The
Committee consisted of the following
Members:
Chairs:
†Mr
Graham Brady
,
Jim
Sheridan
†
Bebb,
Guto (Aberconwy)
(Con)
†
Brennan,
Kevin (Cardiff West)
(Lab)
†
Bryant,
Chris (Rhondda)
(Lab)
†
Cairns,
Alun (Vale of Glamorgan)
(Con)
Caton,
Martin (Gower) (Lab)
†
Clwyd,
Ann (Cynon Valley)
(Lab)
†
Crabb,
Stephen (Preseli Pembrokeshire)
(Con)
†
David,
Mr Wayne (Caerphilly)
(Lab)
†
Davies,
David T. C. (Monmouth)
(Con)
†
Davies,
Geraint (Swansea West)
(Lab/Co-op)
†
Davies,
Glyn (Montgomeryshire)
(Con)
†
Edwards,
Jonathan (Carmarthen East and Dinefwr)
(PC)
†
Evans,
Chris (Islwyn)
(Lab/Co-op)
†
Evans,
Jonathan (Cardiff North)
(Con)
Flynn,
Paul (Newport West)
(Lab)
†
Francis,
Dr Hywel (Aberavon)
(Lab)
†
Griffith,
Nia (Llanelli) (Lab)
†
Hain,
Mr Peter (Neath)
(Lab)
†
Hanson,
Mr David (Delyn)
(Lab)
Hart,
Simon (Carmarthen West and South Pembrokeshire)
(Con)
Havard,
Mr Dai (Merthyr Tydfil and Rhymney)
(Lab)
†
Irranca-Davies,
Huw (Ogmore)
(Lab)
James,
Mrs Siân C. (Swansea East)
(Lab)
†
Jones,
Mr David (Parliamentary Under-Secretary of State for
Wales)
†
Jones,
Susan Elan (Clwyd South)
(Lab)
†
Llwyd,
Mr Elfyn (Dwyfor Meirionnydd)
(PC)
†
Lucas,
Ian (Wrexham) (Lab)
†
Michael,
Alun (Cardiff South and Penarth)
(Lab/Co-op)
Moon,
Mrs Madeleine (Bridgend)
(Lab)
†
Morden,
Jessica (Newport East)
(Lab)
†
Murphy,
Paul (Torfaen) (Lab)
†
Owen,
Albert (Ynys Môn)
(Lab)
Ruane,
Chris (Vale of Clwyd)
(Lab)
†
Smith,
Nick (Blaenau Gwent)
(Lab)
†
Smith,
Owen (Pontypridd)
(Lab)
†
Tami,
Mark (Alyn and Deeside)
(Lab)
Williams,
Hywel (Arfon) (PC)
†
Williams,
Mr Mark (Ceredigion)
(LD)
†
Williams,
Roger (Brecon and Radnorshire)
(LD)
Willott,
Jenny (Cardiff Central)
(LD)
Alan Sandall, Eliot Wilson,
Committee Clerks
† attended
the Committee
The following also
attended, pursuant to Standing Order No.
102(4):
Alexander,
Danny (Chief Secretary to the
Treasury)
Gillan,
Mrs Cheryl (Secretary of State for
Wales)
Newmark,
Mr Brooks (Lord Commissioner of Her Majesty's
Treasury)
Welsh
Grand
Committee
Wednesday
30 June
2010
(Morning)
[Mr
Graham Brady
in the
Chair]
Legislative
Programme and Budget Statement
(Wales)
9.30
am
The
Secretary of State for Wales (Mrs Cheryl Gillan):
On a
point of order, Mr Brady. We are about to start the first sitting of
the Welsh Grand Committee since the election, and I welcome
you to the Chair. This is the first time that you have presided over
this Committee, which, if the past is anything to go by, I am sure you
will find lively and exciting. I also welcome the Chief Secretary to
the Treasury, who will make a statement on the Budget. We are grateful
to
him.
Before
we start our proceedings, I also want to express my sadness on hearing
of the death from his injuries of Corporal Jamie Kirkpatrick, a bomb
disposal expert from Llanelli, Carmarthenshire. Our thoughts go to him
and his family. Both sides of the Committee are eternally grateful for
everything that our armed services do on our behalf to defend our
safety.
Mr
Peter Hain (Neath) (Lab):
Further to that point of order,
Mr Brady. I, too, welcome you to the Committee, and I join the
Secretary of State in expressing condolences to the family of Corporal
Kirkpatrick—a Welsh family based in
Llanelli.
On
an important matter of procedure and courtesy, at five to 9 this
morning, an e-mail pinged into my inbox from the Chief
Secretary’s office, which said that he was to make a statement
to the Committee. Although it is nice to see him in the Committee, that
is a fundamental breach of protocol, whereby the Opposition are
informed when a Minister other than the Secretary of State or Ministers
from the Wales Office is to make a statement. I should have thought
that it is courtesy and decency to do so. The Secretary of State should
have told me that she was not going to lead the debate, but leave it to
the Chief Secretary to do so—when I bumped into her and the
Under-Secretary in the Strangers Bar last night, they did not tell me.
When Ministers in the previous Government addressed the Committee, the
Opposition were always informed well in
advance.
Mr
Elfyn Llwyd (Dwyfor Meirionnydd) (PC):
Further to that
point of order, Mr Brady. I endorse the right hon. Gentleman’s
comment. I heard only this morning in the Tea Room that I was sent a
similar e-mail—I have yet to check my inbox, as I frequently do
not. Such matters are always dealt with through the usual channels and
we agreed to the Committee’s topic of discussion on the basis
that we understood what would happen today. The change will curtail the
whole process by at least an hour, which means that some hon. Members
who have prepared speeches inevitably will not be called. That is not
fair, and it does not reflect the Committee’s
purpose.
Paul
Murphy (Torfaen) (Lab):
Further to that point of order, Mr
Brady. I echo the sentiments expressed by my right hon. Friend the
Member for Neath and by the hon. Member for Dwyfor Meirionnydd. I have
been a member of the Committee for 24 years, five of them as Secretary
of State, and on all previous occasions the business of the Committee
has been negotiated beforehand, so that hon. Members have time to
prepare their response to the ministerial statement. I have no problem
with the Chief Secretary being here—I think it is good that he
is—but the procedures have been breached and we ought to think
seriously about whether we should
continue.
The
Chair:
I am keen to protect the Committee’s time as
much possible and am grateful to Mr Hain for giving notice of the point
of order. I understand that whether hon. Members other than the Chair
are informed of such matters is for the Government to decide, although
it is a matter of courtesy for Opposition parties to be
informed.
Chris
Bryant (Rhondda) (Lab)
rose—
The
Chair:
I will not take further contributions on that point
of
order.
Chris
Bryant:
It is a different point of order, Mr
Brady, although it is slightly aligned. I was told by the
media—not by a Member of Parliament—at quarter past 9
this morning that the Chief Secretary would make a statement to the
Committee. That is a discourtesy to the House, because it is yet
another example of Ministers talking to the media, rather than to the
House. I hope that as Chairman of this Committee, you will pass on our
concerns to Mr Speaker, so that he can take up that issue
properly.
The
Chair:
The concerns have already been noted. I am keen to
proceed.
Alun
Michael (Cardiff South and Penarth) (Lab/Co-op):
On an
entirely different point of order, Mr Brady. The acoustics in this room
are difficult at the best of times, and it does seem that any
assistance to voices is not working, apart from the microphone
immediately above your head. While it is nice for us to be able to hear
your dulcet tones, it is not helpful for hearing the Secretary and
shadow Secretary of State when they speak. Because of the nature of the
present weather, we are also going to hear a lot from the
air-conditioning—we probably need to, otherwise we will be in a
state by the end of proceedings. I appeal for loud voices in
contributions, but is there anything else that can be done to assist us
and to ensure that all of us hear what is said, and that members of the
public at the far end of the room are able to at least get a glimmering
of the
proceedings?
The
Chair:
Your loud voice has been heard, Mr
Michael, and I hope that all Committee members here today will take
note and speak up. I cannot do anything else about the acoustics of the
room. You note that the air-conditioning
is contributing to the problem, but it may help to alleviate another
problem. Before we begin, if Members want to remove their jackets or
other reasonable items of apparel to make themselves more comfortable
during the sitting, they are welcome to do
so.
The
first business before the Committee is the ministerial statement. There
is no time limit on it, but in deciding whether and when to bring
questions to a close, I will, of course, have regard to the pressure on
time for the main
debate.
The Budget as it relates to
Wales
9.37
am
The
Chief Secretary to the Treasury (Danny Alexander):
With
permission, Mr Brady, I should like to make a statement. As a Scottish
MP I have never had the opportunity to attend the Scottish Grand
Committee, because it has never met during my time in Parliament, so it
is a pleasure to be here at the Welsh Grand Committee. I am sorry if
the method of this appearance has caused controversy, but I hope that
it at least gives hon. Members a chance to ask questions and make
points in relation to the
Budget.
I
am delighted to have the opportunity to set out the action that we, the
coalition Government, have taken in the emergency Budget and how this
action will support a more prosperous future for all parts of the UK,
including Wales. As a Government, we are committed to working with the
Welsh Assembly and the Welsh Assembly Government to deliver increased
economic prosperity for all in Wales, based on a spirit of mutual
respect. Some economic powers are reserved for the Government and some
are devolved to the Welsh Assembly, so it is particularly important
that we work together to tackle the deficit and increase economic
growth. I have already had a constructive meeting with Jane Hutt, the
Welsh Assembly Minister for Business and Budget, earlier this month.
Yesterday, I gave evidence on the Budget to the Finance Committee of
the Scottish Parliament—the first time a Treasury Minister has
ever done that in that Parliament. I understand that a similar
invitation may be on its way from the Welsh Assembly, and I look
forward to responding positively when it
arrives.
Mr
Elfyn Llwyd (Dwyfor Meirionnydd) (PC):
Will the Chief
Secretary give
way?
Danny
Alexander:
It is a statement, so I think I am not able to
give way—you can advise me whether that is correct, Mr Brady.
There will be an opportunity for Members to respond to what I have said
in the normal
way.
Albert
Owen (Ynys Môn) (Lab):
On a point of order, Mr
Brady.
The
Chair:
Is it a genuine
one?
Albert
Owen:
It is certainly genuine; it is a request to you. As
we will not be able to ask questions during the statement, are we
allowed to have a copy of it as soon as it has been made, so that we
can browse through it and ask pertinent
questions?
The
Chair:
That is a matter for the Chief Secretary, Mr
Owen.
Danny
Alexander:
I have no objection to copies of the
statement being made available to members of the
Committee.
Huw
Irranca-Davies (Ogmore) (Lab):
On a point of order, Mr
Brady. Unaccustomed as I am to raising points of order, perhaps I can
seek clarification regarding the normal custom and practice with
statements, because we are hearing this one blind for the very first
time. It is singularly difficult for Back-Bench Members to make
useful contributions to this debate when we have had no sight of the
statement whatsoever. I thought that it was custom and practice to
distribute
it.
The
Chair:
You have some familiarity with these matters, Mr
Irranca-Davies, and that point is not a matter for the Chair. It is for
the Chief Secretary to make his statement and for Members present to
question him on
it.
Chris
Bryant (Rhondda) (Lab)
rose—
The
Chair:
Order. I will not take any further points of order
on that
matter.
Danny
Alexander:
I understand that the usual practice is for
ministerial statements to be made available to Members of the
House—
Chris
Bryant:
They should be provided to Opposition Members an
hour
before.
