Nick
Ainger: I am conscious of the time. Even in 2014, our
public sector net debt will be among the lowest in the G7, despite all
our problems and the fact that a major part of
our—
David
T.C. Davies: Private finance
initiatives.
Nick
Ainger: I was about to say income generation. Even though
a major part of our income generation comes from the financial services
sector, we still have one of the best debt to GDP ratios in the G7. The
point about profligacy does not, therefore, bear examination.
We must
recognise that we need to get out of the recession as quickly as
possible. We know—and the Budget recognises this—that 40
per cent. of the unemployed are under 25. Therefore, we must target
resources at those people. As hon. Friends have pointed out, even
relatively short-term periods of unemployment can be devastating for
young people. The work and investment that has been put into Jobcentre
Plus—a total of £3 billion since the
pre-Budget report—is absolutely right.
If hon.
Members are going to criticise, let me appeal to them to outline the
alternative. I understand the argument that the Conservative party
might not want to put forward its alternative Budget, but we have to
tackle the recession. Are we going to follow the advice of people such
as Professor Paul Klugman, the Nobel laureate in economics? He says
that, unless we do something—make investments, create fiscal
stimuli and give tax cuts of various sorts, whether that is VAT or
income tax—the recession will be deeper and longer than it needs
to be.
There is no
question but that, in future, we will have to tackle such problems.
However, we must accept that, if we do not make fundamental investments
now, particularly for our young people in education, training and so
on, we will face a long recession. That will cause huge damage, and the
bill at the end of the day will be even greater.
There are
many initiatives in the Budget, such as the car scrappage scheme, which
will significantly benefit Wales. If we look at the figures generated
by the car industry throughout the UK, the whole chain, which includes
servicing as well as manufacturing, involves 780,000 jobs—it is
a major sector. Look at the amount of money that was spent on the
banks—we had to do that because of the systemic risks—yet
people have carped about our spending £300 million on the car
scrappage scheme. For that investment, we will start to see a recovery
and, with so many car component manufacturers, particularly in south
Wales and north-east Wales, such a scheme is vital for Wales and the
Welsh economy.
I welcome the
measures in the Budget, but nobody could welcome the financial
environment in which it was prepared. Let us be realistic and honest
with ourselves and address the real issues and causes of the recession.
That would do a genuine service to the people of
Wales. 3.35
pm
Mr.
Crabb: I am grateful to be called at the end of this
important debate on the implications of the Budget for Wales. I
apologise again, Mr. Caton, for missing part of the morning
sitting. The parts that I have attended seem to involve a lot of
disagreement over the analysis of the Budget and the wider economic
crisis. However, there are things on which hon. Members on both sides
of the Committee seem to agree. No one is denying that this is a global
crisis, but if we accept that, we must also accept that how individual
national Governments respond is important. It is vital to look at how,
over the preceding years, individual national economies have been
shaped by Governments in the run-up to the crisis. That brings us to
how well prepared the UK is to weather what is unquestionably a global
economic
trauma. Last
night I flicked through some of the Budget press releases that the
Government issued on Budget day. The statement from the Secretary of
State for Wales, who is no longer in his place, described the Budget as
putting
“Wales
in the best possible place to prepare for economic
recovery”. That
is a slight variation on the words used by numerous Ministers over the
past two years, particularly in the early stages of the economic
crisis, when they argued that Britain was the best prepared economy to
weather the coming storm.
Over the past
couple of years, hearing the phrase, “best prepared
nation”, has bothered me, because I have heard those words
before, and I was wracking my brains last night wondering when. It was
four years ago on the British Lions’ tour to New Zealand. By the
end of the third test, the British Lions had been stuffed for the third
time. Clive Woodward, the coach that day and throughout the tour, had
been putting out statements that the Lions were the “best
prepared” British Lions team ever to leave these shores. He
stood on the pitch after that third defeat and said that, despite what
had been written, it had been a successful tour. The way that Labour
Members have been talking about the Budget has echoes of that
statement. There is almost a sense of congratulation about some of the
measures. When we read through all the documents, the truth is in the
main text of the Budget—we are facing a serious
crisis. The
Budget postponed some big decisions that need to be made in the coming
years about how we rebalance the economy and stop heaping debt on to
our children and their children. It has left us with a lot of serious
decision making still to do, which will probably be left to another
Government.
3.38
pm
Mr.
David Jones: May I begin by echoing the words of the hon.
Member for Brecon and Radnorshire and paying tribute to the Secretary
of State for ensuring that this Grand Committee met today at such a
timely moment. The Finance Bill, even as we speak, is being
debated on the Floor of the House. The importance of the Grand Committee
has increased considerably under this Secretary of State, which I
welcome. We are living in an age of devolution. Nevertheless, a lot of
the major decisions that affect Wales are still made at Westminster, so
it is appropriate that Welsh Members have the opportunity to debate
them in this forum.
