Adam
Price: It is ridiculous—how many miles of
electrified track do we have in this 21st-century nation called Wales?
None, not a single mile. It is absolutely ridiculous that we are in
that position. Furthermore, if we look into the future, I am glad that
Network Rail are looking at very high-speed rail again, but we have
asked and asked again why it is looking only at the option of a very
high-speed rail network between London and Bristol. Why are we left off
the agenda? Surely that should be London, Bristol and Cardiff, because
it is vital to connect Wales to the burgeoning high-speed rail network.
In three years’ time, Poland will have a modern, very high-speed
rail network, and it is a country that has had to cope with the
problems of 45 or 50 years of communism and all the rest of
it. Nia
Griffith (Llanelli) (Lab): Does the hon. Gentleman, like
me, welcome the investment that will ensure that we have a proper line
from Swansea westwards? Coming
over the Loughor bridge, we are having an upgrade of that vital bit
through Gowerton, which is absolutely essential to west
Wales.
Adam
Price: I do welcome that, but I believe it is paid for
through the Welsh Assembly Government. That is part of the
problem—Network Rail now believes that if it cuts its
expenditure in Wales, the shortfall will be made up by the Welsh
Assembly Government. However, when they are hard pressed, the Welsh
Assembly Government should not have to dip into other budgets to make
up for Network Rail not giving Wales a fair share of the
budget. Albert
Owen (Ynys Môn) (Lab): It is important to put on
record that the £9 billion investment in the west coast main
line brings benefits to Wales. The argument for electrification has not
been made because many experts, including the rail unions, think that
we should have high-speed diesel. The line speeds are what we need to
improve. There is an allocation from the Department for Transport to
the Welsh Assembly Government to upgrade the line speeds of the trains.
We have the benefit from the west coast upgrade—costing
£9 billion—which this week has brought extra and faster
services to north Wales. It is wrong to give the impression that there
has been no improvement in recent
years.
Adam
Price: I am not saying that there has been no improvement,
but that Wales has not had its fair share of the cake, and I rest my
case there. [Interruption.] The Great Western main
line electrification project literally stops at the Welsh border and no
rationale has been presented for that.
Moving on,
skills are vital, not just to addressing the serious crisis that we are
facing but to building a platform for the future. I note with concern
the comments of the Innovation, Universities, Science and Skills
Committee on the draft Apprenticeship Bill. The Committee believed that
the Whitehall Departments
had “treated
consultation with the Welsh Assembly Government and the National
Assembly for Wales as an
afterthought.” It
was concerned about why that was so. There were references in the Bill
to the Learning and Skills Council, which clearly do not apply to
Wales, so that had not been thought through. Can the Minister say in
his response what has happened on that front and why the consultation
was so poor on that
occasion? In
terms of the broader macro-economic situation, it is increasingly clear
that the cut in interest rates and the recapitalisation have not yet
worked—they have not unlocked the credit that is so vital, both
to individuals and to the business sector. In the United States we have
seen a cut virtually to zero—we are where the Bank of Japan was
in the 1990s. There has also been “quantitative
easing”—the modern equivalent of printing
money—but unless the banks want to lend, not even that works. We
may well be in a similar position soon.
However, a
number of policy options remain available to the Government. We
could—we almost certainly will—see a further cut in
interest rates here as well. If the Government do not see any change of
policy by the banks, then they have to look at the panoply of remaining
options, including the sort of guarantee for bank lending that we have
already heard about. The Government themselves could lend directly
through a state credit institution; they could control, or fix,
interest rates themselves; or they could effect, as the right hon.
Member for Islwyn floated, a wholesale nationalisation of the banking
sector. We may only
be months away from any one of those options being implemented. The
important thing is that we issue an ultimatum to the banks that they
cannot simply use the lower interest rates and the recapitalisation to
repair their balance sheet. They have to strike a balance with their
responsibility to oil the wheels of the economy during this difficult
time.
Mr.
David Jones (Clwyd, West) (Con): The hon. Gentleman says
that the banks cannot simply use the recapitalisation to repair their
balance sheet, but surely that is, at least in part, a requirement of
the Government? The Government require that the liquidity of the banks
should be virtually doubled. Therefore, to a certain extent, the banks,
although not entirely blameless, are also at the mercy of the
Government.
Adam
Price: That is a point well made. I understand that the
banks are not making this case themselves. They are not
calling—at least not publicly—for a relaxation of capital
adequacy ratios. The hon. Gentleman makes the good point that there
seems to be at least a tension between the Government and the Financial
Services Authority, for example, which seems to be suggesting that it
wants to see a more conservative lending policy, because it does not
want the mistakes of the boom to be repeated. On the other hand, the
Government want the banks to start lending more liberally, or as
liberally as they were last year. There is a tension which is, to my
mind, unresolved at the moment, so the point is well made.