Danny
Alexander:
I believe that the statement has been provided
to Opposition Front Benchers, and it will be made available to the
Committee when I sit down—at least that is what should
happen.
I
look forward to seeing the final report of the Holtham commission,
which was established by the Welsh Assembly Government to look at Welsh
funding, and I am keen to discuss Gerry Holtham’s ideas with him
once his findings are published. In “The Coalition: our
programme for government”, we
stated:
“Depending
on the outcome of the forthcoming
referendum”
in
Wales
“we
will establish a process similar to the Calman Commission for the Welsh
Assembly.”
In
making the £6.2 billion programme of savings announced by the
Chancellor, the coalition Government have been sensitive to the needs
of the devolved countries by taking the unprecedented decision to allow
the devolved Administrations to defer their shares of the cuts to next
year, if they wish. We respect their freedom to determine the timing of
the reductions, within the constraints imposed by the budget deficit
left by the previous
Government.
When
I met Jane Hutt, she raised some concerns about the application of the
Barnett formula to the in-year savings made on the Olympics. I was
glad, once it was confirmed that those savings would come from the
budget for the Olympics, to be able to make the appropriate adjustment
to the savings required from
Wales.
The
decisive emergency Budget set out a credible plan to deal with the
record budget deficit that we inherited from the previous Government.
It is a tough Budget, and it needed to be so to reverse the critical
state of our public finances. However, it is a fair Budget, which
recognises that everyone has to make a contribution to getting us out
of the mess that the previous Government left us in. The previous
Government left behind the second largest budget deficit in Europe. We
are borrowing £1 for every £4 that we spend as a country.
There is a £150 billion gap between what we raise in tax and
what we spend.
If we failed
to deal with the deficit, the consequences would be severe and the
poorest would suffer the most. We have only to look at the example of
Greece to see what happens to countries that do not live within their
means—more businesses going bust and higher unemployment. In the
Budget, we have taken the tough decisions called for by the Governor of
the Bank of England and the G20. For example, on Sunday the G20
communiqué made it clear that those countries with the
most
“serious
fiscal challenges need to accelerate the pace of
consolidation.”
No
country has more serious fiscal challenges than those that were left
Britain by the previous
Government.
The
Budget stands for three things: responsibility, by taking action to
eliminate our structural deficit; freedom, by supporting the businesses
that we rely on to rebuild our broken economy; and fairness, by
protecting the most vulnerable, even in these difficult economic
times.
First,
on responsibility, failure to deal with the deficit is the greatest
threat to growth in any and every part of the UK. Failure to act now
would mean higher interest rates hitting businesses, families and the
cost of repaying the Government’s debt. That would mean more
business failures and sharper rises in unemployment, and it would risk
a catastrophic loss of confidence and the end of the recovery. The
Budget takes action now to restore confidence in our economy, which is
needed to underpin the recovery. Higher borrowing would result in
higher taxes in the future, which our children and grandchildren would
have to pay off. The Budget’s forward-looking fiscal mandate
will eliminate the deficit in five years and will put us on track to
get debt falling by
2015-16.
We
have set up the independent Office for Budget Responsibility to assess
our numbers and to ensure that the policy fits the facts, not vice
versa. On the fiscal mandate, the OBR has forecast that the measures in
the Budget will lead us to meet the challenge a year early. The bulk of
the reduction in the deficit will come from lower spending rather than
higher taxes. By 2015-16, 77% of the total
consolidation—including the large chunk that was proposed, with
no detail given, by the previous Government—will come from
spending restraint rather than tax rises, because international
evidence shows that spending cuts are more effective than tax rises in
reducing
deficits.
We
will be responsible in tackling the deficit, but we will also be
responsible in supporting the infrastructure that our economy needs as
a platform for growth. We are committed to making no further cuts in
capital spending beyond those proposed by the previous Government and
the measures taken in the £6.2 billion exercise that we
announced a few weeks
ago.
The
previous Government’s spending plans implied a 20% reduction in
departmental budgets. We are committed to real increases in NHS
spending and to protecting international aid, and this Budget implies
that other Departments will face an average real cut of 25%. We will
set out the details of those cuts in the spending review, and we will
consult widely to inform those plans. That process has already started:
it was launched last Friday to a huge response from public sector
workers.
The
budget for the Welsh Assembly Government will be determined in the
spending review in the normal way. During the spending review
consultation process, we will fully consult the Welsh Assembly, the
Welsh
Assembly Government, public sector workers and the wider population of
Wales. Wales will of course benefit from the fact that we have
protected health spending, which is the largest single devolved
spending programme. Having said that, it will be a tough settlement,
and it will be for the Welsh Assembly to decide how to allocate its
block
budget.
Secondly,
the Budget frees up businesses to go for growth. A genuine and
long-lasting economic recovery must have its foundations in the private
sector. That is where jobs will come from, and we will do everything we
can to support their creation. We want to encourage private sector
growth across the UK, particularly in areas such as Wales which are
currently highly dependent on the public sector. The Budget sets a
strong foundation for growth and for encouraging the investment that
Wales needs. That is why the Budget sets out a plan to make Britain
open for business once more. We will take measures on corporation tax,
for example, reducing the rate by 1% each year from April 2011 to April
2014, which will take the rate down from 28% today to just 24% over
four
years.
The
Budget supports small businesses by cutting the small companies tax
rate and reversing the previous Government’s plans to increase
it, benefiting some 850,000 companies across the UK. It also extends
support for lending to small businesses until March 2011. We are
cutting regulation for business by reviewing rules that are due to be
implemented and introducing sunset clauses while also reviewing
employment law. All of that will reduce the burden of regulation
imposed on Welsh businesses, particularly benefiting small and
medium-sized enterprises. The Budget also takes action to stop the
previous Government’s jobs tax by increasing the threshold for
employer’s national insurance contributions, lifting 650,000
employees out of that tax altogether and leading to a saving of around
£140 million for businesses in Wales
alone.
As
well as supporting businesses with lower rates, we need to give them
certainty about the future. We have set out a five-year plan to
fundamentally reform the corporation tax system with lower rates and
greater certainty. We will shortly announce a new tax scheme to help to
create new businesses in those regions where the private sector is not
strong enough. For the next three years, anyone who sets up a new
business in Wales and other regions—not including London, the
south east or the eastern region—will be exempt from up to
£5,000 of employer’s NICs for each of the first 10
employees hired. That will benefit more than 27,000 businesses in
Wales, and we hope it will also encourage many others to start up their
own companies, which will help to ensure that Wales benefits from
greater prosperity as part of a more balanced and sustainable British
economy.
We
have pledged to be the greenest Government ever. We confirmed in the
Budget that, following the spending review, we will put forward
detailed proposals to establish a green investment bank to support a
low-carbon economy across the whole of the
UK.
This
represents a balanced package, which will send a clear signal that all
of Britain, including Wales, is open for business. Underpinned by our
firm action to reduce the deficit, it will help companies invest,
attract foreign investment, create jobs and boost
growth.
Lastly,
this is a Budget for fairness. Fairness runs through it. It is the
first Budget to include an analysis of the distributional impact of its
measures, on page 67
of the Red Book. It shows that the burden of deficit reduction is shared
across all income deciles, but overall the richest will contribute by
far the most. The Budget will have no measurable impact on child
poverty by 2012-13. It is a progressive
Budget.
The
Budget refocuses the tax and benefit framework and takes action to
reward those who work hard and save responsibly. It includes a radical
programme of welfare reform to focus support on those most in need.
Over the past 10 years, the welfare bill has ballooned from £130
billion to £192 billion today. If we ignore the economic and
social pressures caused by that system, we will only put the whole
country under even greater financial pressure in the future. This
Government will tackle the system head-on through reforms in the Budget
to the disability living allowance, housing benefit, the system of
uprating benefits and tax credits. All those reforms will ensure that
support will be targeted at those most in
need.
We
will also raise the income tax personal allowance by £1,000 to
£7,475 in 2011-12, making almost 1.1 million basic
rate taxpayers better off. That equates to about 83% of the Welsh work
force. Many people will be taken out of paying tax altogether. With our
welfare reforms, that change will help to create the right incentives
for work, which is especially important in many parts of
Wales.
The Budget
also locks in an annual increase in the state pension in line with
earnings, prices or 2.5%— the so-called triple
lock—whichever is the highest. The measure will benefit 11
million pensioners, including an estimated 600,000 in Wales. The Budget
increases the capital gains tax rate by 10% for higher rate taxpayers,
but keeps the rate the same for basic rate taxpayers. It will also
raise more than £2 billion from a levy on the banks to ensure
that the financial sector pays its fair share.
The Budget
takes the necessary action to restore confidence in the British
economy. We cannot go on living beyond our means. The Budget paves the
way to a sustainable future. It is a tough Budget, and I do not wish to
disguise in any way the fact that pain will be involved over the next
few years. As a result, however, every business and every household in
Wales will face a stronger, fairer and more prosperous
future.
Mr
Peter Hain (Neath) (Lab):
I am sorry that the Chief
Secretary has been put in this position by the Secretary of State. This
is a chaotic Welsh Grand Committee. The procedure has been completely
abused and no courtesy has been shown to Committee members. Indeed, we
have been insulted; we were not even informed that the Chief Secretary
was going to come—it is not his fault. I am therefore not going
to put any questions to him, because it is important that Members have
the chance to make the speeches that they have prepared, to ask
questions and to intervene on the Secretary of State and the
Minister.
Alun
Michael (Cardiff South and Penarth) (Lab/Co-op):
We have
heard from the Chief Secretary that the Budget is progressive and fair,
but does he not recognise that it is neither of those things? The hike
in VAT, which his party opposed before the election, will do enormous
damage to the poor, and young people will be abandoned
by the incoming Government’s first cuts, which will take away the
support that enables young people to have a promise of employment and
opportunity in the future. Has nothing been learned from the lessons of
the 1980s?
Danny
Alexander:
I do not accept those claims; this Budget is
progressive and fair. If the right hon. Gentleman looks at the
information that we have provided—for the first time in any
Budget—on the distributional impact of the measures, it clearly
shows that the Budget’s costs will be most heavily felt by those
with the broadest shoulders, which is absolutely
right.
On
VAT, as I explained to the House on Monday night, the Office for Budget
Responsibility showed us when we came into office that the structural
deficit, which is the part of the deficit that can be repaid only by
the action of Government policy, was £12 billion larger than the
previous Government had suggested. We therefore had a choice about how
to fill that gap. Should it be filled through yet more spending cuts or
through a tax measure? We took the view that £12
billion of extra cuts on top of what we were already considering would
have put essential services under threat, and a tax rise was therefore
the right choice. No party went into the last election proposing to
raise VAT, but no party ruled it out either. The right hon. Gentleman
knows that other measures in the Budget—the increase in the
income tax personal allowance, the uprating of the basic state pension
in line with earnings and the substantial increase in the child tax
credit—have the effect of protecting the
poorest.
David
T. C. Davies (Monmouth) (Con):
We know that the scale of
the problem was a deficit of £150 billion every year.
The coalition Government have decided that the solution is to increase
taxes and to cut public spending. To give us an idea of what
alternative solutions there may have been, will the Chief Secretary
tell us how much is being raised through measures such as the 50% top
rate of tax on high earners?
