The
Committee consisted of the following
Members:
Chairs: †
Martin
Caton
,
Albert
Owen
†
Bebb,
Guto (Aberconwy)
(Con)
†
Brennan,
Kevin (Cardiff West)
(Lab)
Bryant,
Chris (Rhondda)
(Lab)
†
Cairns,
Alun (Vale of Glamorgan)
(Con)
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)
†
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)
James Rhys, Committee
Clerk
† attended the
Committee
The following
also attended, pursuant to Standing Order No.
102(4)
:
Gillan,
Mrs Cheryl (Secretary of State for
Wales)
Greening,
Justine (Economic Secretary to the
Treasury)
Newmark,
Mr Brooks (Lord Commissioner of Her Majesty's
Treasury)
Welsh
Grand
Committee
Wednesday 1
December
2010
(Morning)
[Martin
Caton
in the
Chair]
Comprehensive
Spending Review (Implications for
Wales)
9.30
am
The
Chair:
My apologies for the temperature in the room. We
are assured that remedial action is being
taken.
The
first business before the Committee is the ministerial statement. I
intend to bring questioning to a close at 10.10 am, at which point the
Committee will proceed to the main
debate.
The
Secretary of State for Wales (Mrs Cheryl Gillan):
On a
point of order, Mr Caton. May I welcome you as Chair of the Welsh Grand
Committee? This is our second Welsh Grand Committee, and I am sure that
you will conduct it in a firm-handed fashion from the
Chair.
I
also welcome the Economic Secretary to the Treasury. This is the second
time that we have had a Treasury Minister here to answer questions on a
topic of great concern to all Members of Parliament in Wales. I am
grateful for her attendance, and I look forward to your chairmanship,
Mr
Caton.
The
Chair:
As the Secretary of State knows, that is not really
a point of order, but her kind words are
appreciated.
Comprehensive Spending Review
(Wales)
9.31
am
The
Economic Secretary to the Treasury (Justine Greening):
With permission, Mr Caton, I should like to make a statement. I am
delighted to be here today with the Grand Committee. It is absolutely
freezing in this room, but I am sure that the debate and my statement
will warm up the Committee’s
interest.
I
have limited time today, as has been explained, so I want briefly to
set out the background to the spending review as a whole and then
discuss the impact on Wales. I will do my best to answer
people’s questions but, if any can be amplified with further
details after the Committee, I am happy to do
that.
First,
given the background to the spending review, it was clear that we as a
Government needed a plan to pull Britain back from the brink—a
plan that would deal with our debts and put our country’s
finances back on a sustainable path. When we came to power, we
inherited an economy that was on its knees. Our country was borrowing
£1 for every £4 that it was spending. We were running the
highest deficit in our peace-time history and the highest in the
G20.
Britain
was simply not living within its means, so in May, we announced
immediate reductions to in-year spending, avoiding the sovereign debt
crisis engulfing the eurozone. Shortly afterwards, in June, we set out
the emergency Budget, returning credibility to the nation’s
finances. In October, we had the spending review, which brought to an
end years of irresponsible
borrowing.
We
had to tackle the deficit—that was unavoidable. However, we have
chosen to spend the money we had on the areas that matter the most: the
education of our children, the health care of our people and the
infrastructure that supports a prosperous
economy.
Mr
Elfyn Llwyd (Dwyfor Meirionnydd) (PC):
On infrastructure,
does the Economic Secretary regret that Wales has been denied
electrification of its railway line across south Wales? At the same
time, £1 billion has been spent on one tube station in
London.
The
Chair:
Order. I think that I made a mistake in allowing
that intervention. This is a ministerial statement, and questioning
should follow the
statement.
Justine
Greening:
I am happy to answer questions on capital
spending, because they are important. I understand, absolutely, why the
hon. Member for Dwyfor Meirionnydd raised that issue. Hopefully, we
will deal with that
later.
Of
the three key values that underpinned our spending review work, the
first was the need to support growth—in places such as Wales, it
is important for us to tackle unemployment. Secondly, we needed to
ensure that our choices were fair. Thirdly, we needed to deliver
reforms to public services, making them fit for the 21st
century.
The
bottom line was that, if our country lost control of its finances, it
would lose control of its ability to choose how to spend its money. The
country’s priorities would become those of its debtors and not
those of its people. That is why we had to outline a clear and credible
plan to deal with the deficit when we came into government and why we
will stick to that plan.
The
Government are firmly focused on achieving sustainable growth. Tackling
the deficit will help to provide a strong economic bedrock on which the
private sector can build. The Government plan to spend more on capital
infrastructure than the previous Government planned to do. In the next
four years, we will invest more than £30 billion in transport
projects, of which £14 billion will fund maintenance and
investment in our railways, and £10 billion will be spent on
road and local transport schemes. We are creating the new green
investment bank to help finance sustainable infrastructure for the
future, and we have launched a £1.4 billion regional growth
fund.
On
devolved matters, it is for the Welsh Assembly Government to make their
choices on how to spend their capital budget, although Wales will
potentially benefit from UK-wide expenditure, such as that planned to
come from the green investment bank. Even when faced with the economic
problems bestowed by the previous Government, we are still investing
tens of billions of pounds in Britain’s future. That goes
alongside the reduction in corporation tax that we introduced in the
emergency Budget, and our reduction in national insurance, which has
scrapped the worst effects of the so-called jobs tax that the previous
Government pencilled in. If we had not done that, small and large
companies that are struggling to keep people employed across Wales,
during the recession and coming out of it, would be faced not with
reductions, but with increases in corporation tax over the next few
years, at the very time at which we want them to expand and to take on
more Welsh people to
work.
The
second principle behind our decision was to ensure fairness so that
those with the biggest shoulders bear the largest burden, while
protecting the most vulnerable in our society. That is why we have
restored the earnings link for the state pension and ring-fenced NHS
funding. We also want to give children the best possible start in life
by increasing child tax credits for the lowest-income families and by
protecting our investment in schools. On the impact of such decisions
on the Barnett formula, the decision to protect schools funding in cash
terms and to protect the NHS have clearly had a direct effect on the
Barnett
consequentials.
Even
when spending was being reined in, we found more resources for our
schools and for our children’s early years. That has meant that
other Departments have taken bigger cuts, but we believe that that is
the right choice for our country’s future. That is why the
schools budget will rise from £35 billion to £39 billion,
and why we are introducing a new £2.5 billion pupil premium to
focus our resources on children from the most deprived backgrounds in
our country. As I have said, the Welsh Assembly Government have
benefited from the protection that we have given to health and
education in England through the Barnett consequentials provided in the
spending
review.
