Lembit
Öpik: Will the hon. Lady give
way?
Mrs.
Gillan: I am not sure that I should give way to
the hon. Gentleman, because last time it was not worth
it.
Lembit
Öpik: I am sure that the hon. Lady will be pleased
to have given way this time. I fully support what she has said about
the aerospace industry. It is clear that Wales can lead the world in
composite developments. In applauding Airbus UK’s amazing
achievement in getting so much of the composite technology work for the
UK, will she join me in underlining the importance of the Government
working strategically to ensure that Airbus’s further bids are
fully supported? We now see that that support has had a practical and
beneficial effect on the chances of securing work and those jobs for
Wales.
Mrs.
Gillan: It is sad, but I am forced to agree with a Liberal
Democrat on this occasion. The hon. Gentleman is right, which is why I
have raised the issue as a main point in my speech.
I am also
concerned about the defence sector. The announcement of Land Securities
Trillium pulling out of the St. Athan deal has caused concern. I hope
that the Minister will address that later, because we are all hoping
for an announcement shortly to ensure that there is no long-term damage
or threat to that development.
Before
closing, I would like to look at the funding of the measures announced
in the PBR, particularly the £5 billion efficiency
savings, which I have raised with the Secretary of State and the
Financial Secretary before. Public sector workers in Wales are starting
to feel the effect of the downturn and of the Government’s
actions and so-called efficiency savings. The closure of HMRC offices
has been a great blow to the work force across Wales. Sadly, that
process has spread out into the rural hinterland and sparsely populated
areas that badly need those jobs. Presumably, we will soon see further
belt tightening by public sector organisations in
Wales. I
am particularly concerned about councils, whose funding arrangements
are still in doubt owing to the as yet unresolved situation with the
Icelandic banks. It is amazing how something slips off the front pages
as easily as butter off a hot knife. The Icelandic banks have landed a
lot of our councils and universities in trouble, but we have not had
constant updates, so I hope that the Minister will let us know what the
latest situation is. What have the negotiations between his colleagues
in the Treasury and the Icelandic banks and Government revealed? With
further cuts looming, I want to establish what calculations the
Secretary of State has made within the Department regarding job losses
in Wales, across the private and public sectors, before we emerge from
the recession.
Will there be
a point when we know that Wales has turned the corner? What criteria
has the Department established, so that we can identify when the upturn
is coming and maximise it? How, for example, will the Minister and the
Department attract the maximum number of foreign investors back to
Wales, and how will they maintain them? We need to ensure that we
retain foreign investors such as Hoover, Bosch and GE
Healthcare, to name but a few, in our country and that we attract more
to join them. What plans have been made in the Department, and what
moves are going to be made by Ministers in other Departments across
Whitehall? There
has been a lot of talk about what could be done. There has been a
summit, a lot of chat and some proposals, some of which have not
worked. I am more
interested in effective action. Will the Secretary of State consider
having a repeat sitting of the Welsh Grand Committee when we come back
after the Christmas recess, so that we can have a constant update and
keep ourselves informed of the economic conditions in Wales? People
would understand if the Committee met regularly to establish where
Wales’s economy is going and what we can do to help it. I hope
the Secretary of State considers
that. I
am concerned, given the amount of money that the Government have
borrowed, that when the downturn finishes and the upturn comes, we will
simply face higher taxes and that we will therefore not come out of the
recession as quickly as the Secretary of State suggested. I hope that
he will address that.
I thank the
right hon. Gentleman for his courtesy in all his dealings with me this
year, and I look forward to doing business with him in the new year,
when the Welsh economy is hopefully looking better than it does
today.
11.12
am
Mr.
Peter Hain (Neath) (Lab): I have a soft spot for the hon.
Member for Chesham and Amersham, but I must say that her speech
symbolised the abject failure of the Opposition parties to propose any
serious alternative policy to the Chancellor’s pre-Budget
report. The Conservatives, with their plans for huge cuts, would plunge
Wales back into the misery of the Thatcher years. They have absolutely
nothing consistent or coherent to say about solutions to the global
financial turmoil, and voters have rumbled them, as this
morning’s Guardian poll
shows. The
same is true of the Liberal Democrats and their plans for £20
billion-worth of cuts. To be frank, Plaid Cymru’s economic
policies are a joke, taking Iceland as its model. That party has a sort
of policy for an ice-age Wales, combined with independence, which would
leave Wales a whopping £9 billion a year worse off—more
than half the Welsh annual budget—and totally
bankrupt.