Danny
Alexander:
That is not something that we are seeking to
change in the Budget. It makes a modest contribution, but it is none
the less important in the context of overall revenue raising through
tax, and it is necessary to reduce the deficit. The gap between what we
spend as a country and what we raise in tax is £150
billion. We have to close that gap, and if we fail to act, we will take
the much bigger risk of leaving interest rates to rise, which would put
us in a position that other countries in Europe have found themselves
in. Frankly, we never want those questions to be asked of this
country.
Mr
David Hanson (Delyn) (Lab):
The Chief Constable of North
Wales has said that the in-year cut of £1.4 million
to the budget this year, over the budget that I agreed as Crime and
Policing Minister in February, will lead to police officer cuts, as
will the 25% cut in the Home Office funding over the next three years.
How does the Chief Secretary square that with his party’s
election pledge to put 3,000 extra police officers on the
beat?
Danny
Alexander:
It is for the spending review to determine the
precise nature of the savings that we make, and the distribution of
those savings between Departments. Those decisions have not been made,
and that is therefore a judgment that can be made only once the
spending review has been published. It is for the Welsh Assembly
Government to decide how they disburse their share of the
savings—[Hon. Members: “It is not
a devolved matter.”] I understand that. I am making a
wider point. Hon. Members should just listen for a second. It is for
the Welsh Assembly Government to decide how they disburse their share
of the savings, but in the context of the spending review and the Home
Office budget, until those decisions have been made I cannot comment on
the
impact.
Mr
Llwyd:
On a point of order, Mr
Brady.
The
Chair:
Points of order will come after the
statement.
Alun
Cairns (Vale of Glamorgan) (Con):
May I
ask the Chief Secretary about the impact of
employers’ national insurance contributions? Wales is
disproportionately dependent on the public sector—especially the
NHS—as the largest employer. That is particularly the case in
devolved matters. What positive impact will the reduction in national
insurance contributions have on the ability of the Welsh Assembly
Government to increase their
spending?
Danny
Alexander:
The hon. Gentleman is absolutely right that the
reduction in employers’ national insurance contributions will
have benefits in both the public and the private sector. As I said in
my statement, it will lead to savings of about £140 million for
businesses in Wales alone. That is clearly a financial opportunity for
the public sector, although in common with the whole country the public
sector in Wales faces significant reductions in spending over the next
few
years.
Mr
Wayne David (Caerphilly) (Lab):
This is clearly a
regressive Budget, and I want to move that the Committee has no
confidence in the ministerial
statement.
The
Chair:
We are proceeding with questions on the statement.
I have no power to accept that
motion.
Mr
David:
On a point of order, Mr
Brady.
The
Chair:
I have already made it clear that points of order
will come after the conclusion of questions on the
statement.
Roger
Williams (Brecon and Radnorshire) (LD):
Many small
incorporated companies welcome the cut in corporation tax, although it
is partly offset by the alteration in capital allowances. Many
companies in my constituency and in Wales are not incorporated but are
sole traders or partnerships. They have seen no change in their
taxation status but also face reductions in capital allowances. Does
the Chief Secretary therefore anticipate a tendency for companies to
move from being sole traders or partnerships to being
incorporated?
Danny
Alexander:
I am grateful to my hon. Friend for that point.
I will not comment on any trends in that direction, but sole traders
and partnerships will benefit from the changes to employers’
national insurance contributions that were set out in the Budget.
People who set up their own businesses, perhaps as sole traders or with
a small number of employees, will also benefit from the policy that we
have announced to free such businesses from paying national insurance
contributions for their first 10 staff, up to £5,000, for the
first year of their operation. That will hopefully encourage the
establishment of more businesses in Wales, and will help those
businesses to lead the economic
recovery.
Albert
Owen:
In the Budget, the Chancellor mentioned a fuel
rebate for rural areas in Wales and elsewhere. That is something that I
have campaigned for, and I know that the Chief Secretary’s party
was campaigning for it before the election. Will he give us some idea
of when that will come in, where the pilot schemes will be, and the
kind of mechanism that the Government intend to introduce to help rural
areas, which, even if they do have a fuel rebate, could see it wiped
out by the VAT
increase?
Danny
Alexander:
I cannot give the hon. Gentleman precise
details of the locations or the nature of those pilots. In both the
coalition agreement and the Budget, however, the Chancellor reaffirmed
our commitment to investigating such a measure. It is something for
which I, like the hon. Gentleman, have campaigned. It is important to
recognise that in the most remote areas there are disproportionately
high fuel costs and fewer transport alternatives. That is why we are
investigating the measure and we will make announcements in due
course.
Jonathan
Evans (Cardiff North) (Con):
Does the right hon. Gentleman
consider it something of a curiosity that, during the course of the
general election campaign, the Labour party recognised the need to
reduce Government borrowing by £40 billion, and yet it has
challenged his proposals both on tax and on public spending? One of the
proposals that the Labour party has welcomed—perhaps less loudly
than it has been in the challenges it has made today—is the
increase in the threshold at which people pay tax. Given our lower
levels of income in Wales, has the right hon. Gentleman assessed how
many people in Wales will be assisted by that
change?
Danny
Alexander:
The hon. Gentleman makes several points. There
is a degree of denial and complacency about the extent of the problems
that this country has been left by the Opposition, who bear a great
deal of responsibility for the position that the country is in. It is
striking that, in response to the Budget, they tend to welcome measures
that cost money, but not those that save money, which would leave the
economic position even more difficult than the hon. Gentleman has
outlined. The measure on income tax will benefit some 1.1 million basic
rate taxpayers in Wales and will, therefore, be of significant benefit
to people there who are on low
incomes.
Glyn
Davies (Montgomeryshire) (Con):
One major change in the
Budget is the increase in capital gains tax. Many of us welcome the
fact that it was not as punishing as rumours suggested that it might
be. What response
has the Chief Secretary received from people who may be affected by that
and what assessment has he made of the effect the change may have in
Wales?
Danny
Alexander:
The increase in capital gains tax is necessary
to reduce the avoidance of it, which was caused by the very wide gap
that was established by the previous Government between 18% capital
gains tax and income tax. The 18% rate for basic rate taxpayers affects
those on low incomes with small gains. The advice suggests that the 28%
rate will maximise revenue, which implies that it is also the rate that
will have the maximum effect on reducing tax avoidance.
In Wales, as
well as elsewhere, the rate applies only to non-business assets, and we
have increased the exempt amount from £2 million to £5
million for business owners and people with substantial investments in
business. Those measures will be of significant benefit to the
productive side of the
economy.
The
Chair:
We now move on to the main
debate.
Mr
Llwyd:
On a point of order, Mr Brady. I am sure that the
Chief Secretary, despite the clandestine manner of his coming here, did
not do so to mislead the Committee, inadvertently or otherwise. A few
minutes ago, he told the Committee that no party went into the general
election saying that it would not raise value added tax. His party
leaders were cavorting in front of a massive poster, which warned
people about the Tory tax
bombshell.
The
Chair:
The hon. Gentleman is pursuing the debate and the
argument. That is not a point of order for the
Chair.
Mr
David:
On a point of order, Mr Brady. I gave notice
earlier that I wanted to move a motion of no confidence in the
ministerial statement; I still wish to move
it.
The
Chair:
The hon. Gentleman has made his point, but that is
not a matter that I can take forward.
Several
hon. Members
rose
—
The
Chair:
Order. I am taking no further points of order. We
will proceed with the main debate, during which Members will have
opportunities to make their points. It might be helpful if I remind
Members of the timings of the debate: we have from now until 11.25 am;
we will meet again at 2 pm, and debate on the motion will continue
until 4 pm.
Chris
Bryant:
On a point of order, Mr
Brady.
The
Chair:
Order. We are proceeding with the main debate. I
have been clear about that.
I have no
power to impose time limits on speeches, but brief contributions will
allow as many hon. Members as possible to be
heard.
Huw
Irranca-Davies
rose—
The
Chair:
I have been very clear that there are to be no
further points of order at this juncture. I call the Secretary of State
to move the
motion.
Mr
David:
On a point of order, Mr Brady. I beg to move that
the Committee do now adjourn.
The
Chair:
Order. I do not accept the motion. We have a
limited time for the debate. Several hon. Members on both sides of the
Committee are here to participate in it, and we will now
proceed.
Mr
Llwyd:
Further to that point of order, Mr Brady. The
question has to be put to the Committee that we should
adjourn.
The
Chair:
Order. We are sitting in pursuance of an order of
the House, and that takes
precedence.
Legislative Programme and Budget Statement
(Wales)
10.6
am
The
Secretary of State for Wales (Mrs Cheryl Gillan):
I beg to
move,
That
the Committee has considered the matter of the Government’s
legislative programme as outlined in the Queen’s Speech and the
Budget statement as they relate to
Wales.
Earlier,
I welcomed you to the Chair, Mr Brady, and I now welcome you again. I
said in my opening point of order that you could expect a lively
sitting, and we have not been disappointed by the antics from Members
on the Opposition Benches. I thank my right hon. Friend the Chief
Secretary to the Treasury for taking time to address the Committee and
for delivering an open and frank assessment of the challenges that we
face and of the impact of the
Budget.
I
am sad that when the new style of coalition Government offers up the
Chief Secretary of the Treasury to members of the Committee so that
they can question him seriously about the Budget, they have wasted that
opportunity. I had suggested that we have two Welsh Grand Committees,
with one on the Queen’s Speech. Through the usual channels, I
outlined to the right hon. Member for Neath, the shadow Secretary of
State for Wales, a date for that Committee but I received a message
that it was not convenient and that he would rather the two Committees
be rolled together, which is why we have rolled them together
today.
Furthermore,
my office rang the shadow Secretary of State this morning and received
no reply. I am assured by those who arrange such matters that
everything has been done in accordance with the practice that was in
existence. People watching our proceedings will be rather shocked and
ashamed that so many hon. Members failed to take the opportunity for
in-depth questioning of the Chief Secretary, something not accorded by
the previous Government but which we accorded in a spirit of respect to
allow Welsh Members unfettered access to the very member of the
Treasury team responsible for finance in Wales. It is an opportunity
that has been wasted, and it will not go unnoticed outside the
Committee.
Mr
Peter Hain (Neath) (Lab):
I have in my hands a copy of the
notification that I received at 08.55 this morning. It is an e-mail
sent from the office of the Chief Secretary, copied to the leader of
Plaid Cymru and to the Wales Office, and it contains a copy of the
Chief Secretary’s statement. That was the first I knew about it.
It would have been decency on the part of the right hon. Lady and
courtesy to the Committee to have negotiated that in advance, to have
informed the Opposition that she proposed to invite the Chief
Secretary—who is not even here now—and for members of the
Committee to have a chance to anticipate it. Instead, she has
deliberately curtailed the opportunity for hon. Members to put
questions to her and to make their own speeches on both the Budget and
the Queen’s
Speech.
Mrs
Gillan:
I am reliably informed that the phone call was
made to the right hon. Gentleman’s office at 08.30 this
morning.
Mr
Hain:
Why did the right hon. Lady not tell me last
night?
Mrs
Gillan:
The right hon. Gentleman asks why I did not tell
him last night, but he was in a convivial drinking session on the
Terrace—to which he alluded—and I would not have wanted
to disturb his social life, which is obviously so
active.
I
am assured that no practice has changed in the Wales
Office—[
Interruption.
]
—and
the practice was that in place when the right hon. Member for Neath was
in
office.
Mr
Hain:
I am grateful that the right hon. Lady has taken the
second
point.
