Mr.
Murphy: That is certainly a point worth taking up, but I
do not think that it is the central problem. The banks will say
themselves that they are continuing to lend money. The problem is that
they are not lending it to certain sectors, particularly the
construction sector,
as we have heard. They do not want to take any risks—the irony is
that they took too many before. Given all the billions of pounds that
we have put in, the British people expect their banks, some of which
are now part-nationalised, to be able to do their duty in that respect.
I do not want to say any more, because it is important that members of
the Committee have an opportunity to make their points this morning and
this afternoon. My message is simple: we are listening to people,
listening to businesses, responding to the concerns and worries and
sometimes having to take tough decisions, but we are all the time
working on behalf of Welsh men and women to make their lives better
when everybody is feeling the impact of the extraordinarily difficult
times that we are
in. 10.49
am
Mrs.
Gillan: I thank the Secretary of State again for arranging
the Welsh Grand Committee and arranging for the Financial Secretary to
attend. When the Minister sums up the debate, will he say whether any
other Ministers will be called to the Welsh Grand Committee? I wrote to
suggest that it would be helpful to have a representative from the
Department for Business, Enterprise and Regulatory Reform and also from
the Department for Work and Pensions, particularly in the light of the
drastic trend of unemployment figures and the catalogue of closures and
problems that we have already been identifying over the course of this
morning.
I also thank
the Minister for giving us the opportunity to debate this subject,
because it is a rare thing. If left to the Government, we would have
been unable to debate the pre-Budget report in Parliament at all, which
would have been wholly unacceptable because it was, as I think
everybody would acknowledge, a mini-Budget. I am glad that we have had
a chance to focus on it in this forum.
The measures
in the pre-Budget report were, however, supposed to alleviate the
effects of the downturn. A growing number of commentators, including
the European Commission, the International Monetary Fund and the OECD,
are all now predicting that the UK will have the steepest recession and
the sharpest rise in unemployment. Without making any political points,
I am sure that the Secretary of State and I share the concern for the
jobs and livelihoods of families throughout Wales and, indeed, the
United Kingdom.
In addition
to all of this, the Government’s borrowing has come on top of a
giveaway by the Chancellor of £20 billion, which was highlighted
in the PBR and which eventually has to be paid for by somebody. There
is also a £40 billion tax bombshell from the PBR hanging over
all our heads. There is the real prospect that national debt will
double to £1 trillion. All of that will eventually have to be
paid for. Today’s schoolchildren in Wales will be spending most
of their life paying off the astronomical debt that appears to be being
racked up by the Government.
Albert
Owen: The hon. Lady is right to say that the debt will
grow, but does she not acknowledge that, during the 1990s recession,
that debt also doubled under the John Major Government? Those are the
facts. Is it right that we intervene now to cut interest rates and VAT,
or to put both up as the Government did in the 1990s? That is the
choice facing the country.
Mrs.
Gillan: I am not saying that the choices are not
difficult and I am a little tired of hearing people hark back. The
people of Wales are far more concerned about what is happening today
and tomorrow than the people opposite, who always want to live
in the past. I am talking about the future and the children in
Wales today.
Lembit
Öpik: We hark back because the Conservative party
endlessly blames this Government for things that were put in place by a
Conservative Government. Let us remember that the banking system was
deregulated by the Conservative party; that is the direct cause of the
irresponsible lending that took place. Can the hon. Lady therefore
recognise that I, and others, are very happy to talk about the future
but that the Conservative party used to be less hubristic about its
responsibility for the mess that we are in?
Mrs.
Gillan: The hon. Gentleman should spend less time on that
silly machine that he rides around on and more time looking at his
Government’s Financial Services Authority and financial scheme
that we are operating under today.
In Wales, the
poorest part of the United Kingdom, prosperity has fallen even further
behind the rest of the country—particularly in recent weeks. I
have to ask the Secretary of State what kind of incentive there is for
people in Wales to spend money, as the Government are trying to
encourage them to do, when they know that if they hand in £1
today, £2 will be taken back tomorrow, the day after that, and
the day after that. It is always well to remember that every piece of
borrowing will have to be repaid at some stage, and at some
price.
What is
happening to the Government’s efforts? The centrepiece of the
measures under the PBR was the VAT cut, which was billed as being this
great stimulus for the economy. However, there has been little evidence
of that over the weeks since the announcement was made. Quite frankly,
how is a 2.5 per cent. cut going to stimulate the economy and get
people spending when, as every woman on this Committee
knows—there is just one here at the moment—out there in
the shops they are knocking off 20, 30, 40 and even 50 per cent. and
still cannot move the goods. [Hon.
