constituents do so.
Secondly, the increase in the national minimum wage is very significant. It is important in helping to eradicate poverty and to make work worth while. There is more to do for the 16 to 18-year-olds and the 18 to 21-year-olds. Their rates have risen too, but it is something that we must continue to improve both because our young people need and deserve a proper wage, and to ensure that young workers are not used to undercut older workers because they are cheaper to employ.
Thirdly, the focus on getting money to families with children through increased child benefit and tax credits is, rightly, a priority of the Budget. We all remember the considerable concern earlier this year about the Assembly budget, and how the local government settlement would be managed, and everybody was rather dreading their council tax bills this year. In Carmarthenshire, however, those have not proved to be quite the nightmare that people expected and that is in spite of the continued increase in demands on local councils. The number of services that we expect councils to provide due to the demographic changes that we are seeing makes the pressures very considerable. There will always be moans, disagreements and debates about local expenditure, but by and large, I must congratulate Carmarthenshire county council on the way that it is moving forward, building new schools and upgrading its council housing and old people’s accommodation.
To return to the UK Budget, I welcome the Chancellor’s decision to postpone the 2p increase in diesel fuel until the autumn. We should not underestimate the immense significance of making that change. It is unusual for a Chancellor to grant such a big concession—he is clearly aware of the significant impact of the increase in oil prices on the whole economy, and has obviously listened to the concerns of many in the haulage industry. People may criticise that decision for not being very green, but a tax can only be a green tax if there is a valid alternative, an opportunity for people to modify their behaviour because there is a different option for them to take. Having different levels of vehicle excise duty for different types of car gives the consumer a genuine choice between a greener or less green vehicle when they go to purchase a car.
Mark Pritchard: The hon. Lady is being very straight with the Committee in saying that the delay in the increase in fuel tax was not green. Does she agree that, when the increase is introduced in October, it will still not be green?
Nia Griffith: I did not say that it was not green. I said that a tax cannot be considered green unless it has the potential to modify somebody’s behaviour. If the hon. Gentleman would wait, I will explain what I mean a little further. If there are different options, different cars with green ratings that attract different levels of vehicle excise duty, that might influence a person’s decision on which to buy and could, therefore, be termed a green tax. However, the difficulty we have with calling a 2p rise on diesel fuel a green tax is that it is hard to fine valid alternatives. Sometimes there is no other way of doing something than that which uses diesel fuel. For example, I would be a supporter of increased rail freight but we have to be practical, we cannot always expect rail freight to provide door-to-door delivery. In some places we do not have the infrastructure that we might need. It cannot automatically be assumed that—
David T.C. Davies: Does not the hon. Lady accept that in the 1990s, one way to encourage rail freight was to allow lorries to have a higher weight limit if they were taking freight to or from a rail freight depot? That was done away with and all lorries now have the same weight restrictions regardless of where they come from. There is, therefore, less of an incentive to use the railway when something can be put on a lorry at the port and delivered straight to the door.
Nia Griffith: Again, the issue is extremely complex. It is not just a matter of switching from lorry to rail by changing the fuel duty. We have to look at the infrastructure and what the valid alternatives are and, as the hon. Gentleman suggested, there may be other ways to influence those decisions. If we look at just the 2p on the fuel duty, we have to consider the knock-on effect of that, particularly in our rural communities, as my hon. Friend the Member for Ynys Môn mentioned.
The difficulty that haulage firms face is the competition from mainland Europe. Mainland European operators initially just brought goods from mainland Europe to Wales, or possibly across to Ireland, but they now compete for contracts within the UK and are able to be more competitive than companies such as Owens in my constituency, simply because of the different level of duty on the fuel that they load up with before they cross the channel. Family firms such as Owens—which originally served the steel industry and has now worked in many sectors—that have been built up from small family businesses to extremely successful companies operating UK-wide, now find themselves in direct competition with hauliers that can access different rates of fuel duty. That is leading not only to those companies coming in from abroad, but to some of our hauliers trying to base their vehicles in places such as the Netherlands. That means that we lose out not only on the fuel duty but on the vehicle excise duty. We have to think carefully about whether increased duty is advantageous, because it brings increased revenue, or whether by increasing the duty we drive some of our people out of business and lose the revenue altogether.
Mr. Jones: The hon. Lady is developing an interesting and pertinent argument. Does she, however, share my concern that the Government’s proposal to grant to the Welsh Assembly powers to impose road charges on the trunk roads in Wales would exacerbate the competitive disadvantage that Welsh transport is sustaining?
Nia Griffith: I do not have any up-to-date information on that, but whatever consideration is made of such charges there needs to be careful thought about the impact on each of the regions of Wales and about whether there would be any significant disadvantages.
Mr. Roger Williams: The point I will make is, I hope, supportive. The foreign vehicles that come to this country often do not meet the thorough working conditions imposed on our vehicles. The Department for Transport should ensure that any vehicles coming into the country meet the same conditions as our transport organisations and firms.
Nia Griffith: I share the hon. Gentleman’s concerns. In particular, there has been such a rapid increase in the number of vehicles coming through the country that perhaps there is a case for an enhanced inspectorate to look at the conditions of some of those vehicles. Our hauliers face considerable difficulties because they are in direct competition with people who can access lower fuel duty.
Mrs. Gillan: I am grateful to the hon. Lady for giving way, particularly as she said that she did not have any up-to-date information. She may find it helpful to know that the Local Transport Bill is being read a Second time downstairs, as we speak.
Nia Griffith: The hon. Lady must recognise the distinction between giving the Assembly the power to do something, and what it chooses to do with that power. We need to wait and see what proposals it brings forward.
Adam Price: Is that not a classic example of the anti-devolutionary impulses? The true voice of the Conservative party split down the middle, saying one thing in the Assembly in Wales and another entirely here in Westminster.
Nia Griffith: I thank the hon. Gentleman.
Mrs. Gillan: The hon. Lady is most generous in allowing me to respond, as it enables me to point out the hypocrisy of the Plaid Cymru Member. We are in agreement with the Conservative group in the Assembly and we are asking for the measure to be drawn more tightly to protect people in Wales, which is what the hon. Lady and I are interested in. I will not accept any cheap jibes from the Plaid Cymru Member on the matter.
Nia Griffith: I give way one last time.
Lembit Öpik: Notwithstanding the hon. Lady’s comments, does the exchange of the last few minutes not prove that the torch of Welsh Conservative policy making has passed to a new generation in the hon. Member for Monmouth?
Nia Griffith: I shall make no further comment on the interesting dialogue between Opposition parties.