The
Welsh Assembly Government have also benefited in that way from our
decisions on welfare, in that the funding method has been switched from
annually managed expenditure to departmental expenditure limits. If we
had not done that, departmental spending cuts would have to be deeper,
which is what the last Government planned to do had they stayed in
office. That would have had a direct effect on the Barnett
consequentials and on the amount of money going through the block grant
to the Welsh Assembly Government.
The
third and final principle in the spending review was public service
reform. As we all know, we have to ensure that the money we put in
means that we receive the best public services out, and that we do not
waste money on back-office spend that should get through to the front
line. We have started that process by finding every last penny of
possible savings, and we are eliminating the monumental waste that
became endemic over the past decade. That is why we are tackling
administration, improving procurement and scrapping the ineffective and
expensive IT systems that became a feature of the last Government. When
we started to consider all those areas, we planned to save £3
billion, but there is so much waste that we can save £6 billion,
which means that we will be able to save on back-office spending
instead of having to take money out of front-line
services.
Finally,
our reform agenda will see a massive devolution of power from the
centre, which I am sure will bring huge benefits to Wales. Apart from
the schools and public health grants, we will end the ring-fencing of
all Government grants to local authorities from April next year, so
more than 90 separate core grants to councils will be reduced to fewer
than 10.
We will
change how services are delivered through increased payment by results
and personal budgets, and by introducing new rights for communities to
run services and to own assets. I have no doubt that those local
authorities in Wales that can make their own choices will look with
interest at the public service reforms in other parts of the country,
to see how such reforms might apply to their communities. We are
cutting bureaucracy and red tape, and we are ensuring that we can put
money through to the front line.
The spending
review settlement for the Welsh Assembly Government was determined by
the Barnett formula in the usual way. The details of the updated
Barnett formula were published in the statement of funding policy on
20 October, and the Welsh Assembly Government were fully
consulted in a spirit of mutual respect.
The Welsh
Assembly’s budget benefitted from the fact that two of its
largest programmes—the resource health budget and schools
budget—were protected. We have been handed a huge fiscal deficit
and a huge black hole in our public finances, which is not something
that an incoming Government want to pick up. It has been passed over to
us and there is no money, to use the phrase that one Labour party
member used in the note that we were left when we entered the Treasury.
In spite of all that, the Welsh Assembly Government resource budget is
higher in cash terms in 2014-15 than it was in 2010-11. The overall cut
in that budget is smaller than the average for non-protected UK
Departments.
It
is usual for the Welsh Assembly Government to determine their own
priorities within the block budget in the spending review, and I
understand that their draft budget was published two weeks ago. In
addition, in the spending review, it was announced that, depending on
the outcome of the forthcoming referendum in Wales on devolving primary
legislative powers, the Government, with the Welsh Assembly Government,
will consider the proposals in the final Holtham report and how we can
set up a process for considering those. We hope that that approach will
be consistent with the one taken in Scotland following the Calman
commission. We look forward to continuing to work with the Welsh
Assembly Government to promote economic growth in Wales and to deliver
high-quality and efficient public services.
To conclude,
the decisions that we have had to take have restored credibility to our
public finances and stability to our economy. When we came into power,
we faced the worst economic inheritance in modern history. The previous
Government had spent our money like there was no tomorrow; but tomorrow
has arrived. The debts that we were left undermined the funding of our
public services and threatened every job in the country. We have had to
make tough choices, which we cannot shirk, but they are the right
choices. We are determined to create an economic environment in which
companies once again feel they can grow; in which we can reform our
public services; and in which we can ensure that our economy and our
public finances are put back on a sustainable path, which is in
everyone’s interests, including, of course, those of the Welsh
people.
Mr
Peter Hain (Neath) (Lab):
I congratulate the Economic
Secretary on making her first appearance at the Welsh Grand Committee,
as a shield of comfort for the Secretary of State for Wales. I do not
recall any Labour Secretary of State requiring such a shield—on
discussions on budgets, comprehensive spending reviews, or pre-Budget
reports. I am disappointed that she has simply rehearsed the same tired
old vacuous slogan of the Chancellor. I have a question for her: why
have the yields on UK Government bonds been so low since the
financial crisis erupted in 2008? If Britain was on the brink of
bankruptcy, why have the markets been so keen to lend to us at low
rates? What kind of City investor lends to a bankrupt
borrower?
Justine
Greening:
It is fascinating to listen to the right hon.
Gentleman’s
answer.
Mr
Hain:
Question.
Justine
Greening:
Question. It is deeply concerning and shows that
the Labour party does not accept that our country has a problem that
needs to be addressed. [
Interruption.
] No doubt it
is of concern to people that the alternative to responsible government
is a party that created the problem, handed it over to
us—
Mr
Hain:
Answer the question. Why are the yields on bonds so
low?
Justine
Greening:
And still does not accept that there was a
problem in the first place.
[
Interruption.
]
The
Chair:
Order. I am finding it difficult to hear what the
Minister is saying. I would like a little less noise from Members in a
sedentary
position.
Justine
Greening:
It is a shame that the Labour party does not
acknowledge the problem. I accept that it may not want to take
responsibility for it, but it is something we have to tackle. We should
listen to the OECD, the Governor of the Bank of England and the IMF,
who all say that the steps taken by the new Government have put our
country back on the path to prosperity. That can be demonstrated by
asking any business whether it would rather see corporation tax going
up rather than
down. It is clear that the Labour party still has not grasped the
gravity of the situation. It is a relief to the people of this country
that it was kicked out of power back in
May.
Mr
Hain:
On a point of order, Mr Caton. I asked the Minister
a specific question: why are the yields on UK bonds so low? She did not
answer the question. Surely the Economic Secretary should do the Welsh
Grand Committee the courtesy of answering the questions that she is
asked.
The
Chair:
Order. As you know, Mr Hain, strictly speaking that
is not a point of order. It is up to the Minister to respond to
questions in her own
way.
Justine
Greening:
I should be delighted. Perhaps the right hon.
Gentleman needs to go to the City to ask why it requires less of a
return compared with countries such as Ireland, Portugal and some of
our other European neighbours. I recommend that he spends time in the
City asking what it thinks constitutes a good economic policy. I
suggest he takes the blank piece of paper that is currently his
party’s policy and asks whether that inspires
confidence.
In
answer to the right hon. Gentleman’s question, I have no doubt
that one of the reasons that we now have low bond rates is that the
markets have confidence in our plans. I would have hoped he would
welcome that. I suspect that one reason why rates came down
prior to the election is that the markets judged that the Conservative
party was more likely to be in power than the Labour party. They faced
a Labour party that said it had a plan to tackle the deficit, but had
not set out—even remotely—any details. It would not have
been surprising if they breathed a sigh of relief when the polls
suggested that the Labour party would no longer be running the
country.