May I suggest
how we might build on the pre-Budget in respect of the endemic
unwillingness of the financial institutions to provide loans? The
Financial Times reported on 8 December 2008 that the Chancellor is
considering an extension of taxpayer guarantees to cover business
lending, because the economy is still starved of credit despite the
£50 billion recapitalisation of the banks. The most radical
Treasury option under study is, apparently, for the taxpayer to reopen
the wholesale markets to banks by offering guarantees to securities
backed by new lending. It was reported that such a guarantee should
cover lending generally, and that securities backed by small business
loans, car loans or other lending might be included.
I have been
talking to my constituent, Peter Morgan, who has 35 years’
experience as an estate agent in Neath, with other offices along the M4
corridor. He tells me that the problem for the sector can be put down
to just one factor: the total lack of availability of high-percentage
mortgages of 90 to 95 per cent. He maintains that there is no need for
the reckless 100 per cent. or higher mortgages of previous times, and I
agree with him. However, he says that lenders, in an effort to
increase their liquidity, are using the media’s reports that
prices are continuing to fall as an excuse to decline to lend. My
proposal is that the Government offer a form of guarantee on the
higher-percentage mortgages, so that if the borrower defaulted and the
property were to be repossessed, the Government would repay the
difference. That would mean that lenders would have no further reason
or excuse not to lend, which would have an immediate effect on the
property
market. Peter
Morgan tells me that he and other estate agents have more willing
sellers at the moment than at any time in his experience. Despite the
general lack of security and employment, estate agents also have plenty
of buyers who wish to purchase but are unable to do so due to the lack
of available mortgage funds. The problem is not one of housing supply
or demand, but one of finance. Mr. Morgan feels confident
that if the market were kick-started, prices would stop falling,
resulting in positive publicity and, we hope, an end to the downward
spiral.
As we all
know, we are a nation that relies on the value of our housing stock to
provide security, confidence and, in many cases, the facility to secure
future borrowing and credit. I suggest that the Government could
indemnify the lender against any loss on the mortgage for, say, a
period of two years in the event that the property is repossessed. That
should be sufficient to guarantee that lenders have no reason not to
provide at a favourable rate the 90 to 95 per cent. mortgages that are
desperately needed.
Owing to the
considerable drop in prices of 20 to 25 per cent. over the
past 18 months, and the reductions in interest rates, properties are
now very affordable to first-time purchasers in a way that they were
not before. The only reason why they are unable to buy is the lack of
high-percentage mortgage availability. That also applies to the
buy-to-let market. Such availability would boost opportunities for
first-time buyers and galvanise the whole housing market, because their
inability to get home loans has logjammed everything. Will the
Secretary of State please raise that proposal with the Chancellor as
soon as possible and let me know the
outcome? There
is also the vital question of a lack of finance for businesses. If the
Chancellor’s thinking on loan guarantee were pursued, that would
be in line with what many businesses have convinced me could make a
real difference. The banks currently look at the overall situation and
see commercial risk in all directions. When they look at car
manufacturing, for example, they consider the car sales situation for a
particular company, which is currently massively down on last year, and
the precarious nature of parts of the dealer network. The failure of a
dealer would put extra stock into the market, undermine residual values
and create a knock-on effect. The banks then look at the supplier
network and see the potential problems that a collapse of General
Motors or Chrysler might have on the situation. The failure of a
supplier could stop production lines and have a significant effect on
output. It is then possible to understand why the banks are reluctant
to be flexible on their policies and covenants. They are simply taking
a normal, prudent banking point of view, albeit a frustratingly
self-interested one.
On the other
hand, the Government are the only party who can take a global view of
the situation as it influences all aspects of the economy, and the only
party who can intervene—as we have led the way in
doing in the past months. The only way we will unlock funding from the
banks is by way of Government guarantees for approved facilities to
industries that are profitable but have short-term financing problems.
One would naturally expect that measure to be coupled with certain
restrictions, such that, while the Government guarantee was in place,
there would be limitations on the distribution of funds from the
company and so
on. Mr.
Jones: Will the right hon. Gentleman give
way?
Mr.
Hain: I will make a little progress before doing so,
because I am conscious of the time.