Let us return to the matter of the six-month breathing space. I ask my right hon. Friend, the Secretary of State for Wales, to impress upon the Chancellor the need to consider exactly the best way forward for this excellent opportunity. For example, is there a case for changing the balance between fuel duty and VAT? Haulage companies can reclaim the VAT. Such things must be considered in far more depth than can be done in this Committee, but I ask my right hon. Friend to take up the matter, to ensure that we do not lose that business and that our road hauliers remain in business, doing a good job. We must not forget that every item that is transported ends up either as part of the manufacturing industry or as part of what is on the shelves for us to buy, and therefore has a considerable impact on the retail price index.
I would like to raise the difficult matter of regional pay, the idea for which has been floated in some Departments. We all recognise the difficulties in combating regional inequalities, whether at the Wales level, the UK level or the European level. At the European level, we talk about the motor regions. Those are areas such as the south-east of England, France, Germany, northern Italy and north-east Spain, where there is a considerable amount of wealth creation, and, therefore, of spending power.
European programmes over the years have been geared to helping what we describe as peripheral areas; those which are far away from key markets, and need particular support in accessing them and developing their economies. Wales has benefited enormously from those policies, which feature not only in the main programmes of objective 1 and convergence funding, but in many lesser known EU programmes, for which priority is given to bids from areas such as Wales.
However, the UK Government and the Welsh Assembly also have a responsibility to consider how to combat regional inequalities. The Welsh Assembly has made a start by trying to be less Cardiff-centric and trying to move some jobs out of the capital. On a UK level, London is particularly significant, because of its worldwide acclaim as a financial centre. That is distorting for the rest of the UK, because London is so disproportionately wealthy in some respects. The question is, therefore, how do we try to redress that imbalance? There have been various regional incentive programmes over the years for industries to relocate in various places. The Driver and Vehicle Licensing Agency came down to Swansea, the UK Passport Service came to Newport and similar institutions have gone to Sheffield, Manchester and Newcastle. As my right hon. Friend said in his opening comments, there are now far more job opportunities in Wales, and unemployment is at a record low.
However, I am very perturbed by suggestions to introduce regional pay in public sector departments, because that would exacerbate the differences between the wealthy and less favoured areas of the UK. It would also be a factor in driving down private sector wages in Wales. Redressing economic differences between areas is extremely difficult, so deliberately pursuing a path that is likely to exacerbate the situation does not make any sense.
Hywel Williams: The hon. Lady talks about regional pay as if it were something that might happen sometime in the future, but it has already been brought in for court staff in north Wales. Court staff near to Chester get more money than those near to Caernarfon, and I cannot see why, because they do the same job.
Nia Griffith: The hon. Gentleman makes a valid point. Certainly, the cost of housing is lower in Wales than in south-east England, but all other costs that families face, such as food, heating bills and transport, are just the same. In fact, in rural and semi-rural areas, the costs are often higher, because there are fewer suppliers to choose from, and often, people on low incomes struggle to maintain a car, which is the only way in which they can get about in those areas.
Public sector jobs have traditionally been seen as a good option. Although pay has not necessarily been sparkling, the public sector has offered the security of tenure and proper holiday, sick pay and pension schemes. As a result, Departments have been able to recruit and retain quality staff, but there is a real danger that if wages are depressed, staff morale will fall sharply, there will be recruitment and retention problems, an increased turnover of staff, a consequent lack of motivation and experience, and poorer-quality services. I therefore beg the Secretary of State to use his excellent and expert negotiating skills to raise the issue with Cabinet colleagues and ensure that the suggestion of regional pay does not eventually depress the economy of Wales. Having said that, I very much feel that the Budget is a positive measure, and I welcome it for Wales.
Adam Price: On a point of order, Mr. Caton. In the previous exchange, the shadow Welsh Secretary accused me of hypocrisy, which I would normally wear as a badge of pride, coming as it did from a Conservative Member. However, seeing as it is against the rules of the House for one hon. Member to accuse another of hypocrisy, may I invite her, through you, to withdraw that comment?
The Chairman: The simplest way forward would be for you, Mrs. Gillan, to withdraw that particular word.
Mrs. Gillan: I have no problem with withdrawing it. The fact that I used the word indicates the aggravation that I felt towards the hon. Gentleman, who was behaving less than honourably in the circumstances. I withdraw unreservedly “hypocrisy”.
David T.C. Davies: Further to that point of order, Mr. Caton. Would it have been fairer for my hon. Friend to have said that an hon. Member said one thing in one place but appears less consistent about saying the same thing somewhere else?
The Chairman: The hon. Lady could have chosen those words. I must say, however, that we are being a little unfair on those people who have not had a chance to speak yet. If we can get back to the debate, I hope that everyone will be able to speak, because I should like to get on to the winding-up speeches of all parties very soon after 3.30 pm.
3.14 pm
Mark Pritchard: I hope to be brief in order to allow colleagues and other Members to speak.
Disappointingly, although there was a reference to public services in the Budget statement, there was no explicit reference to the national health service, and of course, English taxpayers continue to subsidise Welsh taxpayers, especially in the delivery of public services, and of health services in particular. That is not a criticism of Welsh patients, but a recognition that many border counties in England, such as Cheshire, Shropshire and Herefordshire, feel a real pinch regarding their own scarce resources and the requirement of English taxpayers continually to subsidise the shortfall in Government funding for Welsh health services. The diagnosis is schizophrenia at the heart of Government policy, both here in Westminster and in Cardiff. The people of Wales, Shropshire and the other border counties of England deserve better.
Hywel Williams: The hon. Gentleman said that 10 per cent. of the Welsh population were treated in England. It would be a great service to the House if he could tell us where he got that statistic. I have been pressing for accurate statistics on this matter for quite some time.
Mark Pritchard: I will be completely candid. That is an approximate figure based upon the number of patients that my own local acute NHS trust—the Shrewsbury and Telford Hospital NHS Trust—is seeing. I talked about 60,000. If one adds to that the figures for Herefordshire, Cheshire and the other outflows of patients from Wales to the specialist centres in Liverpool and Manchester, the number gets quite high. The hon. Gentleman is absolutely right. It may well be higher.
Alun Michael (Cardiff, South and Penarth) (Lab/Co-op): Would the hon. Gentleman not acknowledge that the evidence that we have heard on the Welsh Affairs Committee shows that there is a benefit in both directions from the provision of services in terms of numbers at the Shrewsbury and Telford Hospital NHS Trust? The interventions in Wales that have placed an emphasis on public health and therefore health improvement, may well have an implication in terms of reduced patient numbers, so it is not quite as simple an equation as he suggests.
Mark Pritchard: There are three points in response to that. First, I shall come on to public health in a moment. Secondly, the right hon. Gentleman is absolutely right. The matter is complex, but the complexity and confusion have been brought about by Government policy. On the right hon. Gentleman’s substantive remark about funding, of course there is a financial benefit as Welsh patients come into my local NHS hospital trust. However, the trust’s primary responsibility is to treat patients within the county of Shropshire and within England. The Government should adequately fund the hospital trust from English resources to deal with English patients.