Roger
Williams (Brecon and Radnorshire) (LD):
May I welcome the
Economic Secretary to the Treasury? She knows how important science is
to the Welsh economy and how good Welsh institutions are when carrying
out scientific research. The whole scientific community was very
pleased when science did quite well in the comprehensive spending
review. I was with the Natural Environment Research Council yesterday
when it said that, because the seven research councils are going to
bring together all their backroom activities, they will be able to make
savings and invest even more in science, which is so important for our
economy.
Justine
Greening:
The hon. Gentleman is absolutely right. In spite
of the very difficult economic situation that we picked up, we had to
keep an eye on the future, which is why we are going to invest more
than the previous Government had planned. We felt it was important to
protect science funding. As the hon. Gentleman said, it has a real
benefit not only to our economy; it enables people to develop skills in
our universities. The benefits can already be seen in the investment
decisions announced this week by companies such as GlaxoSmithKline, and
there is a real benefit from our proactive policies towards companies
that want to invest, particularly in high-skill, high-technology
industries that involve science. Whether
it is GSK, or companies that I visited before the election, such as
Rolls-Royce up in Derby, which provides a lot of skilled employment for
people in that area, it is vital that we support them and show them
that we understand how they not only benefit our economy in general,
but help to make it more
broad-based.
Several
hon. Members
rose
—
The
Chair:
Order. Many people are indicating that they would
like to ask a question. If questions are kept brief, and answers a
little briefer perhaps, more people will get
in.
Mr
David Hanson (Delyn) (Lab):
The Minister has obviously
considered a range of ring-fencing issues; she has mentioned the
ring-fencing of local authorities in England, which has nothing to do
with Wales. May I return her to the ring-fencing of police community
support officers? That is not mentioned in the Green Book, nor yet by
the Home Office, but it is crucial in ensuring that we continue to fund
police community support officers throughout
Wales.
Justine
Greening:
The right hon. Gentleman makes a good point. It
comes down to who is best placed to take decisions about where and how
money makes a difference. The Government’s approach is about
having the courage to allow the people who know best about those
things, such as local chief superintendents, to make the decisions
around how they spend their resources and what they think is the best
mix for their local communities. It is not just front-line community
policing versus inspection and investigation. It is up to police forces
on the ground to take the decisions, and it is not right for
politicians in Whitehall to be too
prescriptive.
David
T. C. Davies (Monmouth) (Con):
In the run-up to the
general election, the rating agencies made it absolutely clear that
Britain was on the brink of losing its triple A rating, and that it
only did not because they presumed that, whichever party won, something
would be done about the deficit. Does the Minister agree that as no
other country in Europe has tackled the deficit in the way that she and
her fellow Ministers have so bravely chosen, Britain remains a far
safer haven than many other parts of western
Europe?
Justine
Greening:
My hon. Friend is right. Clearly, rating
agencies expressed their concern about the path that the UK was on. I
think that PIMCO expressed the view that there was something like an
80% chance that we would be downgraded. But we should look at the
response of the rating agencies to the spending review and to the most
recent announcement worked on by the Office for Budget Responsibility,
which states that we are on course to reach our fiscal mandate, which
is all about tackling our deficit and ensuring that the next generation
does not have to pay the bills that we should be sorting out right
now.
Nick
Smith (Blaenau Gwent) (Lab):
On UK investment in
infrastructure, can the Minister tell us what percentage of the
£530 million identified for broadband will be spent on
Wales?
Justine
Greening:
I do not have that figure on me, but I am happy
to write to the hon. Gentleman with the
details.
Jonathan
Evans (Cardiff North) (Con):
My hon. Friend might find it
helpful to produce a graph for Labour Members that outlines the
proportionate share of Government expenditure of GDP over the past
13 years. It would show that in the first two years of
Labour government the share fell from 38% to 36%, at a time when
European spending was 10% more than that, at 48%. It would also show
the rise, year on year on year, to more than 50%—an
unsustainable position. That would illustrate the fact that we are not
dealing with the consequences of the
recession.
The
Chair:
Order. Let us keep our questions far
briefer.
Justine
Greening:
My hon. Friend makes an important point, to
which there are two responses. First, like any economy, we have to have
sustainable debt and spending, and secondly, the deficit that we seek
to tackle is structural. It does not matter how well our economy was
doing during the boom years because we were still spending beyond our
means. The problem that we had as a country was that, even in the good
years, when we were getting the highest tax revenues from our booming
economy, we were still spending more. The financial markets were
growing increasingly concerned, because they could not see when we were
going to pay the money back. That is why this question is so
important.
As a direct
impact of borrowing and borrowing and borrowing, we are spending
£43 billion this year—that is several-fold what we have
been able to put into the Welsh block grant. We are spending
£120 million a day just on interest, not on paying off the debt.
That is wasted money, which the British people want to see cut and, in
the future, put into their schools, their hospitals, their police and
their community support officers, instead of going over the water to
some other person who has been lending us the money. The practicality
is that if we do not have a grip on our finances, that £120
million will spiral out of control. That will be the worst thing for
all of
us.
Mr
Llwyd:
May I welcome the Economic Secretary to our
deliberations and may I help her by answering the question put by the
hon. Member for Blaenau Gwent? The answer is that no money was spent on
superfast broadband pilots in Wales, despite there being three in
England and one in Scotland.
I want to
press the hon. Lady on what she said on Barnett, which is important.
Last week, the Chief Secretary ruled out any changes to Barnett. The
Economic Secretary has said that she is looking at it urgently and
referred to an update on the Holtham report. As it represents some
£1.4 billion lost to Wales every year, on top of the cuts that
we have had, will she concentrate on that, because it is terribly
urgent? If she does, we will all be
grateful.
Justine
Greening:
The priority for us is to sort out the deficit,
because that is the context for all the affordability questions,
whether they are on the issues raised on Barnett in the Holtham report,
or whether they are on
all our concerns about being able to put money into capital
infrastructure. The key priority for the Government is to tackle the
deficit. That has to happen before we can start seriously considering
any changes to the Barnett formula. Even the Opposition and the right
hon. Member for Neath would accept that the formula has broadly served
well. Holtham’s main point was that we should look at how the
needs formula is used in England. Many English MPs would be the first
to express their concerns about how it works. When Holtham looked at
the amount that Wales should get, but did not get, there were things
that he did not include in his calculation. For example, he did not
look at how damping works.
We have been
clear—we have worked with the Scottish Government around the
Calman commission. The hon. Member for Dwyfor Meirionnydd will know
that we published the Scotland Bill this week. We want to stabilise the
public finances. We are, of course, looking at aspects of the Holtham
report and we will no doubt want to set up a process to see how we can
take forward discussions on it. I am aware that there will be a
referendum in Wales in the spring. There is another aspect from Holtham
on legislative powers for primary legislation. We will be looking at
what happens in Wales, and on that basis we will get some direction on
what the Holtham report might mean for policy going
forward.