I
have been reminded by my Whip, my hon. Friend the Member for Alyn and
Deeside, and by my predecessor as Secretary of State for Wales that if
the Government proposed to vary the normal business of the Welsh Grand
Committee, it was discussed and agreed through the usual
channels, not only between the official Opposition and the Government
but also with the other parties. That has been the practice for years,
but it did not happen on this
occasion.
The
Chair:
Order. Before the Secretary of State responds, I
say to you, Mr David, that you know the rules of the House and that
certain things are not permissible under them, so I ask you to withdraw
the remark you made from a sedentary position a few moments
ago.
Mr
Wayne David (Caerphilly) (Lab):
I have listened carefully
to what you said, Mr Brady, but it does not alter the fact that what I
said was true and what the right hon. Lady said was untrue. I will not
withdraw
it.
The
Chair:
I would ask you to reconsider, Mr David, in the
interests of courtesy and the rules of the
House.
Mr
David:
In the interests of courtesy, I will reconsider,
but I shall not withdraw the remark because it is
true.
Mrs
Gillan:
Mr Brady, I did not hear the hon. Gentleman
chuntering away on his Front Bench because of the noises that were
coming from behind. I am sorry that we have wasted time in the Welsh
Grand Committee debating in this fashion over procedures. The right
hon. Member for Neath has been around the House for an awfully long
time—he has even done two jobs at the same time, as Secretary of
State for Northern Ireland and Secretary of State for Wales. I would
have thought that this playacting and the orchestrated attempt at
disruption of the Committee were rather
shaming.
I
intend to keep my remarks brief, to allow maximum time for Back
Benchers to participate in the debate, particularly as I really wanted
two separate debates in the Welsh Grand Committee: one on the Budget
and one on the Queen’s Speech. After the longest and deepest
recession since the second world war, Britain needs to build a new
economic model, founded on the principles of freedom, fairness and
responsibility. As many leading economists and financial experts across
the world have commented, the most urgent priority must be to tackle
the record budget deficit. Only by doing that can we
restore confidence in our economy and support the recovery. In our first
10 weeks, we have taken the first steps on the long road to restoring
sound management of our public finances, after Labour’s
extravagance and mismanagement. Within barely a fortnight of taking
office, the Chancellor had conducted and completed a review of the
current year’s spending and identified just over £6
billion of
savings.
Following
the announcement, I read unfounded reports in the press suggesting that
Wales was being hit hardest in the savings we would have to find.
Nothing could be further from the truth. In fact, the percentage cut to
the Wales departmental expenditure limit, or DEL, is below the average
percentage cut in the DEL for the United Kingdom as a whole. However,
Wales must play its part, and it is of course for the Welsh Assembly
Government to decide where, and when, to make the savings. We have
followed through on our promise to allow the Assembly Government the
flexibility to defer all or part of the savings until next year, if
they so wish. We await their
decision.
At
the same time as the savings were announced, we announced a further
£23 million for Wales, which reflects the Barnett consequentials
of recycled savings, used by the Government on targeted measures such
as social housing, further education, apprenticeships and business
rates. However, let me be clear: what we cannot afford to do is to
continue increasing public debt at the rate of £3 billion each
week—that is half the Welsh health and social services budget
for the entire year and more than seven times the annual budgets for
the four Welsh police forces put
together.
An
important achievement is the announcement and establishment of the
independent Office for Budget Responsibility, which has delivered its
first report. The power that the Chancellor has enjoyed for centuries
to determine the growth and fiscal forecast now resides with an
independent body immune to external political
factors.
Geraint
Davies (Swansea West) (Lab/Co-op):
The right hon. Lady
will know that identifiable public expenditure per head in Wales is
higher than in the UK: £9,200 compared with £8,200. Given
that there is more public sector employment in Wales, at a time when
she is cutting public sector wages and jobs, and threatening public
sector pensions as well as raising VAT, does she not accept that there
will be a disproportionate impact on Wales? Will she comment on the
Chief Secretary’s insinuation that perhaps we will be looking
downstream to a situation when Wales will be told, “You will
have more cuts, fewer MPs, and if you do not like it, raise your own
tax from a lower tax base”? Is that the
intention?
Mrs
Gillan:
I am grateful to the hon. Gentleman. He missed an
opportunity to put that question directly to the Chief Secretary of the
Treasury—he could have risen to his feet and put that question
to the Treasury Minister. I am very conscious that a large number of
people are reliant on the public sector in Wales. I have had several
discussions, because we need to make sure that there is not a
disproportionate impact. When we were freezing public sector pay, we
protected the lowest paid public sector workers by saying that
we would allow for those earning under £21,000 to have a
£250 increase in each of the two years. As the Deputy
Prime Minister said, we have to ensure that we look carefully at the
Welsh economy to make sure that there is not a disproportionate
downturn.
Nick
Smith (Blaenau Gwent) (Lab):
Will the right hon. Lady give
way?
Mrs
Gillan:
I want to make some
progress.
As
we heard from the Chief Secretary to the Treasury earlier, last
week’s emergency Budget was tough but fair. It sets out a
five-year plan to rebuild the UK economy. Many of the Budget measures
will be of particular benefit to Wales. More than 600,000 Welsh
pensioners will benefit from the guarantee on uprating the state
pension. More than 1 million Welsh basic rate taxpayers will benefit
from the increase in income tax allowances, and all Welsh businesses
will benefit from reducing the costs of regulation for
business.
Nick
Smith:
Has the Secretary of State any estimates of
employment in Wales for the 12 months ahead? Today, the Financial
Times
states:
“The
private sector is not ready to employ the hundreds of thousands of
public sector workers likely to be laid off in the next few
years”
as
a result of the Budget announcement last
week.
Mrs
Gillan:
There was some speculation in the morning papers
about leaked Treasury documents, but I was heartened when I learned
that the reports were saying that although there was an indication of a
downturn in public sector jobs, there were also good, optimistic
forecasts for private sector jobs of around 2.5 million, so I thank the
hon. Gentleman for that intervention. He was obviously up early enough
to have taken the phone call that went to the shadow Secretary of
State’s office at half past 8 in the
morning.
Nick
Smith:
On a point of order, Mr Brady, if the Secretary of
State had read the Financial Times, she would have realised that
the private sector said it is not ready to take on public sector jobs.
That is the point I am making, which she is not
answering.
The
Chair:
That was a repetition of the intervention rather
than a point of order to the
Chair.
Mrs
Gillan:
We want to rebalance and rebuild our economy,
moving away from an economy centred on debt and out of control public
spending to a new, balanced economy where we save, invest and
export—an economy where prosperity is shared among all sections
of society and all parts of the country. The Budget took the decisive
action needed to pay for the past—unfortunately—and plan
for the future.
Our first
legislative programme, announced by Her Majesty last month, builds on
our programme for Government. It sets out a wide ranging programme of
20 new Bills, which will benefit Wales, while taking
decisive action to put Britain’s economy back on a firm footing
by reducing the deficit and restoring economic
growth.
Time
is of the essence, and the coalition Government have already started
work implementing the programme. We have introduced three Bills so far.
The Identity Documents Bill, which began its Committee stage this week,
will restore freedoms and civil liberties by abolishing identity cards
and repealing unnecessary laws. That is good news for Wales and indeed
the whole United Kingdom. The two other Bills introduced so far deal
with academies and local government restructuring, and do not have a
direct impact on
Wales.
The
programme is radical but efficient. It will renew the political
structures of the United Kingdom, get the police back tackling crime,
improve our education system and help with tackling our unprecedented
deficit. The manageable number of Bills ensures that Parliament can
scrutinise the legislation fully, without being overburdened. This is
not legislating for the sake of
it.
The
legislative programme is, of course, in its early stages and we have
much work to do, but as the programme proceeds, let me assure Members
that devolution is an important ingredient of the coalition
Government’s policy
making.
Chris
Bryant (Rhondda) (Lab):
The right hon. Lady is preaching
to us about how wonderful it is not to have any legislation, but
legislation about constituencies around the country is meant to be on
the stocks soon. Can she confirm that she will propose that there
should be only 30 Members of Parliament from
Wales?
Mrs
Gillan:
I thank the right hon. Gentleman, no, the hon.
Gentleman, for that intervention. He is not a right hon.
Gentleman.
No, I cannot
confirm that. As the hon. Gentleman knows, the Prime Minister announced
his intention to equalise the size of constituencies so that each vote
counts the same and has the same weight. I would have thought that the
hon. Gentleman, in the spirit of equity and fairness, would welcome
that. However, we will of course have to consider the matter and work
with the Welsh Assembly Government to look at the boundaries and at the
effects on Wales—[
Interruption.
] Hold on
one second, the hon. Gentleman is terribly anxious to get to his feet.
We will look at the constituency boundaries and at the Welsh Assembly
boundaries, and at how they interact with the community council
boundaries. I do not want to prejudge the outcome of any commission
inquiry.
Chris
Bryant:
The Deputy Prime Minister, I think, has proposed
that he will introduce legislation on the matter before the summer
recess—in other words, in the next few weeks. Therefore, I
presume that the right hon. Lady must have already been engaged in
discussions about the linkage—perhaps not. Perhaps I shall
patronise her back. Perhaps she should be involved in such discussions,
to ascertain whether the intention is to keep the link between the
number of first-past-the-post seats in the Welsh Assembly and the
number of seats in Wales. What number does she think equalising the
size of constituencies would lead to for
Wales?
Mrs
Gillan:
I will ignore the personal remark. The hon.
Gentleman is entirely wrong—I have already met the Deputy Prime
Minister to talk on this very subject, with my hon. Friend the
Under-Secretary of State for Wales, and our discussions are ongoing. I
am sure that I could make a generous offer to the hon. Gentleman: if he
has any constructive ideas that he would like considered at this stage,
I am willing to welcome a paper from him. As he has revealed the
timetable he thinks we are working on, I welcome a submission from him,
probably by the end of next week. I am sure that anything he wants to
submit to me will be taken into
consideration.
Paul
Murphy (Torfaen) (Lab):
Pursuant to the comments of my
hon. Friend the Member for Rhondda about the impact of parliamentary
changes on the Welsh Assembly, the right hon. Lady is of course aware
that if the number of Members of Parliament in Wales is reduced to 30,
the number of Members of the National Assembly for Wales will be
reduced to 45, which is, of course, entirely unreasonable and
unmanageable. In order to ensure that is not the case, primary
legislation is required. In her discussions with the Deputy Prime
Minister, has she considered that such primary legislation is
necessary, rather than the strange constitutional Bill that will come
before us in the next few
weeks?
Mrs
Gillan:
The right hon. Gentleman is entirely right. It
would be untenable to think of the National Assembly for Wales going
down to 45 Members, with the work that it has to do. I assure him that
we are looking carefully at the matter, and I reiterate the invitation
that I made to the Member over there, if he would like to make
contributions to the process. However, I think that the right hon.
Gentleman would agree that not many people outside this place would
argue for more and more highly paid politicians. We are looking at
slimming down the state and making it more effective, and I think a
large part of our electorate would welcome
that.
Chris
Bryant
rose—
Mrs
Gillan:
I want to make some
progress.
Chris
Bryant:
Will the right hon. Lady be generous for a brief
moment? Is she being
nice?
Mrs
Gillan:
I am just going to do my job effectively and
efficiently and make some
progress.