On the specific point about Welsh patients—this is perhaps my material point—it is incumbent upon the Governments in Cardiff and Westminster to ensure that Welsh patients can be treated locally in their own country, and by people they probably know, rather than those whom they probably do not know if they have to travel 50 or 60 miles. So, yes, while there is some benefit, it is not the optimum benefit that the people of Wales would want to see.
Mr. Roger Williams: I am pleased that the hon. Gentleman is raising this issue and there is the chance to debate it. I do not agree with him on a number of points, but I wish to stress that it is a two-way process because English patients come to Wales. Only last night, the hon. Member for Forest of Dean (Mr. Harper) talked about concessionary bus fares and the inability of his constituents to get free bus fares to visit the hospital in Newport.
Mark Pritchard: Of course, it is a two-way process. I am not pitting Welsh patients against English patients or vice versa. It is right that we should share health expertise throughout the nation—that is the United Kingdom. However, the Government are responsible both in Cardiff and Westminster for setting out a national health strategy, so it is incumbent on them to ensure that, when they have set out that strategy, it is clear and that people, commissioners and providers understand it and that funding follows the services that have been identified within the strategy.
As for a public information campaign, rather than it contradict or undermine my argument, it underscores it. There are often conflicting information campaigns. They are not the same in England and Wales. Their timetable is often out of kilter. There are conflicting complaints procedures between the two nations, such as different referral procedures, different discharge procedures and even separate documentation for the same illnesses. There is a lot of confusion. That does not help patients and it certainly does not help GPs, commissioners and other providers of the services. The Government need to ensure that they tackle such issues before allowing Cardiff even more powers in respect of health.
The future financing of acute and primary care services is critical for the advancement of foundation trust hospitals. The acute trust in my constituency will be looking for foundation status soon. I think that it is the same in Hereford and Cheshire. It is the Government’s policy to encourage more acute trusts to go for foundation status. As that is the case, we move then to payment by results. I wonder whether the Minister thinks a tariff that is introduced in, say, Shropshire should be the same for patients regardless of whether they are from England or Wales. At the moment, the tariff for English patients is per patient and, as he will know, for Welsh patients the tariff is based en masse—whatever the commissioners decide. That is key to providing the right level of services in Wales and in the border counties.
It is absolutely wrong that people in Wales should have to wait to receive treatment for up to 26 weeks. The target is 22 weeks, but at the moment the wait is about 26 for in-patient treatment, whereas it is 18 weeks in England. There is a huge gap, and the Minister should explain to the people of Wales why they are suffering in that way. For many people, it is a matter of suffering. It is not about waiting for the phone call or watching the television. A lot of patients are in pain and they need to get to hospital as soon as possible. Does the Minister wish to comment on the British Medical Association’s statement that Wales should not have a longer waiting time target than England? Does he agree with that comment? That is a pretty easy question. If the Minister agrees, I wonder how he expects to deliver on his agreement and what he expects the timetable to be.
I want to touch briefly on housing, which was mentioned earlier. I have great concerns about shared equity housing. Of course, we all want housing to be more affordable for our key workers and public sector workers. It is right that we get them into decent and affordable housing, because they do a great job in our constituencies providing a wide range of services. However, shared equity housing is the most expensive way of buying a house, unless one buys a £1 million mansion down the road in Chelsea.
Housing corporations and associations are making money on the back of land deals made—supposedly—to give people access to affordable housing. I shall provide an example from my own constituency: a landowner said, “I would like to develop this site,” and the housing association said, “Fine, but we want 25 per cent. of the housing to be affordable.” He replied, “Not a problem. I agree with that,” and sold each plot of land for £90,000. He thought that the housing association might add on £20,000 or £30,000 in administration and staffing charges and sell them for about £110,000 or £120,000.
Returning to the site some months later, however, the landowner found that the housing association had put the affordable houses on the market for £180,000. To many people, that is not affordable—neither in Wales nor Shropshire, where the average house price is about £135,000. However, that also shows that housing associations are not passing on the savings made by many landowners to the end-user, but are basically pumping up their housing stock value—the capital value of their housing stocks—and raising capital on the stock market.
The fireman who came to see me in my constituency about that issue was in a shared ownership. He had a mortgage of £90,000—not the full £180,000—rather than one of £60,000, as he would have had had the property been sold for £120,000. Of course, with shared equity comes responsibility for the upkeep of the property as well. He therefore has a far higher mortgage and far more overheads. I hope that the Secretary of State and the Minister will speak to housing associations and ensure that the savings are passed on to the end-users.
Mr. Roger Williams: Will the hon. Gentleman give way?
Mark Pritchard: Briefly, because others wish to intervene and I am about to conclude.
Mr. Williams: I have listened to the hon. Gentleman’s figures carefully. With plots at £90,000, and building costs on top—
Mark Pritchard: It was the housing plot, not the land plot.
Mr. Williams: I apologise.
Mark Pritchard: That is fine. One or two of us lost the plot earlier anyway—at about 2.30 pm actually. Forgive me, if I did not make myself clear.
To conclude, I make a plea to the Minister: let us sort out these housing associations. The majority do a great job and are well-meaning, but let us ensure that our public sector workers reap the full benefits of savings on either land or building plots.
3.29 pm
Chris Ruane: The theme of last week’s Budget was stability, which is the new prudence. I counted the number of times the word “stability” was used—23 times, I think. That is quite right. If this had been a flash Budget or a giveaway Budget, as suggested by the Opposition, it would not have been the right Budget for our current economic circumstances. We need to consider the backdrop in the UK and around the world: fuel and food prices are at record highs and we are seeing, potentially, one of the worst banking crises since 1929 and the Wall street crash. In ordinary circumstances, any one of those crises alone could have sunk many past Governments, especially the Conservative Government who were in power for 18 years. The fuel crisis of the 1970s also had a big hit around the world. We have been able to ride out these recent crises and that is largely down to the policies of the Prime Minister when he was Chancellor of the Exchequer and indeed those of our current Chancellor of the Exchequer.
If we look at the situation in this country and where we are in the world economic cycle, it is a good position to be in. We have the highest employment level that we have ever had; 29.4 million people are employed in the British work force, compared to just over 26 million people 11 years ago. We have the lowest unemployment level for decades. We have the lowest inflation in the G8 and the lowest interest rates compared to other European countries and the US.
Even under the difficult circumstances that I have outlined, with the fuel prices, the food prices and the banking crisis, the worst-case scenario—the forecast from the Bank of England and other experts—is still that there will be no recession. The worst forecast is of minimum growth, of just above 0 per cent. Therefore, the worst-case scenario, according to the current figures, is still that there will be no recession. Again, that is down to the stewardship of the last 11 years by the Prime Minister, when he was Chancellor of the Exchequer, and by the current Chancellor of the Exchequer.