Simon
Hart (Carmarthen West and South Pembrokeshire) (Con):
We
have heard a lot from the Office for Budget Responsibility in the past
few days. Has the Minister assessed the value of the OBR as it applies
to
Wales?
Justine
Greening:
My hon. Friend is right to point out that we
have looked at the OBR recently. On Monday the OBR released its latest
update, which I think shows a broadly positive picture. It estimates
that as a result of some of the difficult decisions that we have taken
on welfare, the reduction in the number of public sector workers will
be smaller than was originally estimated. For parts of the country,
such as Wales, that are more dependent on public sector workers and are
therefore particularly keen to rebalance the economy, corporation tax
movements and national insurance reductions are important to assist in
rebalancing. The OBR showed that we are moving in the right direction
and that we are better placed in the longer term to protect funding to
the devolved authorities with the measures that we are taking now,
however challenging they may
be.
Jessica
Morden (Newport East) (Lab):
Women make up two thirds of
public sector workers in Wales. For instance, in Newport passport
office, which is threatened with closure, 74% of the work force are
women. As Wales is being disproportionately hit by both the Budget and
the comprehensive spending review, will the Minister acknowledge that
Welsh women especially will bear the brunt of the cuts to the public
sector and the changes to
welfare?
Justine
Greening:
I do not quite agree with the premise of the
question. The hon. Lady is right to say that the emergency Budget and
the CSR were challenging because
of the fiscal deficit. The measures that we have to take to put the
public finances back on a sound footing were difficult
decisions—there is no doubt about that—and they affect
all of us.
In terms of
how the decisions will affect women in particular, we have looked at
all those issues, which were raised at the time of the Budget. That is
something we are particularly concerned to look it. Many of the changes
that we have made to support small companies will help women because
women may be more likely to be working part-time. Some of the changes
that we brought forward last week on national insurance will see some
employers come out of national insurance altogether. The changes will
particularly support the sort of jobs that are often—I am not
saying exclusively, but often—open to women, helping them get
back into the workplace, perhaps after they have had a
family.
The best
thing we can do to protect public service jobs in the long run is to
sort out our public finances and make sure that they are on a
sustainable footing. Then we will not be in a situation in the future
where we have grown and grown the costs and cannot afford them in the
long term. Any household knows that it must only spend money when it
can afford to do so, and it would be doing itself a disservice if it
got its spending up to a level that it knew was not sustainable. The
consequence of that mismanagement, as the hon. Lady pointed out, will
fall on the people who end up bearing the brunt of some of the
reduction in the public service head count that we will see over the
coming years.
Alun
Cairns (Vale of Glamorgan) (Con):
I would like to ask the
Economic Secretary about the distribution of funding to Wales, and
especially about the Barnett formula. Can she confirm that that formula
has been applied in exactly the same way this year as it has been for
the past 13 years? A simplistic comparison with other devolved nations
is simply inaccurate because of the nature of the devolved settlement
that the previous Administration bestowed on Wales. A comparison of
overall changes needs to be reflected in
responsibilities.
Justine
Greening:
My hon. Friend is right. People cannot on the
one hand point out that there are differences between the devolved
assemblies and ask for a consistent Barnett formula, and on the other
say that they want to move towards a more needs-based assessment, as
that could lead to even more differences if needs across different
devolved authorities were
different.
Owen
Smith (Pontypridd) (Lab):
Lovely though it has been to see
the Economic Secretary here this morning, it has been a bit
disappointing that she simply regurgitated the Chancellor’s
speech on the CSR. I wrote to her and her colleague the Chief Secretary
to the Treasury a while back to ask whether any specific analysis had
been done on how the CSR would hit Wales in particular. Has that been
done? Can she point to any specifics that have been looked at, on
welfare cuts or public sector jobs, about how Wales will be
differentially
impacted?
Justine
Greening:
We looked across the piece at how our changes
not only on welfare, but on growth and public service reform, will
affect different parts of the country, so we knew that we needed to
analyse the
distributional effect of our policies. If the hon. Gentleman looks at
the back of the spending review and of the emergency Budget document,
he will see more distributional analysis than has ever been released
before on such occasions. The facts and analysis are there for him to
understand how the Budget affects Wales. We know from questions today
that hon. Members, on the Opposition and the Government Benches, are
clear in their minds about how their local communities are
affected.
I
assure the hon. Gentleman that the Government have published more
analysis on the spending review and the emergency Budget than his party
ever did. I remind him that the reason why we had no analysis of the
comprehensive spending review—on its distributional effects and
its effects in different parts of the country—from his
Government before the election was, of course, that they chose not to
have a comprehensive spending review in the first place. We got on with
it and have put in the distributional analysis. I am sure the hon.
Gentleman can use that to inform his understanding of how Wales will be
affected by the CSR, much of which, in relation to Wales, is on how the
block grant is
funded.
Mrs
Siân C. James (Swansea East) (Lab):
The Economic
Secretary will be aware that I have a disproportionate number of civil
servants in my constituency, as I have the honour to have the Driver
and Vehicle Licensing Agency, the Land Registry Wales office, the
Swansea Pension centre and other small agency offices based there,
making a total of 9,000 people. They are very worried at the moment.
They have undertaken every review, made every cut and introduced every
new working practice, but they are seriously concerned about the lack
of information, the absence of a plan and the possibility of
outsourcing.
Justine
Greening:
We picked up from the hon. Lady’s party
an incredibly challenging set of public finances, which some people
would say are a complete disaster. A big black hole has been passed to
us, and we have to redress that. On public sector workers, one reason
why we introduced the pay freeze was precisely to protect jobs. We
wanted to make sure that we could improve the effectiveness and
efficiency of the welfare budget to take away some of the huge pressure
on departmental spending. Although we thought that we might need to go
beyond 20%, the average departmental spending cut is under 20%, while
the hon. Lady’s party had pencilled in cuts of 20%. The impact
of that can be seen in the
view of the OBR, which is now projecting that we will see fewer public
sector head count reductions than we would have
done.
We
are working hard to find a balance between protecting our front-line
services and ensuring that they are reformed and work better for
people—frankly, by giving people who work in front-line services
more freedom to get on with the job that they want to do and to provide
the service that they want to provide—and sorting out the
financial deficit, because if we do not do so, future funding for such
public services will be put more at risk, which is not what we want to
see.
Chris
Ruane (Vale of Clwyd) (Lab):
Some 48% of the workers in
Cardiff North, 45% in Clwyd West and 46% in the Vale of Clwyd work in
the public sector. What additional and specific help can the Treasury
give constituencies with large numbers of public sector workers, to
ensure that those workers are not just thrown on the scrap heap but are
given
employment?