There may
come a time however, when monetary policies options are exhausted. As
President-elect Obama says, America has reached that point. The only
thing left is a further bout of fiscal stimulus—much bigger even
than the one we have seen to date. My prediction is that the Government
will almost certainly have to look at a fiscal stimulus even bigger
than the one that we have seen. That raises all the difficult issues in
terms of borrowing, but if that is the only option left and if one may
be staring at a 1930s-style slump if monetary policy is no longer
working, inaction is not an option.
I ask the
Government to look very seriously at the housing market because that is
the key to the solution—the way out of this crisis. Unless we
can create a floor in the housing market, stop prices falling any
further and creating the vicious circle that we have at the moment,
there is no hope in the wider economy. That is why I am a little
disappointed that the Government are going to wait until the Budget to
implement the findings of the Crosby review and introduce a state
guarantee for new mortgage lending. It might be too late by then. We
are already 15 per cent. down. Barclays’ and the
Government’s own figures are looking either at a 25 or 30 per
cent. fall from the height of the housing market. The property
derivatives market in the UK is now pricing in a 50 per cent. fall in
house prices. If that happens it would be difficult to imagine what any
Government could do because there really would be a debt deflation
cycle.
Mr.
Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): I am sure my
hon. Friend heard what the right hon. Member for Neath had to say this
morning on the subject. That was a useful suggestion but I hope it
could be coupled with some move on stamp duty because stamp duty is
still a drag on house purchase, especially very often for first-time
buyers. I would like to see a considerable move in that direction to
create a
stimulus.
Adam
Price: I agree. The Government need to increase by at
least a factor of 10 what they are doing in this sector. We had the
announcement of an extra £100 million for HomeBuy
Direct, but that is only £400 million in total, which, off the
top of my head, could help about 16,000 people. That is fewer than one
in 10 of first-time buyers in a year, even at the historically very low
numbers of first-time buyers we have now. It is a drop in the
ocean. What
we need is an all-encompassing system of support for first-time buyers,
particularly in relation to the deposit. Therein lies the problem. Two
years ago it would have been possible for a first-time buyer to have a
deposit of £10,000 on a property worth
£200,000—that would have been enough. Now, for a property
worth £100,000, one needs a deposit of £25,000. It takes
years for a first-time buyer couple to raise that kind of cash. The
Government have to step in, and not just for 16,000 first-time
buyers—that is just one month of first-time buyers. They have to
step in for everyone.
In a letter
to the Financial Times this week, Professor Charles Goodhart
made an interesting suggestion that the Government should provide an
interest-free loan. If we cannot provide a grant for first-time buyers,
we could provide a non-means-tested, interest-free loan for a
significant proportion of the deposit. The Government will have to look
very quickly at that sort of idea, because it could well be too late by
March.
Finally, I
would like to touch on the medium-term consequences of the present
situation, particularly for us in Wales and for the Welsh Assembly
Government’s budget. The figures that I have seen are very
worrying, bringing back memories of those massive cutbacks in public
services that we saw in the late ’70s and early ’80s. The
Government have said that they are seeking £5 billion
of savings over the next few years. It depends where those savings are
found, but most of them are already published in the pre-Budget
report—at least £4.15 billion are in 100 per cent.
comparable areas of expenditure, and I anticipate that the entire
£5 billion will be similarly comparable.
The Barnett
reduction for Wales from that £5 billion saving is approximately
£300 million. The effect of the savings that the Government have
already announced in the pre-Budget report, excluding any additional
savings that may be announced in March, will be that, on the revenue
side, the budget for the Welsh Assembly Government in 2010-11 will be
just under £300 million less than it would have been before
those savings were announced.
On the
capital side, the Government have allowed the Assembly to bring forward
£140 million of expenditure, and it would be wise of the Welsh
Assembly Government to use that in the same way as the Westminster
Government are doing. In addition, the baseline for the Department of
Health has changed—that was also announced in the
PBR—which means a reduction in the baseline of
£75 million of capital expenditure for 2010-11. If
one puts the £140 million and the £75 million together,
we have a lower figure for capital expenditure in 2011-12 of
£215
million. The
upshot is that in 2010-11 and 2011-12 combined, we are talking about a
reduction in the budgets of more than £500 million, compared to
what would have been in those budgets prior to the announcement of the
savings. That is an horrendous figure, and I cannot see how the
Assembly Government can avoid revisiting even some of the budgets that
they have passed. There will be real cuts in services. In addition, we
may be back in an inflationary part of the cycle by then, given the
current volatility of the economy. I am genuinely concerned about how,
three years down the line, we will afford such reductions. I have not
factored into my calculations any additional savings that may have to
be found, such as the £37 billion of additional savings that the
Institute for Fiscal Studies has talked about.