The
Wales Office is a small but determined Department working in Whitehall
and Cardiff on Wales’s behalf, and we are plugging into every
Department in Whitehall, aiming to achieve the best possible attention
to the needs of Wales in every Government policy area. I emphasise what
I have already said to the hon. Member for Rhondda: my door is always
open to any Member of Parliament who wishes to discuss the
Government’s programme and how we shall deliver it. I mean that
and it applies to Opposition as well as Government
Members.
Alun
Cairns (Vale of Glamorgan) (Con):
What approaches has my
right hon. Friend received from Opposition Members about the
legislation? There has
been much consideration and they have expressed concern, so have they
accepted her generous invitation to encourage cross-party
discussion?
Mrs
Gillan:
None whatsoever. The Treasury has made a generous
offer to people to contribute to areas on which they think we can make
cuts to reduce the size of the state and deal with the appalling
deficit with which the previous Government left us. I understand that
it has received plenty of suggestions from members of the public,
public sector workers and others. I am not sure whether a single
Opposition Member on the Committee has made a constructive contribution
to the Treasury. Will they please stand up if they have submitted
something?
Chris
Bryant:
Can I make a representation now? The right hon.
Lady has said that her door is always
open.
Mrs
Gillan:
The hon. Gentleman will have a chance to make a
speech later if he catches the Chair’s
eye.
Although
our ideologies may differ, we should never let that cloud the fact that
we share a common aim—to deliver a better future for the people
of Wales. One of the changes that we have made indicates how the
Government wish to approach devolution. In his first week in the job,
my right hon. Friend the Prime Minister became the first serving Prime
Minister to visit the Senedd. During his visit, he made it clear that
this Government’s relationship with the Welsh Assembly
Government should be built on a foundation of mutual
respect—respect for devolution and respect for Wales as one of
the four countries that make up the United Kingdom—and
recognition that, although the National Assembly and the Welsh Assembly
Government sometimes hold different views from those of the Government
and Members of the House, we still need to help foster positive and
healthy engagement between Westminster and Cardiff bay, not the
pessimism and confrontation that some would
prefer.
Mr
David:
Will the right hon. Lady give
way?
Mrs
Gillan:
I will not give way to the hon. Gentleman. I did
not hear what he said as part of his personal attack on me earlier, but
the Chair obviously thought it serious enough to admonish him and he
did not withdraw it. I will not give way, because I cannot take him
seriously.
Dr
Hywel Francis (Aberavon) (Lab):
On the right hon.
Lady’s point about co-operation, may I congratulate her on the
Wales Office’s wise decision to approve the unamended housing
legislative competence order? It is an excellent decision that
replicates one taken by the Welsh Affairs Committee. Will she, however,
correct a serious error? Perhaps it is terminological inexactitude, but
her hon. Friend the Under-Secretary said in a press statement this
week:
“The
previous Government prevaricated over this LCO for three
years”.
The
fact of the matter is that we are talking about two separate LCOs and
we have received nothing but praise from Jocelyn Davies, the Welsh
Assembly Government’s Deputy Minister for Housing and
Regeneration, for the support given by successive Secretaries of State
for
Wales and by the Welsh Affairs Committee. Will the right hon. Lady
therefore correct the error in her hon. Friend’s press
statement?
Mrs
Gillan:
I will not correct what the hon. Gentleman refers
to as an error in the press statement. The LCO has been substantially
the same over a period of time and, although I will address the issue
later, I have no doubt that it was one of the bear traps left by the
previous Government. The LCO could easily have been put through before
the wash-up session. There was time, as the hon. Gentleman knows, but
the Secretary of State at the time, the right hon. Member for Neath,
decided to leave it behind. We decided not to play politics with the
issue and discussed it with our housing Minister and with the Welsh
Assembly Government’s Deputy Minister for Housing and
Regeneration, whom I congratulate for recognising our well documented
difficulties with the original LCO.
Dr
Francis:
On a point of order, Mr Brady. The right hon.
Lady said that she and her colleagues identified the difficulties. May
I correct her? It was the Welsh Affairs Committee that identified the
error. The minority who finally opposed approval of the order was made
up entirely of Conservative Members. She should acknowledge that. We
should
acknowledge—
The
Chair:
Order. I think we have got the point. It was a
point of argument and not a point of
order.
Mrs
Gillan:
If the hon. Gentleman would like to finish his
point, I am happy to give way to
him.
Dr
Francis:
Prevarication is the word that is being used. In
fact the diligence of Jocelyn Davies in recognising the need for a much
broader LCO was the main reason for the so-called delay. She recognised
and told us in evidence that the WAG wanted to take account of the
Essex review, and the 49 recommendations were incorporated in a new
LCO. That is on the record and I repeat it on the record. The Secretary
of State should acknowledge
that.
Mrs
Gillan:
The first attempt at the housing LCO was
considered by the hon. Gentleman to be equivalent to a lash-up and the
second one made progress. Yes, I acknowledge that Conservative Members
had a problem with an element of the housing LCO and they made that
quite clear. Therefore, as it was left behind as unfinished business
and the shadow Secretary of State did not put it through, we had to
deal with it in the proper fashion.
Alun
Michael (Cardiff South and Penarth) (Lab/Co-op):
May I
point out, through you, Mr Brady, that the first LCO the right hon.
Lady was criticising was supported by Conservative Members? There was
cross-party support for it, with some reservations. The second LCO
proposed a comprehensive approach to how housing policy should be
addressed in Wales and received cross-party support in the Committee
but was blocked later in the House as a Conservative initiative. That
is a matter of fact.
Mrs
Gillan:
I am awfully sorry. The right hon. Gentleman has
been a Member for a long time and has a lot of experience, but I am
informed that that is not the case. There was a period of a week when
the LCO could have gone through, and it was with some delight that it
was left until the wash-up period. All I can say is that we are now
putting that LCO through, unamended, because we have an undertaking
from the housing Minister Jocelyn Davies who recognised our
difficulties with parts of the LCO and gave undertakings that helped us
to fulfil the Assembly Government’s ambitions while respecting
our concerns.
The Prime
Minister chaired a successful meeting of the Joint Ministerial
Committee earlier this morning, something the previous Prime Minister
never did. It has now been agreed that we are to meet regularly to
consider matters of common mutual interest. We have injected a new
seriousness into these structures and I believe it is important to work
with people and Administrations across the United Kingdom to make sure
that devolution works. As the Prime Minister made clear, this is
respect in practice; it is solid proof of this Government’s
commitment to work in collaboration with the devolved institutions and
to integrate devolution in our policy making.
One of the
biggest issues on my desk on my arrival as Secretary of State for Wales
was the referendum. Let me make my position clear. The referendum is a
priority for the coalition Government and for me as Secretary of State.
Many members of the Committee share my eagerness to hold a referendum,
but it needs to be carried out correctly in line with the procedures
set up by the right hon. Member for Neath when he was in power. We must
ask an understandable question and ensure that the people of Wales have
information so that they can make an informed decision. The preparation
work needs to be thorough to minimise any risk of legal
challenge.
Following
my appointment, the preparation work for the legal instrument for the
referendum order continued as it had been started by the right hon.
Gentleman, and work on the question began. In less than eight weeks I
have worked to identify when the referendum can be held without
compromising the integrity of the process and have announced that I
believe that a referendum could be held in the first quarter of 2011,
subject to approvals in the parliamentary
processes.
Albert
Owen (Ynys Môn) (Lab):
Does the Secretary of State
not recall that in 1997 a Government were elected who had a view,
unlike the Secretary of State? There was no neutral Secretary of State,
and the timetable allowed for a referendum that autumn. What is
different this time? Is it lack of political
will?
Mrs
Gillan:
I say to the hon. Gentleman that the procedure we
are following was laid down by his right hon. Friend the Member for
Neath, so he should address that question to
him.
Albert
Owen:
I am asking you the
question.
Mrs
Gillan:
There is a lot of political will on our part; we
are steaming ahead, and I have made more progress. It is right that I
remain neutral because it is a quasi-judicial process, as set out by
the right hon. Member for Neath. My Minister and I will remain neutral
because that is the right and decent thing to
do.
Alun
Cairns:
Does my right hon. Friend agree with the
independent legal advice given by the Assembly Commission’s own
legal advisers, that it would be nigh on impossible to have the
referendum this year, because of the lengthy procedures laid down by
the former Administration and their inactivity? That is the
Assembly’s own independent legal
advice.
Mrs
Gillan:
That is absolutely correct. If Opposition Members
huffed and puffed less, and spent some time looking at the process that
the shadow Secretary of State left behind, they would be quite
surprised at the length, detail and convolution of the process he came
up with.
Mr
Mark Williams (Ceredigion) (LD):
I share the enthusiasm of
the hon. Member for Ynys Môn for an October poll. The real issue
is the extent of the inactivity or the extent of the work not done
before the general election. There was enthusiasm for an earlier poll,
and it now seems that it will be in the spring. That would not
necessarily have been the case. What is the Secretary of State’s
assessment of the work that was done before the
election?
Mrs
Gillan:
I thank my hon. Friend. I am reliably informed
that work had been done on the order—the statutory instrument
that will carry the ballot paper wording—which the right hon.
Member for Neath can confirm, but no work had been done on the
question.
Mr
Hain:
I am grateful to the right hon. Lady and the hon.
Member for Ceredigion for allowing me to do what I did last week at
questions. I was assured on 10 May—one of the last days
I spent in the Wales Office—that an October referendum was
possible; it would be tight, but it was possible. As for the work that
had gone on before, in December last year I asked my then officials to
consult the Electoral Commission about the whole process. That was
preparing well in advance. The Welsh Assembly Government had been
working on a question; it was their responsibility to work on the
question and to draft different options. However, nobody seriously
suggests that there could have been a consultation on the question by
the Electoral Commission in the middle of a general election. It was
always going to be a matter to come back to after the general
election.
Mrs
Gillan:
I take that as confirmation from the shadow
Secretary of State that no work was done on the question in his
office.
Mr
Hain:
No, there
was.
Mrs
Gillan:
There was work. Then the right hon. Gentleman has
access to his papers in his
office—
Mr
Hain:
In the Welsh Assembly
Government.
Mrs
Gillan:
Ah, in the Welsh Assembly Government. I hope the
right hon. Gentleman will make available to me the paper trail that
confirms that work was being done on the question in the Welsh Assembly
Government, at his request and on his understanding. He will have
access to his papers; I do not and I am not privy to the advice he was
given. If the right hon. Gentleman says work was being carried out on
the question in the Welsh Assembly Government, he should
produce the correspondence and the paperwork that back that
up.
Mr
Hain:
Why was the First Minister able to produce a
question, literally within days of notification to do so? It was
because, as he told me, work had been done by some of his senior
officials, as the Wales Office was fully aware. If the Secretary of
State asks those Wales Office officials who now serve her, they will
confirm that the First Minister told me that work had been going on by
his officials in the Welsh Assembly
Government.
Mrs
Gillan:
I will take responsibility for what happens in my
Department. I am not going to reveal advice given to me about
officials. I will just assure the right hon. Gentleman that when I came
into the Department it was quite clear that no work had been done on
the question, and on day one I started that work. In fact, the question
was looked at by the project board, but the right hon. Gentleman had
not even bothered to include the Welsh Language Board or the Electoral
Commission on that
board.
David
T. C. Davies (Monmouth) (Con):
Is the Secretary of State
aware of a speech made by the right hon. Member for Neath, at Cardiff
university on 29 October 2009, in which he
said:
“I
will support a referendum when we are confident we can win—and
not before. Unless public opinion shifts significantly, it is clear to
me that a referendum held before or in 2011 would be
lost.”?
