The
Chairman: Order. We are getting into constitutional
questions rather than concentrating on the Budget. I have allowed the
hon. Gentleman some space to discuss constitutional questions, as a
preamble, but I would like him to get back to the Budget
now.
Mr.
Williams: I shall certainly take your advice,
Mr. Caton, and proceed with consideration of the
Budget.
In putting
together and delivering his Budget, the Chancellor faced a thankless
task—indeed, he received few thanks for it. It is certainly true
that he did not have much to play with; none the less, I was
disappointed with the lack of vision and the lack of action to help
those who need help the most. More than anything, however, this
year’s Budget will be remembered as the one that showed that the
seriousness of our economic situation can no longer be
ignored.
The scale of
the UK’s indebtedness is truly awesome. Watching the Budget
statement was a very strange experience indeed. Some of the numbers
that were cited were so huge that I do not think that anybody had any
comprehension of the effect that they would have, both on the economy
of this country and on our ability to borrow money in the marketplaces.
On the one hand, we were hearing a series of extremely worrying figures
that suggested that a long period of tax rises and public expenditure
cuts is inevitable. On the other hand, however, the Chancellor’s
sunny demeanour and predictions of a swift return to growth made him
seem almost triumphant.
Thinking that
is independent from consensus thinking is not always a bad thing, but
all economic forecasters have revised their predictions downwards and
it is quite possible that they are now being too pessimistic. However,
given the way that the Government’s economic projections have
been used to boost their political position in the recent past, I am
more inclined to believe the estimates put forward by the International
Monetary Fund. Anyway, we now hear that the European Commission, too,
has contradicted the Chancellor’s forecasts. Those forecasts
were not only out of line with those of external observers, but they
have been almost universally rejected as foolish and perhaps
dangerously
optimistic.
Albert
Owen: The most recent European Union report said that the
eurozone economy would contract faster than the United Kingdom economy.
Examples were also given of Ireland’s contraction, showing
that Ireland’s economy could contract by as much as 9
per cent. compared to a contraction of 3.8 per cent. in the
United Kingdom. Some of the comments from outside broadcasters about the
Budget are exaggerated and far off the mark but, at the end of the day,
we are only talking about predictions. If the hon. Gentleman is
suggesting that the IMF is some sort of bible, I point out that it has
also had to revise its figures. We are in very difficult territory. The
comparison between the United Kingdom and the rest of the European
Union is not as bad as the official Opposition is trying to
suggest.
Mr.
Williams: I take on board the hon. Gentleman’s
point that predictions are going to be very difficult in the future,
but one prediction in which I was particularly interested was the
Chancellor’s prediction of growth of 1.5 per cent. next
year—I think that that was the figure he gave. By contrast, the
European Union was talking about growth of 0.1 per cent. That is a huge
difference, representing a huge difference in tax take and employment
opportunities. There
have been times when Labour has had the strength and the stature to
provide the type of programme that is necessary now—for example,
the post-war Budgets stand as era-defining monuments to a brave vision
of social justice. Sadly, however, the Labour party of today, 12 years
after it arrived with such fanfare, seems unable to rise to the
challenge of the times. Far from building for the future, the
Chancellor seems unable to face the present. I had no idea that he was
so fond of horticulture. I fear, however, that his love of green shoots
and rosy prospects has affected his reasoning—he seems to be the
only person who can see the darling buds of May. Unfortunately, the
right hon. Gentleman has failed to grasp the nettle.
[Laughter.]
As far as I
am aware, no one, whatever their political complexion, is in any doubt
that these are austere times. What is in dispute is what that austerity
demands. Across the country, people are tightening their belt
or—in the case of many at Corus—losing their job, but
there is a general consensus among the public that, regrettably, such
sacrifices will be necessary. On an individual level, many people are
seeing their hopes and ambitions mercilessly trimmed, and as a
consequence of these tough times, people are facing tough choices. They
must ask themselves daily what they can afford, what they must cut and
what must remain an aspiration.
Lembit
Öpik: Does my hon. Friend agree that people will
also be asking themselves daily what on earth will happen if the
Conservatives get elected, given that if they do not raise taxes after
the next general election, the national debt will certainly continue to
spiral?
The
Chairman: Order. I think that I have already said that I
do not want any more conversation about Conservative budgets. We want
to talk about this Budget.
Mr.
Williams: My hon. Friend will know that, as always, I
agree with him. One of the most extraordinary things—I am sorry,
you have ruled me out of order, Mr. Caton. I was going to
say something that would take me down the line that you have advised us
against.
David
T.C. Davies: I assure the hon. Gentleman that he will have
all the time that he wants to discuss Conservative budgets after the
next general election.
Mr.
Williams: I am sure that some would agree with that, but
others would not.
The people of
Wales are realistic. They long for an honest assessment of the
situation and the truth about where cuts will be made. The Chancellor
talked about an additional £9 billion of efficiency cuts over
the next few years, making a total of £15 billion overall.
However, he did not tell us how that would be achieved. I hope that the
Minister will be able to identify some of those areas of cuts when he
winds up the debate. We also know that the Assembly Government will
have to find their own efficiencies, totalling £416 million,
when capital expenditure that has been brought forward is
included.