Justine
Greening:
The hon. Gentleman sets out some of the
challenges we have been handed, such as communities that deserve better
than to have complete dependence on the public
sector.
Chris
Ruane:
Ask those
workers.
Justine
Greening:
What we need, if the hon. Gentleman will let me
answer his question, is to encourage the private sector and companies
to go into such areas. That is one of the reasons why we brought
forward a regional reduction in national insurance, which this time
last time week I was about to debate with a lot of Labour MPs who were
saying, “It shouldn’t be regional” or “We
shouldn’t target it”, and “It should be across the
board”, which would have meant that places such as Wales would
have had less of a
reduction.
We
also have a regional growth fund, which will help to stimulate local
growth. We are introducing reductions in corporation tax and, of
course, we are keen to help people. The hon. Gentleman talked about
those working in the public sector, but high levels of unemployment in
Wales were handed over to us. We need to get in place a work programme
that helps the people his party allowed to be out of work instead of
providing them with help to get back into the workplace. We want to
provide them with the support they need finally to get back into work.
His Government might have been happy to write them off over the past
decade, but we are
not.
Comprehensive Spending
Review
10.11
am
The
Secretary of State for Wales (Mrs Cheryl Gillan):
I beg to
move,
That
the Committee has considered the matter of the implications for Wales
of the Government’s comprehensive spending
review.
Before
I make my remarks, on behalf of the Committee I thank the Economic
Secretary, who has dealt charmingly with some rather churlish
behaviour. It is a sad day for Wales when the official Opposition say
that they would prefer not to have Ministers from other Departments to
inform their conversations and debates better. I feel particularly sad
for
Wales.
Kevin
Brennan (Cardiff West) (Lab):
I join the Secretary of
State in thanking the Economic Secretary for her
answers.
When
the Economic Secretary was answering questions, she specifically tied
the future of the Barnett formula to the result of the referendum next
March. If that is the Government’s position, can the Secretary
of State confirm it? If it is not, can she explain the
Government’s thinking on any link between the Barnett formula
and its review and the result of any referendum in
March?
Mrs
Gillan:
I thank the hon. Gentleman, who appears to be the
only honourable gentleman on the Opposition Benches. I hope that he
will check Hansard carefully; I believe that no such direct
linkage was made. However, he is well aware of the wording of the
coalition agreement, which says that we will look at a Calman-like
process for Wales following the outcome of the referendum that will be
held on 3
March.
I
hope that the shadow Secretary of State will apologise to the right
hon. Member for Torfaen (Paul Murphy), because the implication that I
was in some way hiding behind a Treasury Minister also insulted the
right hon. Gentleman, who invited the right hon. Member for East Ham
(Stephen Timms), then a Treasury Minister, to attend the Grand
Committee, which he did on 17 December 2008, and the right
hon. Member for Croydon North (Malcolm Wicks), then the Energy
Minister, who attended the Committee on 18 June 2008. The right hon.
Member for Torfaen did so precisely because we agreed, when I was
dealing with him, that the Committee could benefit a great deal from
having Ministers from other Departments assist us with
questions.
Paul
Murphy (Torfaen) (Lab)
rose—
Mrs
Gillan:
I give way to the right hon. Gentleman, because he
was always most courteous, and we agreed the arrangement between
us.
Paul
Murphy:
It is a good idea to have Ministers from other
Departments. When my right hon. Friends the Treasury and Energy
Ministers came before the Committee they did not engage in the kind of
appalling party political propaganda that we have had to listen to for
about 40
minutes.
Mrs
Gillan:
The right hon.
Gentleman—
Paul
Murphy:
You were not here. Go back to wherever you come
from.
Mrs
Gillan:
The right hon. Gentleman does himself a
disservice; I was paying him a compliment. The Chief Secretary to the
Treasury attended the Welsh Assembly Government Finance Committee on
the CSR because this Government are trying to engage constructively
with politicians of all denominations, in the interests of
Wales.
Paul
Murphy:
The Minister has insistently and persistently
refused to call this Committee on the question of constitutional
change, so how on earth can she say that she is engaging with us on the
issues?
Mrs
Gillan:
The right hon. Gentleman forgets that when we had
a major constitutional Bill in 2006, to change the constitution, the
Committee was not called by the then Secretary of
State.
I
will not take any lectures from the right hon. Gentleman. The Bill was
on the Floor of the House for more than six days, and a large amount of
that time was taken up by Welsh Members on the Labour Benches quite
rightly discussing the matters. The Under-Secretary of State for Wales,
my hon. Friend the Member for Clwyd West, was put on the Bill
specifically to address and discuss Welsh matters on the Floor of the
House. Also, as the right hon. Gentleman knows, I arranged a special
and unique meeting with the Minister taking the Bill through and with
my hon. Friend the Under-Secretary, for every single Welsh MP. An offer
was made at that meeting for any Member of Parliament on the right hon.
Gentleman’s side of the House to discuss the issues with the
Minister
directly.
Alun
Michael (Cardiff South and Penarth) (Lab/Co-op)
rose—
Mrs
Gillan:
I am going to make some
progress.
Alun
Michael:
Will the right hon. Lady give
way?
The
Chair:
Order. The Secretary of State has said that she
will not give way at this
stage.
Alun
Michael:
On a point of order, Mr Caton. In view of the
comments that the right hon. Lady has made, can it be noted that in the
past, Secretaries of State for Wales, of both parties, have organised
meetings of this Committee with courtesy and with discussion on both
sides, and that that approach has been breached by the right hon. Lady?
It is a
disgrace.
The
Chair:
That is not a point of
order.
Mrs
Gillan:
By holding this second Welsh Grand Committee
meeting, I have already doubled the record of previous Governments,
which held only one meeting in 2005 and only one in 2007. I will not
take lectures from the right hon. Gentleman about courtesy, after the
way in which the Committee has behaved, both last time and
today.
Having
had the advantage of directly questioning a Treasury Minister, I intend
to keep my remarks brief to allow maximum time for Members to
participate in the debate. At the last count, there were some 23
Members,
and if my mathematics are correct we have about 200 minutes,
so the shorter I keep my remarks the more opportunities right hon. and
hon. Members will have to make their points, in which we, as a
Government, are
interested.
As
we have just heard, the spending review sets out how the coalition
Government intend to carry out Britain’s unavoidable deficit
reduction plan. The spending review settlement for the Welsh Assembly
Government was determined by the Barnett formula in the usual way, in
exactly the same way as under the previous Government, using the
formula that the right hon. Member for Neath said had “served
Wales well”—just to remind him. However, because of the
decisions that we took to protect spending on health and schools in
England, Wales’s overall spending will be reduced by much less
than the average for non-protected
Departments.