How
can she square what the right hon. Gentleman is now saying with what he
said on that
day?
Mrs
Gillan:
I thank my hon. Friend for that intervention. It
is not for me to square the ramblings of the right hon. Gentleman. He
does not seem to have got his ducks in a row. Leaving the referendum in
that state was, I think, one of those areas that was intended to be a
political trap. There can be no political trap, because I am absolutely
determined that we will fulfil what the Welsh Assembly Government have
asked for. They asked, reasonably, for a referendum on whether they
should have further powers and whether we should effectively get rid of
the LCO process. I believe that it is up to the people of Wales to
decide that. We have now got a question, which has gone to the
Electoral Commission. That question was agreed in the project board,
with the exception of a few words at the end that the First Minister
did not agree with. In my letter to the Electoral Commission, I pointed
out that there was a difference of opinion on a small piece of the
wording. The Electoral Commission also indicated that it preferred to
have a longer document to test over the two weeks and I was delighted
to do
that.
Chris
Bryant:
Will the right hon. Lady give
way?
Mrs
Gillan:
No, I will now make progress to the end of my
speech. I have been very generous in giving way to the hon. Gentleman
and, quite frankly, it has not been worth it.
The project
board produced the question and the preceding statement, which I sent
to the Electoral Commission last week. The Electoral Commission will
have 10 weeks to carry out its work, improving that question. It is
only right that full and proper consideration is given to the question
and that sufficient time is built into the process to ensure proper
preparation for the poll. I will not cut corners and I would rather
work co-operatively to afford the people of Wales a clear choice made
through well-informed judgment. This is a major constitutional
proposal. It needs to be taken seriously and we owe people in Wales
nothing less than to follow the procedures laid down in the
legislation, however
tortuous.
Geraint
Davies:
Will the right hon. Lady give
way?
Mrs
Gillan:
No, I am going to make some
progress.
In
addition to making progress on the housing LCO and the referendum, we
as a ministerial team have been meeting people from all walks of life
in Wales, listening to their opinions and views. From the Hay-on-Wye
festival to the Urdd eisteddfod, from discussing our green economy with
energy chiefs to visiting affordable housing projects in mid-Wales,
from fledgling enterprises housed within the Technium OpTIC centre in
the north to Corus the internationally-recognised manufacturer in the
south, my Under-Secretary and I continue to be hugely impressed by the
talent and skills we have in Wales and are determined to ensure that
the Wales Office celebrates and showcases everything that Wales has to
offer to the UK and to the world—a message I reinforced when I
addressed the CBI annual lunch in Cardiff earlier this month.
It was also a
great honour and privilege for me to attend the national armed forces
day in Cardiff last weekend. I was born in Wales because my father was
a serving army officer in Cardiff when he met my mother who was a Wren.
That event, therefore, had a special significance for me and gave
everyone in Wales, and across the United Kingdom, the opportunity to
show our appreciation of the monumental sacrifices made by those who
have, are or will serve our proud
country.
We
are a fresh, different and energised Government who are already
delivering for Wales. We are a forward-looking Department, focused on
practical and constructive politics rather than the student pranks we
have seen so recently from the Opposition both in this Chamber and
outside. I look forward to working with all members of the Committee,
the Welsh Assembly Government and the people of Wales to ensure, by
unlocking Wales’ potential, that we achieve a bright and
prosperous future that we all want to
see.
10.45
am
Mr
Hain:
I welcome you, Mr Brady, to the most powerful
Committee in the House of Commons. By comparison, the 1922 Committee,
of which you are also a distinguished chair, is but a pale
shadow.
For
the record, I do not recognise at all the description given by the
Secretary of State on the dates and subjects before the Committee. I
would also like to comment on the contortions, twists and particularly
insulting procedures
imposed on us without notice this morning. Wales Office officials, as
the Secretary of State will be able to check, have my mobile phone
number. They are used to getting phone calls or e-mails from me at 6
am, so the idea that they could make a last-minute call to my office
and not get an answer because I was busy elsewhere is preposterous.
Will she give an undertaking—and will you, Mr Brady ensure that
she does—that in the future, if a Minister is coming to address
the Committee and if there is to be a variation to the agenda, proper
notice will be given to members of the Committee through the usual
channels? That would show proper respect for the
Committee.
Mrs
Gillan:
Will the right hon. Gentleman give
way?
Mr
Hain:
No, I will make some progress.
I repeat my
congratulations to the right hon. Lady on assuming her post, and I wish
her well. It is a great privilege to hold the office and to work with
such professional officials in the Wales Office. I am sure that she
will be treated, as no doubt she has been, with traditional Welsh
courtesy on her visits to
Wales.
For
the past 13 years, the people of Wales have had to put up with the
ignominy of four Secretaries of State who were MPs from
Wales—yes, MPs from Wales. What a relief that Gwydyr house has
now been restored to its former Tory glory, continuing the long line of
having Conservatives MPs representing English constituencies in office,
something that goes back to 1987. [
Interruption.
]
At least I represent a Welsh constituency with a healthy majority. The
Conservatives were defeated and were in a desperate fourth place in the
Neath constituency at the last general election. Some might say that
the right hon. Lady is not so much a new Secretary of State for Wales
as a new Secretary of State for Chesham and Amersham, despite the
presence of her Conservative Welsh Back Benchers who are bristling with
talent; just look at them. Never has the Welsh Grand Committee
witnessed a more brilliant bunch of Tory
voyeurs.
Why,
in contrast to Scotland, is there no Liberal Democrat Minister in the
Wales Office, despite such a talented threesome? We have Cardiff
Central’s young mum-to-be, Ceredigion’s scourge of Plaid
Cymru and the hon. Member for Brecon and Radnorshire, who looks
absolutely ecstatic at being part of the coalition with the
Tories—even more so, since on BBC Wales last Tuesday, he
proclaimed the VAT rise to be the best thing since sliced bread, having
denounced it on BBC Wales two days previously as
“a very
regressive tax that falls most heavily on the poorest in
society”
that
he could not possibly support. We have a new Liberal Democrat dictum:
two days is a very, very long time in politics. In fact, the hon.
Member for Brecon and Radnorshire has done a double volte-face because
he popped up on Monday admirably, with his friend the hon. Member for
Ceredigion, with an amendment condemning
VAT.
Roger
Williams (Brecon and Radnorshire) (LD):
The right hon.
Gentleman is an experienced Member in this House, and he will
have read the amendment very carefully. The amendment called
for an impact
assessment of the increase in VAT, as I am sure that there are ways in
which the impact can be modified in some way. That is what the
amendment aimed to
do.
Mr
Hain:
There is a good way in which the impact can be
modified: by not introducing it in the first place, which was the hon.
Gentleman’s original position.
There was the
excruciating sight of the Welsh Liberal leader Kirsty Williams meeting
her new coalition partner, the Secretary of State, on the steps on the
Senedd. Ms Williams was like a bride who suddenly discovered,
to her horror, the wrong person waiting for her with the ring. However,
all the guests were there, the photographers were snapping away, the
presents were stacked up and the vicar was expectant. What did she do?
She went through with the wedding ceremony, smiling rigidly, like the
bride of Frankenstein. Her performance is a vintage hit on YouTube, and
I recommend it as a cure for coalition
insomnia.
As
for the Queen’s Speech, it is clear that the Government want to
pack the Lords and fix the Commons. The right hon. Lady has the dubious
distinction of being the first Secretary of State ever to advocate a
reduced voice for Wales in Parliament, so increasing the voice of her
Buckinghamshire constituents relative to our Welsh constituents. She is
drawing up new boundaries that take no account of the population
sparsity of Wales or the geographic remoteness of rural and valley
communities, slashing the number of elected Welsh MPs from 40 to
30—the Government’s objectives will mean equalisation
plus a 10% cut in the membership of Parliament—and riding
roughshod over the criteria by which Parliament first ensured in 1949
that Wales never had fewer than 35 MPs. Subsequent independent
boundary commissions gradually increased that to 40
seats.
The
right hon. Lady is spearheading a deliberate, calculated attack on
Wales’ influence in Parliament. That is outrageous behaviour for
a Secretary of State whose main job should be to stand up for Wales,
not to attack our citizens’ democratic
rights.
Mrs
Gillan:
I know that the right hon. Gentleman has
constructed a press release and a story, because the line that he is
taking has already been in the press, but he is doing his intelligence
a disservice. He obviously does not understand what is being proposed,
so I shall repeat it for him in words of one syllable. There is no
intention that the legislation should have a disproportionate impact on
Wales. The detailed proposals for the boundaries review will be set out
in the forthcoming legislation, and a vote will have equal weight
across the
country.
Mr
Hain:
But, as the right hon. Lady knows, and as the
Electoral Reform Society’s recent document confirms, if a vote
has equal impact across the country, it will mean a cut in the number
of Welsh MPs, regardless of party. Her party, Plaid Cymru and the
Liberal Democrats will probably be hit, if not equally with Labour then
possibly even more, because the middle of Wales—Ceredigion,
Dwyfor Meirionnydd, Montgomeryshire, and Brecon and
Radnorshire—will be spatchcocked together, probably with half
the number of seats, in order to achieve equalisation and the 10% cut
in the number of MPs that she advocates. The consequence of her policy
for Wales will be a 25% cut in the number of Welsh MPs. I do not see
how she, as Secretary of State, can honestly stand up for that
policy.
Chris
Bryant:
Is there not another pernicious side which has not
yet been commented on? If the number of MPs is cut but not the number
of Ministers, the Government would have a far more effective
stranglehold over the House of Commons. Or has my right hon. Friend
heard suggestions that there should be cuts in the number of Ministers
and, if so, which Ministers would be
going?
Mr
Hain:
My hon. Friend makes an important point. He has led
the way in the past few weeks in exposing the new Government’s
fundamental discourtesy and their insulting attitude to the House of
Commons, which we have seen again in the proceedings of this
Committee.
Paul
Murphy:
On the number of Welsh MPs, the Secretary of State
will of course be familiar with the views of the Deputy Prime Minister,
who has a great interest in the year 1832. She will probably recall
that Wales had 32 Members in 1832 and a population of 1
million. The number of MPs has increased by only 8%, even though our
population is now 3 million. Does she have any comments on
that?
Mr
Hain:
My right hon. Friend, a former Secretary of State
like me, makes a telling and convincing point, as
always.
In
fact, yet again the Conservatives are turning Wales into the great
ignored nation. As First Minister Carwyn Jones said, there is no longer
a strong voice for Wales at the Cabinet table. Scotland has had a
generous reform of the Barnett formula in legislation following the
Calman commission and, on top of that, the fossil fuel levy, but there
is nothing whatsoever for Wales from this
Government.
There
has been no mention so far of the Holtham commission reforms, despite
the belated reference today by the Chief Secretary to the Treasury. The
right hon. Lady could not even persuade her new Tory-Liberal Cabinet
colleagues to honour the agreement that I negotiated with the Treasury
to protect Wales. Instead of taking forward the Holtham proposals, she
has broken a pre-election promise and dumped them in the long grass.
She is a weak Secretary of State, doing what Tories do best of
all—weakening
Wales.
Alun
Cairns:
Does the right hon. Gentleman now completely
dissociate himself from the statements made by the previous Chancellor
of the Exchequer, who was committed to the Barnett formula and said
that there was no place for change to that formula and that he was
going to stay with it when it comes to funding for
Wales?