Mr.
Crabb: The hon. Gentleman makes an important point. He
used the phrase efficiency cuts, to which he attached a figure of
£9 billion. He represents a constituency similar to mine, which
in recent years has seen the closure of 24-hour fire stations, post
offices and tax offices. What fat is there left to trim as part of
efficiency cuts in constituencies such as ours in west
Wales?
Mr.
Williams: The hon. Gentleman makes an important point.
Many efficiency drives have already taken place in Wales and there is
very little fat to cut. Jobcentres have been reduced and cut and people
have difficulty in accessing those that remain. That is why this
morning I asked the Minister about having outreach services for
jobcentres, and I hope that he will respond to that
point.
Albert
Owen: The hon. Gentleman makes an important point about
outreach. Is he aware that under the ProAct and ReAct schemes, when a
company announces redundancies, civil servants go into the workplace to
work with people before the redundancy period expires? Help is already
offered to people within those schemes and by Jobcentre Plus. That is
very different from what we saw during the ‘80s and ‘90s,
when people queued outside jobcentres.
Mr.
Williams: I pay tribute to the staff who go out to
companies that are facing difficulties. The ProAct and ReAct schemes
have had some success in my constituency, although I have had mixed
reports about some of the advice that has been given. My point is not
about when a company is in difficulties, but about individual cases of
redundancy. Individuals can find themselves unemployed not as part of a
great closure process, but as part of people losing their jobs on an
individual basis.
Mark
Williams (Ceredigion) (LD): I am sure that my hon. Friend
will recognise cases such as that of one of my constituents, who had
appointments at a Jobcentre Plus office at 9 o’clock in the
morning, even though he lived in a village that was a significant
distance away. He was told by Jobcentre Plus to move into Aberystwyth,
incurring a crisis loan in the process, just so that he could keep the
appointments. We have talked about a tailor-made service, but in rural
areas that is a very
challenging concept, entailing the type of outreach that the right hon.
Gentleman spoke of and the reopening of Jobcentre Plus
offices.
Mr.
Williams: I accept my hon. Friend’s point, which
has been emphasised during the debate, and I hope it is one that the
Minister, who is known for his understanding of issues that affect
people throughout Wales, will take on
board.
Lembit
Öpik: On the matter of the Budget, does my hon.
Friend agree that it is an extreme irony that public services are being
cut in places such as mid-Wales and Montgomeryshire, where national
wage rates are lower, as is the cost of rent? Does he not agree that,
if the Government want to save money, they should relocate offices to
those lower-cost areas, rather than centralise everything in places
such as
Wrexham?
Mr.
Williams: I thank my hon. Friend for that point. Speaking
in defence of Wrexham, I am sure that it is very much in need of such
services as well. However, the ability to reach out to people in need,
rather than dragging everyone into a central location, is what will
bring benefits in the end, enabling people to get back into work and
eventually reducing the effect of the
recession. Quickly
moving on to the Barnett formula, which has been covered in some
detail, now is not the time to be demanding extra billions from
Westminster, but it is the time to look again at the Barnett formula.
The right hon. Member for Cardiff, South and Penarth, who spoke before
me, cautioned that there would be problems. Even if, on a needs-based
formula, Wales would get more, the uncertainty may play against the
benefits. Those are the sorts of issue that we need to debate when we
look at the Barnett formula. Members of my party are keen to see a
regional approach in England, and the formula that would distribute
resources to the regions of England should be along the same lines as
the formula that distributes resources to Wales. The Holtham commission
is now working, and I do not want to pre-empt its findings, but I
contend that to achieve a fairer formula for fiscal need, measures of
cost and deprivation must be included alongside population size. My
party has argued that for many
years. The
wasteful VAT cut is making very little difference to those who need the
help most, the vast costs are wholly disproportionate to whatever
little good is being done. The VAT cut’s benefits are perversely
distributed, with richer households, who are the least in need of aid,
saving about three times as much as poorer households. The money could
be employed better elsewhere—we have had examples, although we
might not agree with particular ones. However, an investment in green
development and processes would leave a legacy from the recession,
which would be lost by money wasted on the VAT
cut. I
am grateful that the Government have decided to spread out the increase
in business rates, which allowed the Welsh Assembly to do the same. I
thought this morning that the Secretary of State claimed that the Welsh
Assembly had taken the initiative on that, but I understand that the
Treasury did so and the Assembly followed down a similar path—it
was not a specific Welsh Assembly initiative. It was absolutely
crackers to increase business rates—loading a 5 per cent.
increase
on the business rate just because the retail prices index last September
was 5 per cent. whereas now it is nearly zero—when the
Government were doing other things to improve the cash flow of
businesses and their profitability. The whole system of business rates
needs to be looked at again, because it is hugely disproportionate and
affects small businesses and new businesses that are trying to
grow. Child
poverty is growing too. According to figures released by the Joseph
Rowntree Trust, roughly 10,000 more Welsh children will fall into
poverty by 2020, taking the total to 155,000. Elsewhere, Government
measures have also fallen short of what is
desirable. I
welcome the limited agreement towards the development of a green
economy, but the Government are failing to build on an area that has
massive growth potential in Wales. We must take advantage of the
promise held by the green economy in both creating jobs at a time when
they are few and far between and grasping the opportunity to be world
leaders in green technology, which will be of undoubted importance in
the future of the global economy. We cannot afford to fall
behind.