At Prime Minister’s questions today, we heard the Leader of the Opposition saying, “What we need is a give-away, we need to lower taxes and get people spending”. Indeed, that was the policy that was advocated, pursued and implemented under the previous Conservative Government, and that was why we had two booms and two busts. Today the Leader of the Opposition shouted out, “Can you name any other country around the world that is increasing its spending?” We are leaders, not followers. That is why President Sarkozy is coming over here today, to develop bonds, to find out what the formula is and what the policies are that we have adopted over the past 11 years to put us in the strong position that we are in today.
Right at the outset, I think that that economic backdrop needs to be highlighted. I will keep my comments short, as I know that we all want to try to get away early to go to see President Sarkozy. The hon. Member for Montgomeryshire, who is not in his place now, touched on the issue of structural funds, which is an important issue for us. The settlement that was announced in the Budget last week is not a massive increase for the National Assembly, but it is enough to implement successfully objective 1 and the objective that will follow it, which is convergence funding.
When I was first elected to Parliament in 1997, the whole Welsh block was £6.5 billion. As a result of the settlement, next year it will be more than £16 billion. We have seen huge, historic increases, which, as I have said, will allow us enough money to implement successfully the convergence funding.
Again, I can compare and contrast the position of my Government with that of the previous Tory Government. That Tory Government did not apply for structural funds; they were entitled to apply for them, but they did not do so when they closed Shotton down. That was the biggest industrial lay-off that Wales, indeed the whole of the UK, has ever seen; 7,000 workers were out of a job in one day, and of course there were consequences for the allied industries that supported Shotton.
The Opposition did not apply for structural funds when they were in government and pursuing their vendetta against miners with the pit closure programme. There were 275,000 miners in Wales in the 1930s. How many are there today? It was a deliberate political act in 1992 to implement the pit closure programme, when the Tories wanted to “green” the valleys. They had a golden opportunity then to apply for structural funds, but they did not apply for them. They did not apply for them when we had the rural crisis, with BSE, they dropped the temperatures at which carcasses were disposed of and that terrible disease infected British agriculture. They did not apply for them when we had alar in the apples, botulism in the yoghurt and anthrax in the pig herds. We had all these crises under the Tories that affected our rural economy and they did not apply for structural funds.
David T.C. Davies: Will the hon. Gentleman give way?
Chris Ruane: No, I will not give way; I am in full flow. Sit down.
The Tories did not apply for structural funds when we saw the slow decline in seaside towns. The town that I was born in and grew up in, Rhyl and Prestatyn, the seaside towns in the constituency of the hon. Member for Clwyd, West, Kinmel bay, Towyn, Pensarn, Rhos-on-Sea and Colwyn bay all saw 40 years of slow decline. The Tories did nothing about it. Well, they did something about it, but I will come on to that in a moment.
Compare that with what we did in 1997. From the outset, we said that we would apply for the structural funds. The Conservative party said that we would not get them and the Liberal Democrats said that we would not get the matched funding. We delivered both. I pay tribute to the work of my right hon. Friend the Member for Neath. When we applied, my hon. Friend the Member for Conwy, the previous hon. Member for Clwyd, West, Gareth Thomas, and the hon. Member for Meirionnydd Nant Conwy went to see my right hon. Friend. He was junior Minister at the Wales Office and was being told by his civil servants, “Don’t get EUROSTAT climbing all over these statistics at the last hour.”
An example of the way in which that money has been spent in my constituency is the St. Asaph business park, which was built by the Conservatives at a cost of £11 million. The flyover alone cost £2.5 million. The 120-acre site was empty for 11 years under the Tories and was filled to capacity under Labour and not with screwdriver jobs or any old jobs. There are top-quality jobs, including at the OpTIC Technium, which two weeks ago won a European award for the most innovative technium in the whole of Europe. Those are the kinds of quality jobs that Labour has delivered in my community. There are 3,000 jobs in that business park alone. Another example is the revitalisation of Rhyl. Key buildings were bought out by the National Assembly and there is the £4 million Drift Park, which gained objective 1 funding. I am proud of my Government’s achievements on objective 1. I have already mentioned seaside towns.
I am not sure if you are a keen and avid reader of The Sun, Mr. Caton. If you are, you may have seen that two weeks ago there was a front-page article giving the claimant counts of the worst 60 wards or sub-wards in the UK, provided by the Tory party. Number two in the whole country, which was not even at ward level, but sub-ward level, was west Rhyl. It is one of the poorest wards in Wales for historical reasons. The Opposition were rubbing their hands with glee with the mischief-making that they could do with those statistics. They provided them to The Sun, which used them. They were also used in my local papers with headlines like “Dole on Sea”. However, the position after 18 years of Tory rule was far worse.
The Tories are prepared to use those statistics for political knockabout, but they should look at what the Labour Government have done in my constituency with the new deal, pathways, want 2 work and the city strategy. Those are schemes, policies and philosophies aimed at getting people back to work and back into society. They compare very favourably with the record of the Conservative party. Under the previous Conservative Government, 3 million people were unemployed and about an equal number were on incapacity benefit. They fiddled their figures 29 times because they were so embarrassed that unemployment was climbing and climbing and climbing. Their catchphrase was, “Get on your bike.” and their philosophy was, “Unemployment is a price worth paying.” That is the party that supplied the figures to The Sun to do a bit of mischief-making the other week—disgraceful behaviour.
People should look at what we have achieved with these high employment figures. That is on the back of the minimum wage. That shows how incompetent and financially illiterate the Conservative party is. The minimum wage, which for me is the proudest piece of legislation that we have introduced in the past 11 years, shows which direction we are travelling in. When we introduced it in 1997-98, the Conservatives said that it would cost 2 million jobs. Jobs would have gone down from 26 million to 24 million, but that did not happen. Instead, they went from 26 million to 29.4 million. The Conservatives were 5 million jobs out with their prediction.
David T.C. Davies: Is it not the case that it all depends at what level the minimum wage is set? The Government have repeatedly set it at a relatively low level—of course, it will not cost jobs if they do that.
Chris Ruane: Before one sets the level of the minimum wage, one has to accept that there should be one, and the Conservatives did not accept the minimum wage. They have made dubious use of out-of-date statistics that were quoted in The Sun. The statistics are from 2005, before we had want 2 work and the city strategy in Rhyl. The Conservatives have used those statistics for political gain, but Labour is working and unemployment is not a price worth paying.
The most recent Budget has given us political and economic stability at a time of worldwide economic instability. Stability has been the watchword of the past 11 years, and it has been maintained despite the dark forces out there. That has given the public and private sectors the confidence to invest in towns such as Rhyl, Prestatyn and Denbigh.