I am struck
by the number of businesses that I meet that have orders but whose
efforts to make the necessary investment to deliver those orders are
frustrated by the lack of finance. I found that to be the case when I
talked recently to a south Wales engineering company. It has a huge
order, much of it to be exported, but it cannot get the production
lines going because the finance is not available. Again, I should be
grateful if my right hon. Friend the Secretary of State raised that
“Made in Wales” proposal with the Chancellor and let me
know the outcome.
Will my right
hon. Friend also discuss with the Welsh First Minister the local
government settlement, which seems to be unchanged in Wales by the
pre-Budget report? In England, the settlement was more than 4 per
cent., whereas in Wales, it was just 2.9 per cent. The Assembly budget,
however, has been increased for 2009-10 by 4.2 per cent., including in
health and social services by 5.3 per cent., with which I do not argue,
in the economy and transport by 5.1 per cent., but in central services
and central administration, by 6.9 per cent. Despite the fact that
services provided by local government touch every child, people of
working age, the elderly and those with disabilities, they are not
getting an equitable share of the
budget. I
applaud the tough decisions taken by Andrew Davies, the Minister of
Finance, in confronting many difficult choices that the Assembly
Government have not made over past years, but how on earth can the
Assembly prioritise investment in critical county council services
lower than increases in its centrally controlled budgets, which include
central services and administration? The latter will have a £25
million increase, which is more than double inflation and treble the
increase for local government. I cannot understand that
comparison.
Albert
Owen: My right hon. Friend is making an important point.
My authority of Anglesey has received a mere 1.5 per cent. increase
when wage increases for staff are predicted to be double that. A large
percentage of spending goes on wages. Does he agree that at times of
difficulty like this, there should be rises across the board for each
authority that faces the same problems? If there are not, those that
have low settlements will have to increase council tax, cut services or
raid their
reserves.
Mr.
Hain: My hon. Friend makes a fair point. In the case of
Neath Port Talbot, the increase of 2 per cent. means a significant
real-terms cut of more than 2 per
cent. The county council estimates that inflationary pressures will
account for about £10 million in the coming year. The cash
uplift of the planned 3 per cent. council tax increase is £6
million, which leaves a serious shortfall of £4 million, or 1.7
per cent. That means that efficiency savings of 1.7 per cent. are
required just to meet inflationary pressures. That does not take
account of rising costs, which are estimated to be £4
million.
That means
that key services will be underfunded, such as special educational
needs, extra social services help for the adult and elderly population,
growth indices and children’s social services—the baby P
case raises issues that must be addressed. In all, the county council
will be about £8 million short. That means that there must be
massive cuts or a very big council tax hike, which the Labour
leadership on the council has pledged will not
happen. Neath
Port Talbot is universally acknowledged to be the most efficient county
council in Wales. It delivers the best quality services, from education
to planning, and has already made huge efficiency savings—much
greater than many other county councils, despite its relatively
deprived population. It also has a £20 million liability from
Icelandic banks. Will the Secretary of State please press the
Chancellor or the relevant Minister to grant local governments a much
more sympathetic ear than they so far appear to have had on this
problem? Finally,
notwithstanding the issues I have raised, I strongly support the
Government’s policies, which show that only Labour can
successfully lead Wales out of the global crisis, as my right hon.
Friend
said. 11.23
am Adam
Price (Carmarthen, East and Dinefwr) (PC): With perfect
timing, I walked in just as the right hon. Member for Neath was
describing Plaid Cymru’s economic policy as a joke. I am sure
that he was not referring to me personally. I am sorry that I missed
the beginning of his speech as I always listen with interest to his
comments on economic
policy. First,
let me offer a word of caution. In Iceland, one problem was the size of
its financial services sector in relation to its economy; in terms of
its comparative advantage, it placed much emphasis on that sector. Its
external liabilities in that sector were four times its GDP. There are
parallels between that and the over-importance of the financial
services sector in the UK. The UK’s external liabilities in
relation to the economy are almost exactly same size as
Iceland’s. The circumstances are different, but I caution
against making easy political points about Iceland, because other
lessons could be drawn from the circumstances it found itself
in. A
question we face is how long and how deep the recession will be. It is
likely to be comparable to the three major recessions in the UK in the
post-war period. From peak to trough, output fell by 3.3 per cent. in
the recession of the mid-1970s, by 4.6 per cent. in the early 1980s and
by 2.5 per cent. in the early
1990s. 11.25
am The
Chairman adjourned the Committee without Question put
(Standing Order No.
88). Adjourned
till this day at Two
o’clock.
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