Mr
Hain:
I welcome the hon. Gentleman to the Welsh Grand
Committee and to his seat in the House, but he obviously did not read
the written ministerial statement made on 25 or 26 November last year
that the Chancellor and I agreed. Nor did he read the Welsh Labour
manifesto which represented a further refinement of that negotiation
between us which effectively committed to guarantee that Wales would
not lose out, as it had started to do under the Barnett formula, in the
public spending review.
Mrs
Gillan:
I still do not quite understand the right hon.
Gentleman’s contention that Scotland has had a revision of the
Barnett formula and Wales has not. I recall listening to him giving
evidence to the Lords Committee when he said that he wanted no change
to the Barnett formula whatsoever and that Wales had done rather well
out of it. Has he now changed his position because he had 13 years to
give Wales a fair deal and did
nothing?
Mr
Hain:
If we are going to look at the record of our Labour
Government over 13 years, which I am more than happy to do, I should
point out that the budget for Wales was more than doubled. It went up
from less than £7 billion to nearly £16 billion. Now it
is to be cut. The Barnett formula was doing very well for
Wales.
Mrs
Gillan:
Paying for it
now.
Mr
Hain:
Yes, the people of Wales will pay for it now. They
will pay for her Government’s policies. The Barnett formula, as
the Holtham commission, which was established only 18 months to two
years ago by the Welsh Assembly Government, confirmed, had been
delivering well for Wales but in the last few years the degree of
convergence that is built into it had started
to—[
Interruption.
] There is no point in
laughing. That is what the Holtham commission shows. We immediately
addressed that once the Holtham commission’s first report had
been
published.
Nia
Griffith (Llanelli) (Lab):
Does my right hon. Friend agree
that the tax burden imposed by the recent Budget will take more money
out of Wales with far less coming back in in benefit, making that,
together with the formula, a double
whammy?
Mr
Hain:
I absolutely agree with my hon. Friend. That is a
point that the Minister needs to address in his reply. Only yesterday
the right hon. Lady had to make a humiliating climb down on the housing
LCO. She and her Minister blocked it in the pre-election wash-up
negotiations but Carwyn Jones has now forced her to take it through.
And a good thing too for the homeless and the thousands in Wales in
desperate need of affordable
housing.
On
the Budget, the Government say the richest will bear the brunt. That is
simply not true. Many on low and modest incomes will feel the pain much
more. The real scandal of the budget is that the poorest will be hit
the worst. I expect nothing less from Tories, but Liberal Democrats
should hang their heads in shame. The party of Lloyd George, who first
established the state pension in 1909, and William Beveridge, who in
1942 paved the way for the welfare state, has abandoned all it stood
for.
Roger
Williams:
Can the right hon. Gentleman explain why the
Labour Government failed to link old-age pensions with increases in
earnings and so impoverished pensioners in Wales for 13
years?
Mr
Hain:
I am grateful to the hon. Gentleman for saying that.
He does a fantastic job for his constituents. I am just sorry that he
has now got into bed with the
wrong party. On the question of linking pensions to earnings, we had put
that in our manifesto. We were committed to doing
it.
Roger
Williams:
After 13
years.
Mr
Hain:
We had taken 1 million pensioners out of poverty
through the pension credit, the winter fuel allowance and all those
measures. We saw our priority as addressing those pensioners most in
poverty. That is what we did. Having done that, we then intended to
remake the link between pensions and earnings broken by the previous
Conservative
Government.
Geraint
Davies:
My right hon. Friend is aware that the Liberals
are supporting cuts in departmental spending for education in England
and, obviously, in the block grant for Wales, but is he also aware that
in Swansea the Liberal Democrats are cutting some £5.6 million
out of education? At a time when we should be fuelling growth to cut
the deficit, including increasing jobs and skills, is that not
completely the opposite of the right strategy—sacrificing our
children’s futures for the short-term interests of
cost-cutting?
Mr
Hain:
I could not agree more. The Liberal
Democrats’ control of Swansea county council has resulted in an
absolutely repugnant policy of cutting funding for schools massively
and disproportionately compared with any other county council in Wales.
Schoolchildren in Swansea are suffering worst as a result of Liberal
Democrat
policies.
Mr
Mark Williams:
Will the right hon. Gentleman at least
acknowledge that the pupil premium policy, which my party fought on in
the general election and which will be a feature of the coalition
Government’s policy, will have positive Barnett consequentials
for Wales, to support the disadvantaged children to whom the hon.
Member for Swansea West
alluded?
Mr
Hain:
I think that the Barnett consequentials for Wales
will be that the Welsh budget is cut. Everyone knows that. So all the
existing services, including schools, will have to be funded from a
smaller budget. That is the result of the Budget of his
Government—the Government that the hon. Gentleman
supports.
Jonathan
Edwards (Carmarthen East and Dinefwr) (PC):
Does the right
hon. Gentleman agree that the banking levy, at the rate at which it has
been set, is a bit of a gimmick because it is more than cancelled out
by the cuts in corporation
tax?
Mr
Hain:
Indeed. The hon. Gentleman makes a good point, which
I will address in a moment.
On Sunday,
The Observer reported a study by leading economists that finds
that the poorest families in Wales will lose 21.7% of their household
income as a result of the Budget and the public spending
cuts—more than a fifth of their income. Even worse, they are
being hit fully six times harder than the richest families. That was
the first such study to take account not just of the tax and benefit
changes proposed in the Budget and elsewhere, but of savage cuts in
public spending. In other words,
the poorest lose a fifth of their income and, even worse, they are being
hit fully six times harder than the richest residents in
Wales.
Not
only will pensioners pay more in VAT, but they were shamefully excluded
from the much-vaunted £1,000 rise in the basic tax threshold.
Perhaps that is something on which the hon. Member for Brecon and
Radnorshire and his colleague can table another amendment—he
would have enthusiastic support from Labour Members. Pensioners did not
benefit from that so-called fair tax change insisted on by the Liberal
Democrats; they are excluded from it. Welsh pensioners have suffered a
double attack through VAT going up and their not getting the increase
in the tax threshold. Increasing VAT to 20% will affect everyone, most
of all pensioners and those in
poverty.
The
Financial Times has said that areas such as Wales that rely most on
the public sector will be hit hardest by the deep cuts in public
spending that have been announced. Worse still, those big cuts are
based on a big lie: that the public finances are so terrible that the
cuts must be faster and deeper than Labour’s tough deficit
reduction plan, which would have halved borrowing within four years.
The Prime Minister and the Chancellor have been deliberately scaring
the public, with the Liberal Deputy Prime Minister and his Business
Secretary joining in
enthusiastically.
However,
as the Government’s own Office for Budget Responsibility said
two weeks ago, the situation they inherited is actually better than
what was forecast as recently as Labour’s Budget in March.
Borrowing is £9 billion lower this year and would have
been £22 billion lower over the coming four years;
growth is higher and unemployment is lower; business bankruptcies and
home repossessions are running at half the rates of the 1980s and
1990s, during Tory recessions—all because of Labour Government
actions and investment to support jobs, businesses and struggling home
owners, which have left Britain much better placed than America or the
rest of Europe to recover from the worst global recession for 80 years.
These brutal cuts are not ideological or economic—the new
Con-Dem Government are not cutting savagely because they need to. They
are cutting savagely because they want
to.
One
thing has certainly changed since Labour left office: the eurozone
countries, especially Greece and now Spain and Portugal, are today in
real difficulty. Without Labour’s progressive influence, fiscal
conservatism is now dominant in Europe—it is running
riot—with huge cuts on the way in public investment and jobs. As
President Obama has warned, that endangers world recovery. It also
means a downturn in the very European markets where the vast majority
of our trade takes place. Now is precisely the moment not to cut public
spending savagely, because it will put at risk the still fragile
British recovery. Cutting deeper and faster repeats the mistakes of the
Tory Governments of the 1930s, 1980s and
1990s.
We
are coming out of recession, but our economy and the economies of many
countries around the world have not fully recovered. Our recovery is
fragile, and the global recovery could easily be derailed. Only
Governments can step into the breach during such difficult times. Cut
off that support and the risk is palpable. The private
sector is not yet robust enough to replace Government investment, nor is
it getting anything like the support delivered by
Labour.
John Maynard
Keynes—a signed-up Liberal—will be turning in his grave,
not just at this damaging folly, but at the manner in which the Liberal
Democrats have breathtakingly somersaulted, trading the tens of
thousands of jobs that will be lost in Wales and the hundreds of
thousands of jobs that will be lost across Britain for their own jobs
in government. The Deputy Prime Minister, the Welsh Liberal Democrat
leader Kirsty Williams and even the once-saintly Business Secretary are
now arguing the precise opposite of what they did during the election
campaign only a few weeks ago. Big cuts based on a big lie—a
real tragedy for Wales.
There are two
big challenges facing Wales: first, how to secure jobs and growth; and
secondly, how to get borrowing down in a way that is fair to everybody.
The new Government’s first Budget has failed the fairness test
and goes back to the same old Tory, right-wing agenda of attacking
pensioners, hitting people on low incomes, causing unemployment to
rocket and making our hardest-working families pay the price. The only
difference is that, this time, the Budget is defended to the hilt by
the Liberal
Democrats.
What
we have from the Con-Dem Government is a strategy for cuts, but where
is the strategy for growth—the lifeblood of this country? Growth
is essential to secure a future for ourselves and our children. Without
growth, Wales will be condemned to years of
decline.
Alun
Cairns:
Does the right hon. Gentleman recognise that
interest rates for businesses have dropped since the Budget was
announced because of the sure, constructive way in which Government
debt will be repaid?
Mr
Hain:
Actually, long-term interest rates, future bond
rates and so on were coming down under our Government. Interest rates
will be forced up again as borrowing and debt rise, as more and more
people fall out of jobs and rely on the state for support.
After record
levels of employment and prosperity, falling unemployment and falling
numbers of incapacity benefit claimants under Labour, Wales will be
returned to its traditional Tory place: bumping along the bottom, with
higher unemployment, lower incomes and poorer
prospects.
Alun
Cairns:
We are already on the
bottom.
Mr
Hain:
There are still 100,000 more jobs in Wales than when
we came to power in 1997. Those jobs will be under attack as a result
of this Tory Government.
That is not
where Wales needs to be. That is no future for my three Welsh-born
grandchildren; nor is it any future for the 240,000 Welsh men and women
on disability living allowance who now face cuts. Now the Tories, with
the help of the Liberals, plan to punish hundreds of thousands of
people in Wales on incapacity benefit and other benefits. We had a
benefits regime that was tough but fair; they are pledged to one that
is punitive and
unfair.
Mr
Elfyn Llwyd (Dwyfor Meirionnydd) (PC):
I agree entirely
with what the right hon. Gentleman says about the social welfare
budget. On Monday, I had to appeal to a tribunal on behalf of a lady
who has to dialyse four
times a day, but who was failed by a medical practitioner, who said that
she was fit. That is absolutely disgraceful. If the belt is to tighten
even further, many people will suffer very badly, and I do not want to
be part of that.
Mr
Hain:
I agree with the hon. Gentleman.