I shall give two examples of that investment in my constituency. In Rhyl, there is an £85 million development, by Modus, on the old fairground site. The hon. Member for The Wrekin was slagging off property developers earlier, but Modus is involved in an £85 million development. Also, the Welsh Health Minister last week gave the go-ahead for a £300 million hospital in Rhyl. I hope that that public and private money will be tied into the back-to-work agenda, to get people in the west ward of Rhyl, upper Denbigh, south-west Rhyl and in other wards in my constituency, as well as others around the country, back to work.
Several hon. Members rose
The Chairman: Order. The Members who are still to speak know that we have a limited amount of time left. I hope that they will take that into account.
Hywel Williams: On a point of order, Mr. Caton. When do you intend to start the winding-up speeches?
The Chairman: In a sense, this is the beginning of the winding-up speeches. I had hoped that each of the political parties would have a chance to respond to the debate, but I should like to call the official Opposition at 4 pm.
3.43 pm
Hywel Williams: I have edited my speech fairly heavily, and want to make just one point following the question that I asked the Secretary of State this morning about capital gains tax. As I have said, I see desperate couples in my surgery every week who cannot find anywhere to live. Public sector housing is not really available because of the sell-off of stock and the decanting of those with the worst social problems to the worst stock. I even come across a lot of people who say that they cannot rent in the private sector, because landlords are selling off their properties rather than renting them. Purchase is out of the question, because of mortgage requirements. Some people have taken mortgages of six times their income.
There is a huge housing need and money is tight, which is why I was surprised when the Government gave the nice present of taxpayers’ money to second home owners by reducing capital gains tax from 40 per cent. to a flat rate of 18 per cent. This morning, the Secretary of State said that he doubted whether that would have a major influence, but I refer hon. Members to the quote of the Local Government Association housing spokesman in today’s Evening Standard. I shall not quote him in full, as hon. Members can read his comments. He says that there is a need for debate to ensure that people are not priced out of their local communities, and that that holiday homes can
“lead to desolate dormitories that are bereft of spirit or life and drive house prices to unaffordable levels for local people.”
There is a good deal more in that article, which hon. Members might like to take a look at.
The issue will certainly be of significance in my constituency and in Gwynedd in general, where holiday homes represent 80 per cent. of housing stock. The western part of my constituency has 3,000 holiday homes in a population of 18,000 people, and that represents a substantial problem. I fear that even more of our housing stock could become holiday homes, fuelled, perhaps as an unintended consequence, by the capital gains tax advantages that the Government seem happy to afford to people who can buy two houses.
Will the Under-Secretary respond to some questions? Did the Government do any modelling of the effect of the capital gains tax change on rural and coastal communities? Was it examined when the matter was first considered? Did he put the case for rural and coastal Wales, and what response did he receive?
I fear that this is a similar case to that when self-invested personal pensions were proposed a few years ago and people were allowed to put their holiday homes into their pension portfolios. I took that up with the Treasury repeatedly, and was repeatedly told not to worry. The response I received from the Minister at the Treasury at the time was that any capital gains would be mopped up by capital gains tax. Yet, the Government are now potentially reducing the capital gains tax on holiday homes from 40 per cent. to 18 per cent. I received a consistent response then, so I am sorry to see this change being proposed now.
Many of us in this Committee like to quote Nye Bevan. I repeat what many people have said in the past:
“The religion of socialism is the language of priorities”.
Those priorities seem skewed in this case, not only in respect of concessions to non-doms, but in terms of capital gains tax, which will have a profound effect on homeless people throughout Wales, but especially in rural and coastal Wales.
3.47 pm
Julie Morgan (Cardiff, North) (Lab): I apologise for not being present for the debate this morning. I had a long-standing commitment to speak at a conference, so I missed the opening speeches, for which I apologise.
I will take only a few minutes and use the opportunity to concentrate on families in Wales, particularly those with children, how the Budget has helped them, and what more needs to be done.
Hon. Members have already welcomed the £20 child benefit for the first child. When we came to Government in 1997, there were fears that child benefit would be abandoned. I am sure that all hon. Members remember that. However, child benefit has been one of the most successful benefits there is. It is universal and universally claimed. The fact that it has gone up to £20 for the first child is tremendous, given that it was under threat when this Government came to power. The extra £50 for the child element of the child tax credit also recognises the difficulties of bringing up children.
The Budget has built on a strong foundation since 1997. The Government have had the laudable aim of bringing down child poverty and have made considerable steps towards doing so. There is a long way to go yet, but we are making good progress. That has been based on a combination of universal benefits, such as child benefit, and the tax credit system, which has targeted low-paid families in work.
I entirely agree with the Government’s measures to encourage work, because that is the way out of poverty. In Welsh families today, both parents and many single parents have to work, and deal with the matter of child care and how to manage working and looking after children and elderly parents. That is one of the key issues that we have to solve in Wales.
I want the Chancellor to recognise the realities of family life in Wales today. Many families are able to get access to registered child care nurseries and book and use registered child minders. Those services are acknowledged by the money that comes from the Chancellor to support caring. Two thirds of the care in Wales is done informally. That means it is done largely by grandparents, relatives and friends.
One of the main points that I want to make is that there ought to be a way of recognising the reality of child care in Wales today and the role of grandparents. During the women’s day debate, when I made a similar point, the Leader of the House said that although our Labour Government have often been mocked for encouraging a nanny state, she would be happy for it to be a granny state, and I agree with that. We need to acknowledge that sort of informal care, because that would enable even more parents to work and to do so in a satisfactory way, with good care for their children. It would perhaps also bring money into economically deprived areas and help enormously in allowing such things to happen.
I have other proposals on how we could improve the lives of working families in Wales, but I am aware that you are anxious to move on, Mr. Caton. My main point is therefore that I would like the Chancellor to acknowledge the role of informal care in the future.
3.51 pm
Mr. Roger Williams: We have had an interesting and full debate on a Budget that has been described, on the one hand, as sparse and, on the other, as dull. There is nothing wrong with a dull Budget if it is effective, but this Budget has not managed to generate a huge amount of debate within the Chamber. Indeed, a number of the allocated times were not filled. However, we have filled the time in Committee today very well, and the debate has been a tribute to the contribution of Welsh Members from all parties.
I do not want to go through all the contributions, because I know that the hon. Member for Clwyd, West will want to do that, but I will comment on one or two of them. The Secretary of State, in his usual assured and statesmanlike manner, painted a rosy picture of the Welsh economy. We agree with him on a number of issues, but much work remains to be done. Some of the issues that are absent from the Budget are telling, so the Government and the Secretary of State need to address them.
The hon. Member for Chesham and Amersham painted a picture that was not so rosy. She was doing rather well until she started to refuse to take interventions, and then I felt that the contribution was not as productive as it could have been. One of the issues that she raised was support for getting unemployed young people back into work. She suggested that the Barnett formula had underfunded that work, and I shall return to that point later.