That
represents a 7.5% reduction in the Welsh Assembly Government resource
budget, which is an average annual cut of less then 2%, and less than
the 3% year-on-year revenue reductions that the Welsh Assembly
Government had previously said they were planning
for.
Jonathan
Edwards (Carmarthen East and Dinefwr) (PC):
Does the
Secretary of State acknowledge that the Welsh settlement is far worse
than the ones for the other devolved Administrations due to the way in
which non-domestic rates are
calculated?
Mrs
Gillan:
No, not at all. That is a myth. It is a fair
settlement by any definition and we do not dictate from here how those
moneys are spent. It is for the Welsh Assembly Government to decide how
to manage their finances, reflecting their own policies and priorities,
which they did last month when they published their draft
budget.
Guto
Bebb (Aberconwy) (Con):
On the settlement for Wales, is
the Secretary of State aware that the Plaid Cymru economic spokesman
who beasted Jeremy Paxman on “Newsnight” stated that the
settlement awarded to Wales was better than what the Assembly had
planned for in early
2010?
Mrs
Gillan:
Everybody has got that YouTube moment on their
iPods. Much as I respect Plaid and its views, sometimes it does not get
its policies and its ducks in a row.
Devolution
has meant that we pass the money to the Welsh Assembly Government and
they make their own choices. In England, the coalition Government have
decided that total spending on the NHS will increase in real terms in
each year of this Parliament. The Welsh Assembly Government, however,
have chosen to freeze NHS spending in cash terms, which means a
real-terms decline of 7.6%. Because of those decisions taken by the
Labour and Plaid Cymru Assembly Government, Wales is now the only part
of the United Kingdom where health spending will not be protected. The
Government have undertaken to increase the schools budget every year of
the spending review in real terms, but that is not the decision of the
Welsh Assembly Government. In Wales, education will be cut by 7% in
real terms over the next three years. Those are, of course, devolved
matters for the Welsh Assembly Government to decide. I hope, however,
that the Welsh Assembly Government’s decisions
on where to allocate funding will not see standards of health care and
education fall behind in Wales. I am sure that we all share that
ambition.
Geraint
Davies (Swansea West) (Lab/Co-op):
Given what the right
hon. Lady has said, and given that 50,000 students have demonstrated
outside Parliament, does she support the Welsh Assembly’s
decision to cut the teaching grant by 35%, instead of by 80%, and its
decision to ensure that future Welsh students will be able to go to
university in Wales and England for the same amount as it costs now?
That will increase the productivity and economic outlook for Wales in
future.
Mrs
Gillan:
I am grateful to the hon. Gentleman for that
intervention, and I am sure that he supports what the Welsh Assembly
Government is doing. It is a devolved matter, for them to decide. They
will have to explain how they made those choices and ended up with
reductions in spending on health and on students’ fees. I am
sure that they will have good explanations and that the people of Wales
will understand that those are the priorities of the Welsh Assembly
Government. I am not some sort of viceroy—quite the reverse. I
will not dictate to them how they spend their money or how they make
those
choices.
Alun
Cairns (Vale of Glamorgan) (Con):
Does my right hon.
Friend share my concern that, as a result of yesterday’s
announcement, there is a risk that Welsh universities will become the
lowest funded universities in the whole of the United Kingdom? That
could lead to a second-class university system in Wales, compared with
the rest of the UK and
Europe.
Mrs
Gillan:
I very much hope that what my hon. Friend says is
not true, because I have seen the magnificent work that is done in our
universities, whether at UWIST, Cardiff university or Swansea
university and the fantastic work that is being done there in the
Institute of Life Science. He knows that I am second to none in my
admiration—
[
Interruption.
] No, I am second
to none in my admiration and there is no such thing as Labour
investment, which the hon. Member for Wrexham chunters about from the
Back Benches. It is taxpayers’ money that is invested or
allocated by a Government of whatever complexion. It is the Welsh
Assembly Government who have made those choices and it is up to them. I
believe that it was a Labour-Plaid coalition that made those
decisions.
Ian
Lucas (Wrexham) (Lab):
The Labour Government made choices
to invest in higher education and to develop the university sector,
both in Wales and in England. In contrast, the right hon. Lady’s
Government are cutting funding to universities and the teaching grant
by 80%. That is the level of commitment that the Tory-Lib Dem rag-bag
coalition gives to higher
education.
Mrs
Gillan:
I am not going to rehearse the debates in the
Chamber last night, and all the crude party political points that were
made. Needless to say, what we are doing is stabilising the finances of
this country because of the legacy of the previous Labour Government
and the—
The
Parliamentary Under-Secretary of State for Wales (Mr David
Jones):
Profligacy.
Mrs
Gillan:
Profligacy, as my hon. Friend
says.
The
Lord Commissioner of Her Majesty's Treasury (Mr Brooks
Newmark):
And
waste.
Mrs
Gillan:
And waste, as my other hon. Friend says. We have
to make tough choices. We are going to rebalance the economy and get it
back on
track
Several
hon. Members
rose
—
Mrs
Gillan:
I am going to make some
progress.
I
note that the budget on the economy and transport by the Welsh Assembly
Government will be cut by 21% over the next three years. I hope that
despite that, the Welsh Assembly Government will remain committed to
implementing their economic renewal programme and encouraging
investment, promoting Wales as a place to do business, developing the
skills base and encouraging innovation. They will have my support if
they continue to do
so.
Several
hon. Members
rose
—
Mrs
Gillan:
I have an embarrassment of riches here. I will
give way to the hon. Member for Dwyfor
Meirionnydd.
Mr
Elfyn Llwyd (Dwyfor Meirionnydd) (PC):
When the Minister
speaks of cuts in the transport expenditure, does she realise that the
failure to allocate money for the electrification of the
Bristol-to-Swansea line is extremely disappointing? It has been
rumoured that she is against it. What is her true
position?
Mrs
Gillan:
If I can ask the hon. Gentleman to wait a bit, I
will get to that later in my speech, which I would like to get through
on a timely basis. I reassure him that I strongly support the
electrification of the railway line down to Swansea. My position has
never been in doubt. However, he will have to wait a bit longer for any
announcement from the Department for
Transport.
Several
hon. Members
rose
—
Mrs
Gillan:
Settle down, boys.
Mr
David Hanson (Delyn) (Lab):
The right hon. Lady talks
about the manufacturing industry, but can she tell the Committee what
representations she made when a Labour Government commitment of
£60 million for the manufacturing of wind farms on a UK-wide
basis was changed in the Budget to £60 million for England only?