Although I
welcome the Government’s decision to modify tax relief on
pension contributions by those earning £150,000 or more, when it
comes to closing to the tax loopholes of the super-rich, they have
barely scratched the surface. Perhaps the Minister could arrange for
the Chancellor to meet with my hon. Friend the Member for Twickenham
(Dr. Cable), who can give the Government some guidance on the matter.
We have identified further loopholes, which, when closed, would provide
enough revenue to enable us to raise the income tax personal allowance
to £10,000. Not only would that be a welcome boost for those who
most need it, but it would increase the spending power of many,
hopefully boosting the retail and other sectors.
One thing
that we do not need at this time is a significant increase in the
inheritance tax threshold. The most noticeable Conservative
contribution to the debate has been to increase that threshold, which
would help just the 1.5 per cent. richest people in the
country. John
Smith (Vale of Glamorgan) (Lab): Bankers
mostly.
Mr.
Williams: I thought that that was a perverse way of
dealing with the situation. We want to put more money into the hands of
people who will go out and spend it and thus ensure that the economy
gets going again and at a faster rate of
recovery. The
Budget was spectacular in some ways, but guarded in others. Although it
is difficult to look forward to the future—some of the
predictions made will prove to be wildly out of kilter with
reality—Wales will have to see whether the Budget is good for
its
purposes. 2.57
pm
John
Smith: Thank you, Mr. Caton, for calling me to
speak in such an important debate. My apologies for not being able to
attend this morning’s sitting; I did pass a message on to you.
However, I had the chance to look at the record, and I think that we
have had a wide-ranging
and interesting debate on probably one of the most important topics that
has ever been discussed in this House—certainly that has been
discussed by the Welsh Grand Committee. It is not any old Budget; it
may end up being one of the most important Budgets ever made, certainly
in living memory. It is a Budget produced in what we know is the
biggest recession since the second world war, and it may be bigger than
that. It is a Budget with a background of the biggest financial crisis
in the world in 100
years. I
sometimes think that the nature of the discussion that takes place in
the House and in the country fails to grasp the enormity of what we are
trying to deal with at the moment and of what could happen if it goes
wrong. It is critical that we work together internationally, both
fiscally and financially, to ensure that we pull the world out of
recession as quickly as we can, as the consequences of failing to do so
could be enormous. It is therefore a very difficult Budget at a very
difficult time. I think that we will have to wait and see what its
effect will
be. Initially,
I was delighted with the way in which the Budget was received by the
markets. Since it was announced—one would not have believed it
if one read some of the commentaries—we saw not only a
stabilisation in the markets, but a 10 per cent. increase in their
value. It has been a long time since we have seen such a response to a
Budget in this country, and we should remember what the backdrop is:
one of the most difficult economic crises that we have ever
faced.
The
objectives of the Budget—a difficult one in difficult
times—effectively followed the propping up of our financial
system. Some people did not support the propping up of the system. They
were quite happy to see not only one or two banks go, but a domino
effect. We have to bear the cost of all that, but the measure of
whether the Budget succeeds is that its objective help protect the most
vulnerable people in society from the impact of the recession, for
however long it carries on, by supporting them through the benefit
system, by supporting small business and helping people with their
mortgages. They are all very important measures, but that is only one
side of the
equation. The
other side of the equation, which is equally important, is ensuring
that we maintain public investment—and not just maintain it but
continue to invest in such a way that it will allow us to grow out of
the recession, to shorten its duration and thus shorten its impact on
British society in general, and Welsh society in particular. As a
direct follow-on from the Budget, I wish to concentrate my remarks on
the importance of getting public investment right, which means
identifying the right sort of investment. I am delighted to have the
chance to speak today because at this time of doom and gloom, and talk
about recession and hardship, a planning application will be submitted
to the Vale of Glamorgan county council this Friday that will amount to
one of the biggest construction programmes ever entered into in Wales
and the biggest public investment in the history of the British
Government. It is a big story; it is big news. It is exactly the sort
of public investment that was advocated in the Budget, and it will help
us to grow out of the situation in which we find ourselves. Businesses
often invest the most in the very depths of a recession because they
know that the opportunities for growth
are at their greatest. The project is important, because it is an
investment in the skills of the people of Wales and in the skills of
the people who serve in the armed
forces. Dr.
Hywel Francis (Aberavon) (Lab): May I pay tribute to the
wonderful leadership that my hon. Friend gave to the campaign to
achieve such a result? Does he agree, as my right hon. Friend the
Secretary of State said in his opening remarks, that the theme of the
Budget is very much about partnership? Alongside the Welsh Assembly
Government and the Wales Office, my right hon. Friend built a
partnership not only with the Government, but with the private sector
and significantly with educational bodies. The Welsh Assembly
Government and the United Kingdom Government are building a new
knowledge economy not only in that region, but throughout
Wales.
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