The hon. Member for Carmarthen, East and Dinefwr started in a philosophical style, which contrasted with the contributions that he used to make in Welsh Grand Committees, when he was rather less of a philosopher and more of an attack dog. That was something that we used to look forward to. Towards the end of his contribution, I think that the old Adam seemed to reappear—and I mean that as a Biblical term, rather than as an unparliamentary one—and we had some of the former glory that we associate with him.
Members will be pleased to know that I will start with a brief mention of the Barnett formula, which is rather topical today. Those who listen to the “Today” programme will have heard a contribution on that issue from the leader of the Labour party in Scotland, who is the Deputy First Minister of the Scottish Parliament. Indeed, there was recently a mention on the front page of The Daily Telegraph that the Prime Minister had initiated a research project to look at how appropriate the Barnett formula was for present needs. The same article suggested that the right hon. Member for Witney (Mr. Cameron) was doing the same work in the Conservative party. There was, of course, a rebuttal from both parties that suggested that no one was doing any work on it, although I believe that that was a shaving off of the truth. The Barnett formula lies at the heart of the failure of the Government and the Assembly to achieve the targets that they had set themselves.
I wrote to the leaders of the main parties in Wales asking them to talk about the Barnett formula. I received a reply from the hon. Member for Meirionnydd Nant Conwy who is not here at the moment, but—with no disrespect meant—I do not think that the difference between us on the matter would be great. However, I have yet to receive a reply from the Secretary of State or from the hon. Member for Chesham and Amersham who speaks for the Conservative party on such matters. It was suggested that the all-Wales convention should look at the Barnett formula, but we know that that will not be the case. One Wales promised to set up an independent commission to review it and I hope that that will still happen but, in the meantime, I should like the Secretary of State and the hon. Lady to reply to my letter. Many fear that we face an economic storm. Indeed, one economist said that it could be a perfect economic storm in which we have a decrease in growth and an increase in inflation, and that we could not address the decrease in growth by reducing interest rates substantially because we would get stagflation.
The lending practices of banks have created a credit binge with people throughout Wales and the United Kingdom borrowing far more than they can handle. The ready availability of credit has driven up house prices to unaffordable levels in Wales, which was something that my hon. Friend the Member for Twickenham had identified early on as a real problem. We are seeing the unwelcome effects of the binge. There has been a staggering 168 per cent. rise in bankruptcies in Wales since 2000 and repossession rates are also high. Meanwhile, Northern Rock has had to be taken into national ownership. It is the most vivid symbol of the Government’s failure to keep borrowing at an affordable level and shows the lack of regulatory control.
Many of us were disappointed by the Budget. We knew that the Chancellor did not have much to play with and that his hands had been tied by his predecessor’s actions, but there was an opportunity to rebalance the tax system in favour of families and low earners who find themselves in difficulty as the credit crunch starts to bite. It has been said that, when the Prime Minister was Chancellor, he did not tell Tony Blair about the content of his Budget until the day before it was delivered. After listening to this year’s statement, I cannot help wondering whether he followed the same procedure with his Chancellor. Bearing in mind more tax on low earners, more bowing before big business and more use of green taxes to plug gaps rather than to deal with people’s behaviour, all we have is more of the same with no progress being made on any of the problems that face families in Wales today.
I am surprised that the abolition of the 10p rate has not been commented on more widely today. Single people in my constituency without children and who aspire to get back to work, often at low wages, now face a barrier and a disincentive. The incomes of those earning less than £18,000 who are not eligible for tax credits will be reduced in money terms, let alone in value terms. The gap between the rich and the poor continues to grow. We have seen the sad spectacle of Labour stealing Tory proposals to put more money into the pockets of millionaires. The proposal to charge non-doms a one-off payment of £30,000 will either cripple ordinary workers or be small change for foreign billionaires. Whatever soundings-off may have been heard in recent weeks, I do not believe that too many of those billionaires will turn down the chance to pay for the right to continue not to pay tax in this country, no questions asked. It would be sensible for non-doms to be charged tax like any other British citizen after seven years.
In 1997, the Government pledged to eradicate child poverty by 2010, but progress has been painfully slow. The latest figures show that 150,000 Welsh children still live below the poverty line. For the last 10 years, Wales has had higher rates of child poverty than the UK average. As a result of this Budget, the expected shortfall in the targets being achieved is £2.5 billion. To tackle child poverty, we propose abolishing the current tax credit payment system and returning to six-monthly fixed awards that cannot be demanded back because of a change in circumstances.
The whole tax credit system is creaking and is a waste of precious resources, with too many people entitled to claim tax credits who do not need them. That clogs up the system, reducing the pot of money available for the truly needy. The child trust fund should be scrapped, and the money from it should be used to invest in children earlier on in their lives, when far more difference can be made.
If you will spare me two minutes, Mr. Caton, I will draw my comments to a conclusion. The abolition of the tax allowance on commercial buildings is a retrospective tax. People who have planned to put up new buildings on the basis that they would receive a tax allowance, now find that they will not. The abolition of the tax allowance on agricultural buildings is particularly difficult because they decrease in value over the years, whereas the value of commercial properties can sometimes increase. Therefore, people who invest in agricultural buildings find that they are hit with a double whammy.
The encapsulation of my argument on green taxes is that they should be there to discourage a particular type of behaviour, not to increase the tax take. There should be opportunities for the relevant people, particularly those on low incomes, to receive tax reductions more substantial than those proposed by the Government. However, it gives green taxes a bad name if they are regarded as a tax-raising initiative rather than a behaviour-modifying initiative to tackle climate change.
There can be no doubt that we face turbulent times ahead. It is right to acknowledge that the Government cannot be blamed for the global slow-down, but their excessive borrowing has left us in a much weaker position than other major economies. The Chancellor may have used the word “stability” to death in the statement, but perhaps he was experimenting with a form of hypnosis. I certainly felt that I was losing the plot on one or two occasions. In reality, we face the greatest period of economic uncertainty since the dying embers of the last Tory Government.
The Budget is a green cop-out that dodges the difficult decisions on environmental taxes and offers no help to the millions of hard-pressed families struggling to make ends meet. It leaves loopholes for the super-rich in place and bears down on the poor, particularly in that it does not address the matter of regressive council tax. It also does far too little to tackle the injustice of child poverty, which remains more widespread in Wales than anywhere else in the UK.
4.4 pm
Mr. David Jones: This has been a fascinating debate, much of which has been about the Budget. It is perhaps a tribute to the Committee that, notwithstanding the competing attraction of President Sarkozy and his wife, so many members have remained to the bitter end.
The Secretary of State rose to deliver what he said would be a brief speech, but which, in fact, turned out to be reasonably lengthy, not through any fault of his, but through the multiple interventions that he accepted, although, they added considerably to the gaiety of the Committee and contributed a lot to the political knockabout of the day. However, the core of his speech was very brief. It revolved around the theme of stability; a word that has been repeated by many Labour Members today. Clearly, Labour business managers have rammed it into Labour Members that they should repeat the word “stable” again and again in relation to the Budget.