I ask that
when the Holtham commission reports on the financial arrangements in
these islands, the Government give that report urgent consideration. I
understand that these are difficult times and they will be difficult in
all parts of the United Kingdom, but Wales is a special case. Ours is a
socially disadvantaged nation and it does not seem fair that we should
shoulder exactly the same level of cut that will be felt across the UK,
when we have to cope with a huge legacy of social disadvantage that is
there not by our choice, but as an inheritance of previous mistakes
made by previous Administrations in previous generations. I urge the
Minister to look urgently at the figures. When the Holtham commission
report comes in, may we have funding justice across these
islands? 2.33
pm Dr.
Hywel Francis (Aberavon) (Lab): It is a pleasure to follow
the hon. Member for Carmarthen, East and Dinefwr once again. He has
given a thoughtful and balanced presentation, although I do not agree
with everything he said. I was particularly struck by his historical
parallels and I offer to him another interesting historical
perspective: I have recently been looking at the impact of the
miners’ strike of 1984-85 on Wales. Quite apart from the
terrible human sacrifices and losses that people incurred as families,
one of the striking things about that period was that we lost 20,000
skilled jobs, with very little serious attention being given by
employers or the Government to assisting those miners. That is a
striking contrast with today, when employers, unions and the
Governments in Wales and Westminster are committed to the question of
skills. That is the theme of what I want to
say. In
that context, I endorse the Government’s responses to the global
crisis, as represented in the Chancellor’s pre-Budget report and
in the welcome statements made this morning by two Ministers. I want to
address some of the key issues from the perspective of the Select
Committee on Welsh Affairs, which I chair, and from the perspective of
being the MP for Aberavon, which relies heavily on manufacturing jobs,
particularly in steel and the automotive sector.
I warmly
welcome the both decisive and consensual way in which the Governments
here and in Cardiff are dealing with the crisis, and in particular the
work of the
Secretary of State in his role on the National Economic Council and his
pivotal role in the Welsh economic summits. Implicit in all that is the
recognition that businesses and families are genuinely, and of course
understandably, very worried. They appreciate the need for honesty and
reassurance at the same time. Everyone recognises the value of the
Welsh economic summits as an important, positive development, and they
need to be strengthened and developed. I shall offer some suggestions
in that
direction. I
certainly welcome the role of CBI Wales in directly contacting Welsh
MPs to ensure that the views of local businesses are communicated back
to the Government directly. We appreciate and endorse its recent
contact with Welsh MPs and its strengthening of the relationship with
us. In my discussions with local businesses, my constituents and trade
unions, there has been a general appreciation that the crisis is
global, but a recognition that something can and must be done to
mitigate the problems facing us.
It so
happens that the Welsh Affairs Committee’s recent work has a
direct bearing on the global challenges facing Wales. I am sure that
everybody will be pleased to know that our globalisation report will be
published in the new year, and it will be a timely intervention. The
impressive evidence that we received, particularly from those involved
in higher education in Wales, indicated to us the great role that
universities, colleges and schools play in developing Wales and moving
it towards achieving a globalised knowledge economy. Our cross-border
inquiry is proceeding, and our education report will also be published
in the new year. In that report, too, we have highlighted some
important issues. I do not want to anticipate too much of what it will
say, but the evidence that we have gathered indicates that we need to
raise the significance of education, skills and training in our
discussions, particularly on the present
crisis. Even
the work that we are about to begin on the carers legislative
competence order has a bearing on all this. I warmly welcome the Welsh
Assembly’s proposal, and I believe that the 350,000 unpaid
carers in Wales will benefit from the LCO. The opportunity that it will
afford many of them to be given proper advice and guidance on entering
the work force will benefit them and the Welsh
economy. Against
the welcome background of the Government’s pre-Budget report
providing more loans and deferred tax payments for small businesses,
more support for jobcentres, a moratorium on repossessions and
£3 billion of capital projects, I turn to issues that have been
raised with me in my constituency that have a bearing on skills. Port
Talbot, as you know, Mr.Caton, is steel, and steel is Port
Talbot. However, what is new for us is that in steel, as in other
manufacturing sectors, the economy is much more integrated throughout
the world. Therefore, we are much more vulnerable to rapid changes in
it. At the same time, however, as I said in my opening remarks, we have
a company in Corus and a trade union—my trade union—in
Community that are very committed to the local community and keen and
anxious to support local families and the Welsh economy. Philippe
Varin, the chief executive of Corus, recently said that it has a
constructive partnership with the union and is committed to local
communities. We have a skilled, innovative and
loyal work force who wish to ensure that the Government’s dynamic
commitment to a growing skilled economy is achieved. The skills agenda,
as represented by the Leitch report and the Webb report in Wales, needs
to be implemented now—fully—and the commitment to those
two reports must be greater than ever because of the crisis that we
face. I shall now
look at the nature of the crisis as it is represented in steel and in
Corus. Corus rightly draws attention to some very serious challenges,
but it recognises that the situation is not without hope by any means.