Did she make any representations to the Departments on behalf of Wales
when that grant, which is the same amount of money, was
changed?
Mrs
Gillan:
I speak to my colleagues in Cabinet and other
Ministers on a regular basis. I had a meeting specifically looking at
renewable sources of energy and funding. I was so interested in
ensuring that hon. Members
are fully informed about what has happened on energy relating to Wales
that I am pleased to announce that I have secured an opportunity for
the Minister of State, Department of Energy and Climate Change, my hon.
Friend the Member for Wealden (Charles Hendry) to address the Committee
in early February. I will let members of the Committee have the date as
soon as I have it so that there is good advance
warning.
Mr
Llwyd:
On a point of order, Mr Caton. The Secretary of
State obviously does not understand the process involved. The timings
on a Welsh Grand Committee are decided through the usual channels.
Every Whip of every party takes part and decides the dates and
subjects. It is not in the Secretary of State’s gift. She says
she is not a viceroy, but she is acting like
it.
The
Chair:
The point has been
made.
Mrs
Gillan:
Now Opposition Members are upset when arrangements
are made for a Welsh
Grand.
I
urge the hon. Member for Dwyfor Meirionnydd to keep his blood pressure
under control. I have not announced a date. I said potentially in early
February, and of course it would be subject to the usual channels. I
have no intention of imposing a date on the Committee, and I am just
announcing that I have secured an opportunity for the Minister of State
to come here so that we can have a debate on energy. The matter has
been raised by the right hon. Member for Delyn, and it is of great
importance. Many people have raised the matter with me, so I am
responding to requests. As there seem to have been issues over timing
or allowing the Committee to sit in any way, shape or form, I
announced, out of courtesy, that the Minister is willing to attend in
February. I hope that the usual channels will perform the usual polite
discussions on when the sitting can be
held.
The
tough circumstances we face meant that we have had to take a hard look
at some of the spending decisions that were planned. It is a Government
Minister’s responsibility to ensure that all Government
commitments are both affordable and achievable. While any decisions of
this nature, and on spending, are difficult, the Government has had the
courage to make sure that money is spent where it offers the best value
for the public
purse.
Nick
Smith (Blaenau Gwent) (Lab):
Will the Secretary of State
give way on
investment?
Mrs
Gillan:
I will not. I want to deal specifically with some
projects that were raised in the context of the CSR. We examined
closely the plans for the St Athan defence training centre. It will not
be going ahead in the form proposed by the previous Government, as it
became clear that the contractor could not deliver the project in an
affordable and commercially robust way within the time given. However,
let me assure the Committee, particularly my hon. Friend the Member for
Vale of Glamorgan, that it is not the end for St Athan. It remains an
attractive location for potential future training provision, and I am
working closely with the Secretary of State for Defence on the case for
a training base to be located there.
On the Severn
barrage, I know that the right hon. Member for Neath has had a thing
about it for a long time. In the current economic climate, we took the
view that the Severn barrage—proposed by the previous
Government, but unfunded, Members should note—could not go
ahead. It would have been irresponsible to do so given the economic and
environmental implications. My colleague, the Secretary of State for
Energy and Climate Change, believes that Wales has other viable, more
cost-effective low-carbon options, including a significant expansion in
wind power, which represent a better deal for industry and
consumers.
Mr
Peter Hain (Neath) (Lab):
As the Secretary of State knows,
the £20 billion to £30 billion cost of the Severn barrage
is privately funded. Consortiums have told me that they are more than
happy to fund it. Some 5% of Britain’s electricity could be
generated by the tidal power. It is a fantastic opportunity, which is
wasted.
Mrs
Gillan:
That is a myth. We do not intend to review Severn
tidal power before 2015. However, we have agreed that it would be
irresponsible to rule out such an important source of renewable energy
for ever. We are keeping an open mind in case circumstances change in
years to
come.
I
turn now to Wylfa, about which I have good news. I am
delighted that Mr Owen is chairing this afternoon’s
Committee—I give him an advance welcome to the
Chair—because I know that he will be delighted with the
announcement that the Government made about Wylfa. Not only has its
operational life been extended for another two years, but it has been
included on a short list of eight sites across the UK where new nuclear
power stations could be constructed. After the loss of Anglesey
Aluminium under the previous Government, this is finally some welcome
news for the economies of Anglesey and north Wales—and good news
for workers at
Wylfa.
We
have more good news for Wales, although one might not think so from the
way in which the Labour party sometimes behaves. We are proceeding with
other contracts that will deliver real, affordable benefits for Wales,
for example, the
A400M.
Owen
Smith (Pontypridd) (Lab):
We are pleased that Wylfa is on
the shortlist of eight sites. However, will the Secretary of
State explain why Wales—in particular, the port of Ynys
Môn—was not considered for some of the money that is
going to English ports to develop deep-water ports for wind
energy?
Mrs
Gillan:
First, economic development is devolved.
[Hon. Members: “Energy is not
devolved.”] Economic development money is devolved. There are
always discussions on the ports and I shall continue such discussions
on the future of ports right across Wales, including that of Anglesey.
The good news for
Wales—
Owen
Smith:
It is the money of the Secretary of State for
Energy and Climate
Change.
Mrs
Gillan:
It is not his money; it is taxpayers’
money.
Owen
Smith:
It is absolutely accurate, of course, to say that
economic development is devolved. However, the money to develop deep
sea ports for wind turbine construction comes from the Department of
Energy and Climate Change, which is not devolved. The Welsh ports are
best placed to benefit, given the Lundy and the Irish sea developments,
so they should have received a proportion of that money—we do
not understand why they did not. Will the Secretary of State
enlighten
us?
Mrs
Gillan:
I am sure that the hon. Gentleman will join me in
inviting the Minister to come here to explain. Inspiration has arrived
on funding
reports.
Chris
Ruane:
Will the Secretary of State give
way?
Mrs
Gillan:
Just sit down and let me finish.
[
Interruption.
]
The
Chair:
Order. Let the Secretary of State deal with one
intervention before the next one.
Mrs
Gillan:
What do I
need?
Chris
Ruane:
A governor-general’s
hat.
Mrs
Gillan:
On funding reports, I am reliably informed that
the Welsh Assembly Government received a Barnett consequential and
money will be disbursed under English regional funding.
[
Interruption.
] The hon. Member for Pontypridd
asked me a question and I have supplied him with an answer.
The good news
for Wales concerned the announcement of the order for the
A400M—the strategic tanker aircraft—and the £500
million that has gone into the Scout combat vehicles that will form a
vital part of the British armed forces’ future capabilities.
Their development is a further vote of confidence in the work of Airbus
in Flintshire and General Dynamics in
Gwent.