Wales has
been through a difficult time, as has every other country in the world,
but the Government are repeating the mistakes of the past, when cuts
were made with no regard to the consequences. We have no argument over
the need to reduce our borrowing. That is why Labour set out a plan to
halve the deficit over four years, cutting borrowing by £70
billion—a huge reduction involving very difficult decisions and
cuts. What we were not prepared to do—as this Government
obviously are—was top that up with a further £32 billion
of spending cuts and a further £8 billion of tax rises, over and
above Labour’s plans. Tories, using the Liberal Democrats for
cover, have made the wrong choice. They are gambling with the recovery
and it will not be bankers or the many millionaires in the Cabinet who
suffer; it will be the people of Wales who pay the
price.
Mrs
Gillan:
Will the right hon. Gentleman give
way?
Mr
Hain:
No, I am going to make some progress.
Tories, using
the Lib Dems for cover, accept that unemployment is a price worth
paying. Listen to their new independent Office for Budget
Responsibility, which projects that, as a result of this Budget,
employment will be down by 100,000 and that there will be lower growth
this year and next. The scandalous abolition of the future jobs fund
means that 11,000 unemployed Welsh young people who have already
benefited, and a further 6,000 who were due to benefit, will be back on
the dole. The former Monetary Policy Committee member, David
Blanchflower, predicts 250,000 extra young people on the dole across
Britain following cuts in the future jobs fund and other Budget
measures. That suggests up to 20,000 Welsh 18 to 24-year-olds
condemned—as were young people in Wales hit during the Tory
1980s and 1990s—to generational joblessness. Many tens of
thousands of Welsh jobs will be lost in both public and private
sectors—50,000 being one estimate. That could well prove to be a
huge underestimate according to the Treasury assessment of 1.3 million
jobs lost over the next five years, as reported in The
Guardian.
To reduce
Government borrowing, Labour chose to raise national insurance
contributions rather than increase VAT. Now we have both. Only weeks
ago, the Tories said that the national insurance rise was a jobs tax.
Last week, we found that they are increasing the tax on employees and
they have put up VAT to 20%. Only weeks ago, the Prime Minister said
that the latter was a tax rise that we would not see, and the Liberal
Democrats condemned the prospect as a dire, draconian tax bombshell.
Now they will try to force it on to the statute book—a
fundamental breach of trust with voters. This is the third time in a
row that a new Tory Administration have raised VAT, despite denying any
plans to do so before the election: Margaret Thatcher did it in 1979,
John Major in 1991 and the present Prime Minister in 2010. What a sorry
hat trick.
Mrs
Gillan:
The right hon. Gentleman obviously has a long and
pre-prepared speech, which is why earlier today he could not question
the Chief Secretary to the Treasury on these important financial
matters.
When the
right hon. Gentleman was Secretary of State for Wales, at the time of
the last Budget given by the Labour Chancellor, there was a £20
billion gap in that Budget. Will he let us know what the plans were for
raising that sum? In the spirit of what was laid out by my right hon.
Friend, the Chancellor, may I invite the right hon. Gentleman to tell
us in a written submission where he thinks the cuts should be made?
After all, it was his Government who spent the money and borrowed
£1 in every £4 we spend. We cannot go on like that. We
have to deal with the deficit for the long-term health, wealth and
prosperity of people in
Wales.
Mr
Hain:
We intended to deal with the deficit. We had a tough
deficit reduction plan, as I have already told the Committee. The right
hon. Lady is going to increase borrowing—increase the
deficit—by putting more and more people on the dole and pushing
more and more businesses into bankruptcy.
While
pensioners would have been exempt from the national insurance rise,
they are not exempt from VAT. The Government say that we are all in
this together, but many people on low and middle incomes will see their
earnings cut. Child benefit will be frozen for the next three years for
more than 7 million families. In two years’ time, tax credits
will be reduced for families earning just over £15,000 and
scrapped for families earning just over £30,000. The right hon.
Lady may remember during our election television debates specifically
denying to me that that would happen—yet another broken promise.
She also specifically denied in those same debates that hundreds of
Welsh police officers and police community support officers are for the
chop, as are many thousands throughout Britain. Yes, there was a boost
to child tax credit, and much was made of that, but it was more than
offset by housing benefit cuts, and scrapping of maternity and
pregnancy grants along with other benefits targeted at supporting
children.
The Con-Dem
Government have also launched a full-scale war on public sector
pensions. Of course reform is needed, and Labour introduced such
reforms, such as postponing the retirement age, increasing public
employees’ pension contributions, and closing old schemes and
starting new ones—all changes negotiated with the trade unions.
The orchestrated Lib Dem-Tory assault on public pensions heralds a race
to the bottom, which will leave a huge burden on future taxpayers
coping with pensioner
poverty.
Guto
Bebb (Aberconwy) (Con):
Will the right hon. Gentleman give
way?
Mr
Hain:
I want to make progress. I have been generous in
giving
way.
For
every high-earning public service pensioner who provokes headlines in
the Tory media, thousands and thousands of public sector workers are on
very low pensions. For example, the average pension for a female
national health service worker is £5,000 per annum. The median
rate is even lower. Half of female NHS workers are on a pension of less
than £3,500.
Guto
Bebb:
My constituency is hugely dependent on small
businesses. A pension pot of around £100,000 is required to
generate a pension of £5,000 a year. Over the past 13 years, the
Labour party has attacked private pensions and not once did we hear
about the struggles of small business men trying to ensure that they
also have a decent
retirement.
Mr
Hain:
The VAT increase will not help small businesses or
their employees, will it? As for their pensions, that is why we
introduced the new personal account pension scheme. As Secretary of
State, I introduced that scheme to establish in every workplace a
compulsory pension, to which both employees and employers would have
been required to contribute, topped up by the
Government.
For
companies, there is a reduction in the headline tax, but allowances
that make all the difference to investment and future jobs growth have
been cut. We should not be surprised. Just two weeks ago, the new
Government scrapped our plans to extend a loan to Sheffield
Forgemasters and secure the promise of high-quality jobs. Tories and
Lib Dems should not insult our intelligence by trotting out the line
that they can renege on their election promises because the books were
worse than they thought. That is also simply not true.
The Tories
and Liberals are constantly scaremongering and comparing us with
countries such as Greece. That is ridiculous. We are a large, developed
economy and no one believes that our positions are anything like
comparable. The truth of the matter is that the Tories, with Lib Dem
help, have done what Tories always do—cut, cut and cut again,
until public services for all give way to private profits for the
few.
The
Budget is a Lib Dem summer sell-out. It turns the Lib Dem orange book
into a Tory blueprint. Britain needed a Budget to give the green light
to growth; instead, it switched all signals to stop. Instead of driving
the economy forward, the Budget has engaged reverse thrust. Because
there is no room left for interest rate cuts, the Budget increases the
danger of a double dip recession that could take Wales back to the dark
misery of the 1980s and 1990s, when whole generations of young and old
people were condemned to suffer. It is an outrage and I warn the right
hon. Lady that the people of Wales will not take it lying down. We will
fight
back.
11.18
am
Mr
Elfyn Llwyd:
There are several things in the
Queen’s Speech that are acceptable, and I want to look at the
positive side. If my hon. Friend the Member for Carmarthen East and
Dinefwr (Jonathan Edwards) is called, he will focus on the Budget, in
which there is little to be positive about. I shall start with the
parts of the Queen’s Speech with which I agree, but
before doing so, I welcome all new Members to the first Welsh Grand
Committee of this Session and you to the Chair, Mr Brady. I convey the
apologies of my hon. Friend the Member for Arfon for his absence. He
had surgery last night at Guy’s hospital, but I hope that he
will be discharged later today. Several hon. Members were concerned
about him, but I hope that he is on his way
back.
Mrs
Gillan:
I am grateful to the hon. Gentleman. Perhaps
because of the antics at the start of the sitting, I omitted to ask him
to give his hon. Friend our best wishes for a speedy
recovery.
Mr
Llwyd:
I am grateful to the right hon. Lady. My hon.
Friend is a popular Member and many people are worried about him, but
he is on the way back,
thankfully.
Mr
Hain:
May I endorse that message of good wishes from the
Secretary of State? The hon. Member for Arfon is a nice man and is
respected throughout the House. We wish him well and we wish him back
soon.
Mr
Llwyd:
I am much obliged to the right hon. Gentleman for
his comments. I will relay them to my hon. Friend
today.
We
support the Equitable Life Bill and the ombudsman’s
recommendations and we hope that the episode will be brought to a head
shortly. The postbags of every member of the Committee are full due to
the issue, and I am hopeful that we can get something done fairly
quickly. Many would-be recipients are getting on in age, so I hope that
we can get moving. I also hope that Sir John Chadwick will report back
shortly, so that we can
progress.
We
support the removal of the national insurance rise for employers. When
it was first announced, we considered it to be a jobs tax. It is
sensible to defer and not do it. We also welcome the annual increase in
the basic state pension as part of the pensions and savings Bill,
although we would have liked to see the Government go further and
increase pensions by a third to the level of pension credit guarantee,
especially for those aged over 80. It is a step in the right direction,
however.
We
welcome the energy security and green economy Bill. I hope that that
measure will be taken forward in partnership with the Welsh Assembly
Government to ensure energy efficiency in homes and businesses and,
importantly, to promote low-carbon energy production, from which we in
Wales are set to
benefit.
In
response to the previous Gracious Speech, I suggested a veterans mental
well-being Bill. I hope that the wide spectrum of problems that impact
upon service veterans is taken into consideration in the armed forces
Bill. I am pleased that it is to be introduced in the first year of
this Parliament, reflecting its importance, and I welcome the
commitment in the coalition document to rebuild the military covenant,
including the provision of extra support for veterans’ mental
health needs.
We in Plaid
Cymru have recommended a multi-agency support centre for veterans,
providing welfare where necessary and medical and other support so that
assistance can be centralised in one place. We also strongly support
the Gelli Aur project in Carmarthenshire becoming a convalescent home
for service veterans. We recently published a paper on the matter and I
am on the Howard League for Penal Reform commission looking into
veterans in the criminal justice system. I hope that, together, we can
take steps to respond to the problems and ensure that veterans,
wherever and whoever they are, get the care and support they deserve. I
therefore hope that the Bill that has been announced is as
comprehensive as it should
be.
I
am sure that much of the freedom Bill or the great repeal Bill, which
will remove some of the previous Government’s measures, will be
supported. I wonder whether it will involve revisiting elements of the
Government of Wales Act 2006, with which many of us found fault. The
rules that prevent people from acting as candidates
in both the constituency and on the regional list are a specific
problem. We will see how things pan out. In general, we support the
rolling back of some of the authoritarian measures introduced by the
previous Government. I have long fought against the introduction of
identity cards, which have cost billions of pounds for no obvious
security benefit. I am also glad that we will move towards the Scottish
system for the DNA database and introduce safeguards against the misuse
of anti-terrorism legislation. As always, however, the devil will be in
the
detail.
Albert
Owen:
Like the hon. Gentleman, I opposed identity cards
and voted against the Government. Does he agree, however, with the
importance of biometric passports in an age in which other countries
accept
them? Without such passports, Britons travelling to America, Australia
and other countries would have to provide
fingerprints.
Mr
Llwyd:
That may be a valid point, but, on the narrow point
of ID cards, I could not see the point of
them.
I
am happy that any discussion of changing the Human Rights Act 1998 has
been dropped—something that I am sure has occurred because of a
damascene conversion among its opponents on the Government Benches. I
read earlier this week that the proposed Tory Bill of Rights has been
severely criticised by very senior European jurists, but in principle
we would be able to welcome the parliamentary reform
Bill.
11.25
am
The
Chairman adjourned the Committee without Question put (Standing Order
No. 88).