Members: “Men shop too.”] I am pleased that
they are in touch with their feminine side and go shopping as well.
They will have noticed that the stores are offering 50 per cent.
discounts but the goods are not shifting. People will not go out and
buy a DVD player just because it now costs £39.10 instead of
£39.90.
In many
cases, despite such protestations, the cut will not be passed on to the
consumer. I understand that those paying the Severn bridge toll will
not see a drop in prices. British Gas customers who ring the helpline,
as I did myself the other day, are greeted by a message announcing that
although British Gas is committed to passing on the cut, three weeks
later the company is still working it out. I do not think that the VAT
cut, which was billed as the country’s great saviour, is
working, and I think that Ministers are putting their heads in the
sand.
People are
losing their jobs. The number in Wales has just increased by
14,000—the only larger increase in figures has been in the
north-east—to 94,000. If people
cannot run their car or pay their mortgage, a 2.5 per cent. cut in
VAT—that is 30p off a £15 restaurant bill—will not
get them, or even me, spending. I cannot find any evidence that the
£12 billion temporary VAT cut has given any confidence to
consumers anywhere. What it has done is added to the bill that they
will eventually have to pay through higher
taxes. Mr.
Roger Williams: I share the hon. Lady’s concern
that people using the Severn bridge will not get any relief on their
tolls. Does she agree that a way around that—I understand how
complex it is for operators to pass on that saving—would be to
have one day in 45 when use of the Severn bridge was free? That would
be easy for the operator and would give at least some relief to drivers
who use it
regularly.
Mrs.
Gillan: I am not into micro-managing businesses, but I am
sure that anybody listening to the debate will take on board the hon.
Gentleman’s suggestion. If it is a practical solution to the
problem and enables the cut to be passed on, I am sure that it will be
welcomed. Hon. Members will know that I proposed something much simpler
than that: allowing Severn bridge tolls to be paid by credit card. That
seems to be impossible in this modern age under this Government, so I
am not sure that the hon. Gentleman’s solution would be
possible.
The weakness
of our economy at the moment is becoming obvious. The pound has been
falling against the euro. House building in Wales is drying up, house
sales and values are falling and even the stamp duty holiday, which has
not been referred to here but was handed out by the Government, seems
to be having little effect, as banks are basically failing to pass on
interest rates to customers or to start lending normally.
The
Government want to be seen to be acting. They certainly spend a lot of
their time blaming world economic circumstances, but it is clear, as my
right hon. Friend the Leader of the Opposition pointed out last week,
that the problem has two parts: the recession, which is happening
around the world, and the record level of Government debt that has left
our country more exposed than others.
Labour
Members seem to think that it is amusing to concentrate on the
strapline handed out to them and insult the Tory party as the
do-nothing party. They must be careful. They used to say that they were
going to end Tory boom and bust. This is not a Tory boom and bust; it
is a Labour bust. Once more, they will be hoist on their own petard as
they do nothing to recognise or challenge the mountainous
debt—Government debt—that they have presided over and
that has built up during the past decade.
Far from
doing nothing, Conservatives have advocated a series of measures to
help families and businesses, and the Secretary of State knows that.
Since the recession started to bite in July, businesses have downsized
or folded at an alarming rate in Wales, including Bosch, JCB, Hoover,
Ford, Corus, L’OrĂ(c)al—big names in big
trouble—as well as some of our smaller businesses, such as
Ffestiniog railway, Harlech Food Service and TyreGenics. It is clear
that businesses of all sizes and across all sectors need help. Sadly,
even our highly skilled jobs are
disappearing.
Mr.
Touhig: I understand the hon. Lady’s point. She is
quite right to point out some of the difficulties facing our economy.
However, does she not realise that we must give consumers and business
and industry in Wales confidence that we will come through these
economic difficulties? Simply advocating—as she is doing along
with the Liberals—that the House of Commons increase VAT does
nothing for confidence in spending. When I was in Cardiff last Saturday
the city was booming, and crowds of people were in the shops. Surely it
is our job to give people confidence that we will come through the
economic difficulties. Talking us down does not
help.
Mrs.