I do not
think that I am being entirely partisan when I say that it is a
thoroughly bad Budget. It is not only Conservatives who are criticising
it, or Welsh nationalists who are partially criticising it, but also
respected independent commentators across the board. This morning, my
hon. Friend the Member for Chesham and Amersham referred to the
commentary of Cazenove Capital Management. Its report, penned by
Mr. Richard Jeffrey, a respected independent commentator,
said that it
was: “The
most shocking budget of our lifetimes and, it is to be hoped, the
lifetimes of our children and
grandchildren”. On
the Treasury’s own figures, the public sector budget
deficit is set to rise to £170 billion in the current
financial year, from £90 billion last year and
£34.6 billion in 2007-08. That is an alarming
increase by any standards and at those levels borrowing will be
equivalent to 12.4 per cent. of GDP in this financial year. Economists
normally consider 3 per cent. to be the boundary of acceptable
borrowing by a Government. Therefore, as Richard Jeffrey said, these
figures are, by any standards,
shocking. We
have heard a lot of history in the course of the debate, primarily from
Labour Members. We had a very erudite contribution from the hon. Member
for Carmarthen, West and South Pembrokeshire, who correctly analysed
the cause of the current world downturn. But however bad that world
downturn is, the impact on the public finances in this country is
probably greater than in almost any other industrialised country. The
sad thing is that it need not have been.
When Labour
came to power in 1997, it inherited an extraordinarily benign financial
legacy. For the first two years of that Government, the then
Chancellor, the present Prime Minister, adhered to Conservative
spending plans. In consequence, the country enjoyed a net budget
surplus of £4.5 billion in 1998-99, which rose over the next two
years to £18.3 billion. It was after he departed from
Conservative spending plans that things started to go very badly wrong.
The fact is that, despite what Labour Members say, inflation in public
spending vastly outstripped that in the economy as a whole. In the
10 years to 2008-09, inflation in the national economy
averaged 2.3 per cent. per annum. However, the rate of inflation of
spending on Government goods and services during the same period ran at
an average of 4.3 per cent.
In other
words, the so-called prudent Chancellor utterly lost control of
spending in the public sector and that is why things are so bad in this
country. Rather than using the good years to pay off debt, that
Chancellor deliberately ramped it up and, in consequence, now has to
take lectures on prudent economic management from the President of
Chile and the Prime Minister of Poland.
Given the
scale of the economic crisis that everyone agrees that we face, one
might have thought that the Government would use the Budget as an
opportunity to rein in borrowing and reduce the national debt. In that
respect, the Budget was a non-event. The measures announced by the
Chancellor, according to the Institute
for Fiscal Studies—again, hardly a partisan body—will fill
only half of the projected deficit over the next eight years.
Addressing that deficit is going to cost every family in the country
£2,840 every year in additional taxes, or in public spending
cuts. What that
means in practice was illustrated only today by the National Institute
of Economic and Social Research. It points out the options available to
the Government, when they ultimately decide to grasp the nettle that
they have put off in this Budget: requiring everyone in the country,
every man and every woman, to continue working to the age of 70;
increasing the basic rate of income tax by 15p in the pound; or cutting
Government spending by a tenth, with an obvious impact on front-line
services and, needless to say, a corresponding Barnettised cut in the
budget of the Welsh Assembly Government.
The saddest
aspect of this is that a Government who came to power promising
prudence have instead delivered profligacy. The so-called iron
Chancellor has been shown to have feet of clay. Like every Labour
Government before them, this Government have played fast and loose with
the national finances. They have brought the country to the brink of
bankruptcy. They have run out of money—out of our
money.
The hard fact
is that the country simply cannot afford another term of a Labour
Government. Across Wales, and across the UK as a whole, people are
counting the days until the next general election when they can finally
sweep this clapped-out, incompetent Government out of
power. 3.45
pm
The
Parliamentary Under-Secretary of State for Wales (Mr. Wayne
David): Despite that contribution, we have had a good
debate today. It has been quite humorous at times. We have had
references to green shoots and the darling buds of May from the
horticultural hon. Member for Brecon and Radnorshire. We have had
football analogies—Jimmy Greaves has been mentioned once or
twice. We have had one or two own goals from hon. Members. Generally,
the tone has been very serious, because we are in difficult times. The
situation that we face is extremely serious and these are challenging
times for all who believe in
democracy. By
and large, we have had two kinds of contributions. On the one hand, we
have had contributions from the Conservatives—the hon. Members
for Chesham and Amersham, for Preseli Pembrokeshire and for Clwyd,
West—that have been extremely critical of the Budget. They
fundamentally disagreed with the Government’s approach to
stimulate the economy and to work in partnership on a global basis with
other countries facing similar problems. They have been critical of the
entire strategy. They are fundamentally opposed to the maintenance of
public expenditure and to the practical measures to stimulate the
economy, which will at the same time help people who are experiencing
great difficulties because of the economic downturn. We have heard
plenty of criticism—plenty of carping, dare I say?—but we
have not heard any practical proposals about what their philosophical
opposition to the Budget will mean in practice.
