Legislative Programme and Budget Statement (Wales)

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. 

Column number: 16 

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).