Sales are down by an average of 47 per cent. throughout the business,
and production has been cut by 30 per cent. across the board. One blast
furnace has been temporarily closed down in Port Talbot, and savings of
£500 million are being sought throughout Corus—an
increase on the figure of £350 million at the October European
works council. Corus is also seeking a £100 million
saving on the UK payroll over the first six months of 2009,
so very big demands are being made of the work force, yet, thanks in
part to the good work of my hon. Friend the Member for Llanelli,
Trostre and the Orb appear to be bearing up. Corus Packaging Plus at
Trostre is benefiting from people staying at home to drink out of metal
cans and from the buying of canned food, and that is certainly a
welcome development—for Llanelli, anyway. There is still a
profitable market for electrical steels, too.
However,
Llanwern is unfortunately on virtual shutdown as Port Talbot is able to
roll all the steel that it needs at the moment. A final decision on the
capital expenditure for the relining of number four blast furnace in
Port Talbot is, worryingly, still awaited, too, and 400 redundancies in
the Corus distribution and building systems division have been
announced and are being consulted on in various locations throughout
the UK. They include Shotton, in north Wales, where 95 redundancies are
being sought, and a few are being sought at some south Wales
sites.
At the same
time, however, it is most welcome that employers and the unions are
engaging positively and constructively with the Government in two
different contexts. First, Corus is seeking a subsidy from Michael
Leahy, the general secretary of Community. The Government could
conceivably provide funding, but the union is anxious to ensure that
such commitments include the condition that the work force be given
plenty of opportunity to be trained or upskilled. Those discussions
ought to be encouraged and strengthened, and I would like the Secretary
of State for Wales to be actively involved in supporting these
developments. At the same time, it is most welcome to see that the
steel union Community is also committed to the retraining. It has put
in a bid to the Department for Work and Pensions to access such funds.
In broad terms, although it is a challenging time, unlike in the mid
1980s in the coal industry the Government, employers and unions are
keen to assist the work force in upskilling and reskilling.
Equally
important in my constituency, but very different, is the automotive
sector. It has a different set of challenges, mainly because so many of
the plants are small and reliant on much bigger plants elsewhere, as we
have seen with Honda. We had two major setbacks with the Linamar plant
in my constituency and the announcement that Borg Warner will close in
2010. As that is likely to
take place 18 months or 21 months from now, there is an ideal
opportunity for the employers, the unions and the Government to come
together to make a difference to the life chances of those working
there. Again, that is in stark contrast to the experiences of miners
and their families in the mid
1980s. It
has almost become a byword or a clichÃ(c) that we live in
exceptional times and we need exceptional measures. I have been
impressed by the Roosevelt or Obama spirit of “Yes we
can” in my own constituency. It is a strange mixture of people
being genuinely worried about their jobs and a serious desire that they
be able to make a difference themselves against the background of a
supportive Government. I recently received an e-mail from a small
company in my constituency which, with your permission, Mr.
Caton, I shall read out, excising some of the references for reasons of
commercial sensitivity. It illustrates the way in which local companies
are rising to the challenge and looking to the Government for support
but not expecting them to solve all their problems. The e-mail
states: “We
have been through a tough 18 months with some customers transferring
work to low cost countries. We have however been working hard to offset
that by concentrating on other markets. Over the last 12 months we have
added some of the world’s largest prime contractors to our list
of customers... As with all growth it consumes cash, we have got
up front costs we must invest in before we get payment from our
customers, such as wages, materials and equipment. I have put in an
application for Government funding...So to recap, things look good
if we get the investment or if we don't then things will be bleak. We
hope the new investment will allow us to increase our workforce by 12
over the next 12
months.” So,
even in an apparently difficult time, local businesses are responding
innovatively, recognising the importance of skills and the partnerships
that they can develop with the Government and trade unions.
To sum up,
the PBR, through our overarching commitment to skills and innovation
and infrastructure investment, provides the basis for changing a
situation of adversity to one of considerable opportunity. I am
reminded of a recent visit by the Welsh Affairs Committee to Mondragon,
in the Basque country, where there was the pioneering work of the
co-operative movement and mutualism. They prefer not to talk of
globalisation there. They say that it is a neo-liberal concept. It is
more important to talk, in their words, of
“internationalisation
as an open and internationalised environment building external
networks, social cohesion, solidarity with the world, and respectful of
the environment.”
Mr.
Stephen Crabb (Preseli Pembrokeshire) (Con): I, and
perhaps other hon. Members, would find it helpful if the hon. Gentleman
explained the difference between globalisation and
internationalisation.
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