Gillan: I agree entirely with the right hon. Gentleman. It
is very important to express confidence in our country and economy, but
it is not just I who am reflecting on the real position. There are
commentators outside the country who say that this country is not best
placed to face the current downturn. Sticking one’s head in the
sand and ignoring reality is not the way to treat it. The Conservative
party has offered solutions. We are not the do-nothing party; quite the
reverse. I will go on to list some of the things that we have
suggested. We would be delighted if the Government took up our
suggestions today rather than tomorrow, when we think that it will be
too
late. Let
me continue on the subject of highly skilled jobs. The Secretary of
State knows that I am particularly concerned about that issue and the
GE Healthcare announcement. I hope he will talk to GE Healthcare and
ascertain what he can do to ensure that highly skilled science jobs are
not lost permanently to Wales, which is what I fear, and I know that he
does, too.
Businesses in
Wales need access to credit, as they do throughout the United Kingdom.
We have to get banks lending once again. The Secretary of State cannot
deny the fact that Government action is still not working. We have
proposed the establishment of a national loan guarantee scheme, which
banks will be able to use to underwrite a significant proportion of new
loans to businesses. I have heard much of the lending scheme that the
Government keep pushing forward, but it only covers 0.2 per cent. of
our businesses. Our scheme will not cover 100 per cent. of the loan as
some risk must be taken by the banks to avoid reckless lending. It will
mean, however, that less capital is required to provide loans, which is
something that the banks are desperately short of. Such action will
free up short-term credit lines, overdrafts and trade credit. It gets
to the heart of the credit crunch without relying on an unfunded
spending
splurge. The
CBI, the chambers of commerce and the Federation of Small Businesses
have all supported our version of the national loan guarantee scheme.
The scheme needs to be introduced now to save jobs. I secretly think
that the Government are considering the scheme, and I hope and pray
that they will adopt it. The Minister denied it when my hon. Friend the
Member for Clwyd, West asked the Financial Secretary about it. None the
less, I secretly think that the Government are considering the scheme,
but they will rename it and try to disguise it as one of their
initiatives. I really do not care about that because we need the
national loan guarantee scheme to protect our businesses in Wales. The
unemployment figures have risen faster in Wales than in any other area
in the United
Kingdom.
The
Parliamentary Under-Secretary of State for Wales (Mr. Wayne
David): To clarify what I said, the Government will look
at every option. We are not entering this situation with a closed mind.
The important thing is that we all realise that we have to develop
policies. Frankly, I would much prefer it if the Opposition had stayed
true to their initial word and been far more supportive of the action
that the Government are taking, rather than adopting such a carping
tone.
Mrs.
Gillan: The hon. Gentleman is a kind and benevolent man.
He is obviously worried that he said something wrong, but I assure him
that he did not. I want him to welcome the national loan guarantee
scheme, and I hope that his Government will consider
it. We
have suggested other ways to help struggling businesses: for example,
we have said that we will set the main rate of corporation tax at 25p
and the small companies rate at 20p; that we would give small and
medium-sized businesses a chance to defer their VAT bills; that we
would cut national insurance costs for firms with fewer than five
employees; and that we would provide £2.6 billion of tax breaks
for those companies that help to get unemployed people back into
work—something that we really need in Wales. In addition, we
would like a chapter 11-style breathing space, so that problems can be
worked out with businesses before the liquidators move in. Measures
such as those would make a real difference to Wales’s families
and businesses. The Government have never been too afeared to pinch
Conservative policies in the past; I urge them to do so
again.
While we are
talking about Welsh businesses, I want to mention our aerospace and
defence sectors, which the Committee touched upon earlier. The UK
aerospace industry is vital to our economy in Wales. As we all know,
Airbus alone employs some 7,000 people in
Wales. Mark
Tami (Alyn and Deeside) (Lab): More than
that.
Mrs.
Gillan: I defer to the hon. Gentleman’s knowledge.
I do not know the exact number on the payroll. If it is 10,000, it is a
considerable number of people in the supply chain that
follows.
We need
continuous Government commitment to Airbus and to wing assembly in the
UK. We also need a commitment to supporting investment in composite
technology, to looking at the Export Credits Guarantee Department
regime and to providing the correct support to sustain Airbus. If we do
not act, we risk losing out to our fellow European countries, such
Germany and Spain, which are ready to take up any slack in UK
innovation or production. I urge the Secretary of State to ensure that
he remains on top of the situation, not least because of what is
happening in other parts of the defence
sector.
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