The hon. Member for Brecon and Radnorshire described the Budget as sparse and dull. In truth, it was a sparse Budget because it had to be. Frankly, the Chancellor had very little room for manoeuvre and he has nothing left in the kitty. The Secretary of State was obliged, because of the sparsity of the Budget, to rummage around to find some themes that he could elaborate on in his speech. He referred to progress in the relief of child poverty, a theme picked up by various members of the Committee, including the hon. Members for Carmarthen, East and Dinefwr, for Llanelli, for Ynys Môn and for Cardiff, North, to mention but a few. Yes, there has been some progress in relieving child poverty, but it is fairly clear that the Government will not hit their target by 2010. Save the Children estimated that they will fall short of that target by as many as 450,000 children.
My hon. Friend the Member for Chesham and Amersham was challenged by members of the Committee to say what Conservatives would do it they were in the Chancellor’s position. I will give a flavour of what we would do. We would end Labour’s couple penalty in the tax credit system. We would increase the working tax credit from £3,430 to £5,385—an increase of some £38 per week. The direct effect of that would be to lift 300,000 children in two-parent families out of poverty. I commend that policy to the Government.
The Secretary of State referred to pensioners. Certainly, the winter fuel payment increase is welcome, but I remind the Committee that it is a one-off payment. Although there will be an increase, it will not keep pace with increases in fuel inflation. Gas bills rose by 12.6 per cent. and electricity prices by 10.6 per cent. in February alone. There is a considerable way to go before that sort of increase is mitigated. In truth, inflation is running at a considerably higher rate than it has for some time. For example, since February last year the price of bread has gone up by 15.1 per cent., eggs by 30.8 per cent. and butter by 36.3 per cent. Mortgage interest payments are up by 11.8 per cent. since last February. Notwithstanding that, the Government persist with their suggestion that inflation is running at between 2 and 2.5 per cent. per annum. That is because the Government have adopted the consumer prices index as their measure of inflation. The retail prices index, which was formerly used by the Government, showed an increase of well over 4 per cent.
Many hon. Members have referred to their constituencies. There were thoughtful contributions from many hon. Members, in particular from the hon. Member for Llanelli. She mentioned the effect that the increase in fuel prices is having on rural communities, which are suffering most in the present economic climate. The Chancellor has increased vehicle excise duty. He has postponed the increase in fuel duty, but that will be in place within a year. There are disparities in the cost of fuel. In my constituency of Clwyd, West, diesel in Cerrigydrudion is being sold at 118p per litre as opposed to about 110p per litre on the coast. So, rural communities are suffering. That suffering has been exacerbated by the post office closure programme, which often results in closing the only shop in the village.
Ian Lucas (Wrexham) (Lab): Will the hon. Gentleman give way?
Mr. Jones: I shall not give way. I am sorry. The hon. Gentleman has not been here for the debate and I have little time left to me.
The hon. Member for Carmarthen, East and Dinefwr made an interesting speech, which started off in philosophical mode and then developed into an interesting discussion about the Laffer curve, which shows the degree of erudition that can be expected of a Welsh Grand Committee.
The hon. Member for Ynys Môn referred to a tough Budget, but also to there being global problems. Indeed there are, but the Government have not been prudent, despite the repeated use of the word “prudence” by the Prime Minister during his tenure as Chancellor. We did not fix the roof while the sun was shining, so to speak, and the Chancellor had no option but to deliver a tough Budget. The hon. Gentleman made some interesting suggestions about developing skills audits at a local level, and referred to tax implications—perhaps he also had in the mind the Laffer curve.
The hon. Member for Aberavon referred to his specialist subject of education. He referred to the work of the Select Committee on Welsh Affairs, on which I also serve. He referred to the example of China and the extent to which Chinese universities are targeting their courses to the needs of commerce and industry. I agree with him. That is a model that could well be adopted in Wales and in the UK as a whole.
The hon. Member for Montgomeryshire referred to the Budget as cautious. He was the only member of the Committee to use the R word—recession. He said that the UK economy is showing signs of recession. If this country takes its lead from America, as it frequently does in economic matters, it may well be that he was not wrong to use that word, because it would appear that at the moment the United States economy is in recession. He also referred to disparities in salary levels in rural areas. He was right to do so, because those disparities result in disproportionately high rates of inflation experienced by rural dwellers. Essential items are not disaggregated from the calculation—in other words, rural dwellers have to spend more proportionately on such staples as food, housing and fuel.
The hon. Member for Vale of Clwyd mentioned stability. He trumpeted the achievements of the Labour Government, but spoke little about the Budget. The hon. Member for Caernarfon referred to the single issue of capital gains tax and the effect that he feels the present regime has on the housing market in his part of the world—a beautiful part of the world and therefore attractive to second-home buyers. He and I have a problem in that regard because I do not believe that it can be resolved as simplistically as changing the capital gains tax regime. He nevertheless made a pertinent point. The hon. Member for Cardiff, North mentioned again the issue of child benefit and child poverty.
The debate has been interesting, particularly because of the themes that have developed, especially child poverty and the effects on rural communities. It is interesting that we have been able to devote so much time to the discussion of the Budget, because it was not a Budget of stability. It was a Budget of paralysis, paralysis experienced by a Government that now faces extreme economic problems and has not been sufficiently prudent to put by the wherewithal to deal with problems as they have arisen.
4.16 pm
The Parliamentary Under-Secretary of State for Wales (Huw Irranca-Davies): In the minutes that remain I will try to cover as many points as I can of this wide-ranging and stimulating debate, which has proven the worth of the Welsh Grand Committee by allowing its members to speak on a wide variety of issues relating to the Budget.
One word that has not been used today—it is often overused—is partnership. Here that is the partnership between the Labour Government in Westminster, the Labour-led Administration in the Welsh Assembly, the local authorities and the voluntary and private sectors in Wales. That is why we now have nearly 130,000 more people in jobs since 1997, why manufacturing output in Wales rose by 1.2 per cent. in 2007 and why construction output—I will return to that in a moment—has risen by 6.4 per cent. over the past year. That has not happened by accident. Many members—on both sides of the Committee—have remarked on the stability and consistent stewardship of the economy under both the previous and the current Chancellors. That is why we are able to deliver investment. There are 1,500 more police officers and 688 more community support officers since 1997. There are 8,000 more qualified nurses, 500 more consultants, 1,700 more schoolteachers and 5,700 more school support staff. Those are notable successes, delivered against a background of good stewardship of the economy.