That is
important because, as we all know, it is the easiest thing in the world
for politicians to be critical. But politics is about making a choice,
and in about a
year’s time the people of this country will have to make a
choice. They will want to know what the Conservative party is actually
offering. It is criticising what it terms high levels of public
expenditure. Does that mean that it is in favour of massive public
expenditure cuts? To be honest, we can deduce little else. We have to
ask the question, which schools and hospitals are the Conservatives
going to see closed? Which nurses’ jobs are they going to see
cut? Those are the meaningful things that they will have to put
honestly to the people of this country in the run-up to the next
election. This debate has been sad, because it has lacked that
essential dictum for us to have a serious political
debate. David
T.C. Davies: Will the hon. Gentleman give
way?
Mr.
David: No, time is limited. I am sorry.
We have had a
specific reference to the issue of objective 1 funding from the hon.
Member for Chesham and Amersham, who suggested that the Welsh Assembly
Government were about to return quite large sums of money to the
European Commission, but I point out that 96 per cent. of the
allocation to the Welsh Assembly Government from the European
Commission for objective 1 has been spent. It has been spent
well. The
Welsh Assembly Government have had accolades from the European
Commission for their effective expenditure of European money, which was
put to very good use. That is in sharp contrast to the situation under
the Conservative Government. They tried to spend as little European
money as possible in Wales under objective 2, because they knew that if
that money was not spent the Treasury would be able to claw it back
under Margaret Thatcher’s Fontainebleau formula. Today, we are
celebrating 10 years of devolution, which has been an effective
instrument. If we were controlled by central Government, there would
still be the possibility that we would lose out financially. That is a
good point to make on today of all
days. The
contributions from Opposition Members were in sharp contrast to the
contributions from Labour Members. We have had an excellent
contribution from my right hon. Friend the Member for Cynon Valley. I
congratulate her on her 25 years in the House. She struck the right
chord by stressing that the Budget is ultimately about fairness and
opportunity—the two leitmotifs running through it. Her
contribution was reinforced by what the Secretary of State said
earlier. Particularly useful was the contribution from my right hon.
Friend the Member for Cardiff, South and Penarth, who reminded us that
it is important to have a long-term perspective and to learn lessons
from
history. As
we all know, Wales is still deeply scarred from what happened in the
1930s—mass unemployment and grinding poverty—because the
Conservative Governments of the day decided to adopt
non-interventionist and laissez-faire economic policies. As a result,
the problem got worse and worse until, towards the end of the decade,
we managed to pull ourselves out, only to be slugged into a world war.
That is a mistake that we must never allow to happen again, so it is
very important that we learn the lessons of the
past. My
hon. Friend the Member for Llanelli demonstrated that the Government
are pursuing practical policies, which show that they are on the side
of ordinary people. We heard a contribution from the hon. Member for
Blaenau Gwent and, although I had reservations about some of his points,
nevertheless he made some good ones, stressing the vital role that
tourism has to play in this difficult economic time. The final
contribution was made by my hon. Friend the Member for Vale of
Glamorgan, who set the scene well before focusing on the defence
technical academy. None of us must forget how important that academy is
to the economic well-being of Wales. It will be the largest investment
in the Welsh economy ever—something that will have a
tremendously positive impact not just in the short to medium term but
in the long term. I wish him well in his campaign to ensure that there
is appropriate road infrastructure leading to the academy in St.
Athan. Finally,
as far as hon. Members’ contributions were concerned, we had a
blockbuster on economic analysis from my hon. Friend the Member for
Carmarthen, West and South Pembrokeshire. He analysed accurately why we
are in this deep and difficult economic crisis, but he also showed that
there is only one way forward, which is along the lines of what the
Government are trying to
do. I
focused on those contributions, but there were also contributions from
the two Plaid Cymru Members, including the hon. Member for Meirionnydd
Nant Conwy. I found his speech surprising. It could be summed up as,
“I want my cake and I want to eat it.” In essence, what
he was saying was that, yes, the Government were perhaps going along
the right lines, but far more public money should be used as a fiscal
stimulus and we should be following the example of the United
States—which I do not disagree with. On the other hand, he was
critical of the Labour Government’s record, in allegedly
spending too much money in the past. How on earth can those two
arguments be
squared?
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