My hon. Friend the Member for Aberavon also touched on Neath Port Talbot county borough council and I join him in congratulating it and celebrating the remarkable achievements of one of the finest—if not the finest —local authority in Wales. The National Institute for Construction—Wales is an exciting prospect, which, if successful, will enable Wales to move ahead and capitalise on the massive demand for skills across all levels of construction. I am sure that that will benefit not only his constituents but the wider Welsh economy, particularly in south Wales. He also mentioned the recurring issue of a small but clever country competing in a global economy.
My hon. Friend the Member for Ynys Môn talked about a tough but fair Budget against a backdrop of global challenges, and about stability and growth. He also mentioned the nuclear academy at Staffordshire university. My right hon. Friend the Secretary of State and I met him yesterday to discuss that and other matters. Once again, that is driving forward the skills agenda in Wales. My hon. Friend remarked—as have other members of the Committee—on the doubling of the budget for the Welsh Assembly Government since 1997. That does not happen by accident, but under successive Labour Governments.
I should also mention biofuels, to which several people referred. I was privileged the other day to visit Sundance Renewables in the constituency of the hon. Member for Carmarthen, East and Dinefwr—it does excellent work in a co-operative project. It is concerned not with growing crops for biofuels but recycling fuels that are taken from restaurants, chip shops and so on around the area. It is a good green initiative. There are concerns about biofuels, but the situation is not all bad.
My hon. Friend the Member for Llanelli spoke about a Budget for a fairer, caring society, and about the 17,000 pensioners in her constituency who will benefit from it. She also spoke about the minimum wage. I was on a bus recently to promote the minimum wage under the slogan, “Are you on the £5.52?” However, within a week, it changed to, “Are you on a £5.73?” The Government have consistently increased the minimum wage. We remember being told that it would lead to devastation throughout the economy and the loss of millions of jobs, but the reverse has happened—there are more people in jobs, who benefit from the minimum wage.
My hon. Friend the Member for Vale of Clwyd also commented on the stewardship of the economy and its effects on his constituency. He used the St. Asaph business park as an exemplar for the transformation of the economy and his constituents’ lives under Labour. That is true in north, south, east and west Wales. To echo his phrase, we do not want a return to the rollercoaster of boom-and-bust economics.
The contribution of the hon. Member for Carmarthen, East and Dinefwr was generally balanced and thoughtful. He acknowledged the reduction in relative poverty in Wales and mentioned that it was greater than in the UK as a whole. He pointed out how we could go further—we all want more progress—but he was right to talk about the Government’s track record and what is happening in the Welsh Assembly Government, which shows that we are going in the right direction. On that theme, child benefit, working families tax credit, pension credit, pension reform—which is the next stage—welfare reform and the minimum wage, which I have mentioned, are vital.
The income inequality that grew rapidly in the 1980s has been largely arrested, excluding—I take the hon. Gentleman’s point on this—the extremes of distribution. The data show that the inequality for the bulk of UK households has fallen since 1997. We can contrast that with 1979 to 1997, to pick a random period, when household income inequality rose to its highest level since at least the early 1960s. We have arrested the inequality; we will do more, but we are going in the right direction.
The hon. Member for Montgomeryshire had warm words for my right hon. Friend the Secretary of State’s predecessor, and gave credit to the Prime Minister and former Chancellor of the Exchequer for building a stable and prosperous economy. The entente cordiale is happening not only in the Royal Gallery today, but in this Room. He mentioned Northern Rock and said that we had stolen one of the Lib Dems’ flagship policies.
Mr. Roger Williams: All of them.
Huw Irranca-Davies: I heard that. With Northern Rock, we saw a Chancellor of the Exchequer look at all the options, explore them exhaustively and choose the right one in a timely fashion, as opposed to leaping prematurely at any one option.
The hon. Member for Montgomeryshire rightly mentioned objective 1 and how mid-Wales and other areas that did not benefit from it could do so. More must be done for mid-Wales and rural areas, but I recall that, when the Government sought objective 1, they were met with either downright hostility or complete scepticism, as has been remarked on. However, we did it, and we have delivered on convergence funding as well. We continue to deliver funding to Wales on that and other matters.
The issue of BT was raised. My right hon. Friend the Secretary of State is meeting BT next week, and I am sure that he will be happy to raise the issues mentioned by the hon. Member for Montgomeryshire.
The hon. Member for The Wrekin spoke about cross-border issues and patient flow. Neither financial nor patient flow is one way. The Welsh Affairs Committee is investigating cross-border issues. Also, the Minister of State, Department of Health, my hon. Friend the Member for Exeter (Mr. Bradshaw), whom I met recently to discuss the matter, and a Welsh Assembly Minister will be working together on cross-border protocols to ensure that the problems are resolved to everybody’s satisfaction. The hon. Gentleman also spoke about housing associations and gave some examples—from his constituency, I believe—of housing associations that seemed to be milking property and land values. If he has any illustrations of that happening in Wales, my right hon. Friend the Secretary of State and I will be more than happy to pass them on to the Welsh Assembly Government, but we have not come across any.
The hon. Member for Brecon and Radnorshire spoke about the Barnett formula and the reviews under way in the Welsh Assembly Government and Scotland. We look forward to the outcome. Curiously, he was unusually antagonistic—that is not like him at all. He has turned over a new leaf; he is going to be the thorn in the side of Welsh Grand Committees. In respect of the letter on the Barnett formula, we did a quick check, and we do not have a record of it. That is not to say that he did not send it, but if he sends it again, we will be happy to read it. We cannot trace it at the moment; there must be a problem with the post.
The hon. Member for Chesham and Amersham spoke about small and medium-sized enterprises in Wales. Total entrepreneurial activity in Wales has risen to 5.5 per cent. from 3.9 per cent. in 2002. The SME sector is vital. It employs nearly 1 million people in the UK and creates a turnover of nearly £80 billion. Apart from what is in the Budget, the Welsh Assembly Government have committed to a culture of investment, drawing on the new single investment fund. She and others made much of capital gains tax. The 18 per cent. rate is less than half the headline rate paid in 1997. Under the previous regime, capital gains were charged directly to income tax at rates of up to 40 per cent. In terms of entrepreneurs and SMEs, the rate responds directly to the concerns raised by business groups. It is targeted to provide a special 10 per cent. rate for owners of small businesses and those who invest a material stake in such businesses. On overseas trade, the growth in Welsh exports between 1999 and the last four quarters was 39.9 per cent. above the total rate of growth for all UK countries and English regions.
Many hon. Members focused on child poverty, including the hon. Member for Chesham and Amersham. The measures announced in the Budget will lift another 250,000 children out of poverty in the UK. Child benefits such as the child tax credit and the child fund are important measures introduced by the Labour Government. Every single day, 240 children are lifted out of poverty in this country; every day during the Tory years, 200 children went into it. That is the contrast. We need to do more, but we are along the right lines.
Question put and agreed to.
That the Committee has considered the matter of the Budget Statement and its implications for Wales.
Committee rose at twenty-nine minutes past Four o’clock.

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