We
are also improving the rail infrastructure in the Cardiff to Barry
corridor, and improving the M4-M5 interchange between London and
Cardiff. Improved rail infrastructure and shorter journey times are
vital components for delivering a successful economic recovery in
Wales. As I have said to the hon. Member for Dwyfor Meirionnydd, I
remain fully supportive of rail electrification. Electric trains offer
lower carbon emissions than their diesel equivalents; they are cheaper
to buy, operate and maintain; they allow journey-time reductions; and
they certainly offer passengers a more comfortable ride.
As a first
step, we will electrify the Great Western main line from London to
Didcot by 2016. For services beyond that, and into Wales, we must work
with the Welsh Assembly Government to produce a joined-up business
case. My Department is holding meetings on the matter on almost a daily
basis, with the Department for Transport, the Welsh Assembly Government
and key stakeholders.
It is not
enough to electrify the main line to Wales—for Wales fully to
benefit from electrification, we need to work with the Welsh Assembly
Government to ensure that there are joined-up improvements to commuter
lines beyond Cardiff. I remind Committee that, under the previous
Government, not a single inch of line was electrified in
Wales.
Roger
Williams (Brecon and Radnorshire) (LD):
The right hon.
Lady will be aware that over the years—including the 13 years in
which the Labour party was in government—the journey time
between Cardiff and London Paddington increased. She may like to
reflect on that.
Mrs
Gillan:
The improvements concerning Didcot are already
reducing the time by 15 minutes. Instead of welcoming that
announcement, all we have heard is, “I want
it—and I want it now.” Unfortunately, government is not
that easy; we have to put concerted thought into every single spending
decision and we have undertake analysis to get the best possible value
for money.
Nick
Smith:
Will the Secretary of State give
way?
Mrs
Gillan:
No, I am reaching the end of my remarks
now.
On a UK
level, the latest growth figures fly in the face of most predictions
and are a vindication of the decisions that we took to cut £6.2
billion-worth of spending this year and of the measures that we
announced in the June Budget.
The economy
grew in the most recent quarter at its fastest third-quarter rate for a
decade, which underpinned confidence in our economy and in the
Government’s economic policies, so that we can look positively
to the future. The Office for Budget Responsibility forecast shows that
Britain’s economic recovery is on track and the Government are
on course to balance the books.
Jessica
Morden (Newport East) (Lab):
The Secretary of State has
not yet mentioned the Newport passport office. Will she update the
Committee on how she is getting on in fighting for the 270 threatened
jobs?
Mrs
Gillan:
That is not strictly on CSR, but I know the hon.
Lady is fighting hard for her constituents in Newport, along with her
colleagues. I can reassure her that I am continuing my discussions with
the Home Office and the Minister responsible, and I will be doing
everything I can to ensure that there is a positive outcome. As she
knows, we have already secured the front-of-house operation, so up to
45 jobs will remain in Newport. I was very pleased about that, and I
know that the hon. Lady welcomed the decision as well. I assure her
that I will continue to press the case.
The economy
is growing. More jobs are being created. The deficit is falling. The
tough decisions taken by this Government have taken Britain out of the
financial danger zone. The Office for Budget Responsibility’s
forecasts show that we are dealing decisively with the nation’s
debts, and show the world that Britain, and Wales, can live within its
means. If we listened to Labour, our debt would be almost £100
billion higher by the end of the Parliament and we would be
paying £4 billion more in debt interest alone by the
next election. Faced with the worst economic inheritance in modern
history, we have made tough choices and brought our country back from
the brink of bankruptcy. We have secured a fair settlement for Wales,
and now we in government want to work with the Welsh Assembly
Government to build a stronger, more prosperous
Wales.
10.41
am
Mr
Peter Hain (Neath) (Lab):
I welcome you to the Chair, Mr
Caton. May I deal immediately with the point that Secretary of State
made in answer to an extraordinary question from the hon. Member for
Brecon and Radnorshire about rail? Any of us who used the rail system
when the Labour Government came to power know that it is now much more
punctual and carries many more passengers as a result of the Labour
Government’s multi-billion investment—investment that
will not happen in future. [
Interruption.
] No, I
will not give
way—
The
Chair:
Order. The speaker is not giving way. Peter
Hain.
Mr
Hain:
I welcome the news that the Prince of Wales is soon
to become a father-in-law and that the happy couple intend to live in
north Wales, where I know they will receive a warm welcome, not least
from their new MP, my hon. Friend the Member for Ynys Môn, who
is chairing the Committee this
afternoon.
May
I thank the Secretary of State for allowing a meeting of the Welsh
Grand Committee? How wrong we all were to think she is frightened of
Welsh Grand meetings—she clearly loves them. She will have
noticed in her inbox the letter to the Prime Minister by three former
Secretaries of State for Wales—my right hon. Friends the Members
for Cardiff South and Penarth and for Torfaen, and myself. In it we
argue that the current occupants of the Wales Office are presiding over
a period when relations between our countries, and their now separate
Administrations, are at rock-bottom. We express our concern to the
Prime Minister that his Administration appear ignorant of, or
indifferent to, the needs of
Wales.
The
Secretary of State and the Economic Secretary today have shown a
curious combination of Welsh wizardry, Irish folklore and Greek
mythology on the economy. The Secretary of State has been telling tall
stories about the British economy and Labour’s record in
office—particularly in terms of the impact on Wales. The
Government keep pointing their finger at Ireland and Greece and
muttering, “There but for the grace of God, and the genius of
George Osborne, goes the United Kingdom”. The truth is that
Britain’s position is as different from Ireland’s and
Greece’s as chalk is from cheese. The much lower yields on UK
Government bonds since the credit crunch bear eloquent testimony to
that—a point that the Economic Secretary was clearly ignorant
of. Right the way through this crisis, UK Government bonds have been
much, much lower than those of other countries and have been on a
downward trend.
Jonathan
Evans (Cardiff North) (Con):
Does the right hon. Gentleman
deny that Standard & Poor’s has put this country on the
watch list?
Mr
Hain:
One credit rating agency gave a signal to that
effect, but the others did not. When one looks at the health of the
British economy when we left office, which I will come on to in a
moment, one sees that the Secretary of State and the Economic Secretary
are clearly peddling myths. They love repeating the mantra
about pulling Britain back from the brink of bankruptcy. It is a nice
line, but unfortunately it is not true. If it had been true, the yields
on UK Government bonds would have been sky high because of the risk of
default. In fact, they have been remarkably low ever since the global
financial crisis erupted in 2008, reaching just 4.1% at the beginning
of this year, under a Labour
Government.
Guto
Bebb:
Is the right hon. Gentleman aware that long-term
interest rates in the UK have fallen by almost 1% since the election,
which is in complete contrast with the rest of the eurozone and
reflects the confidence of the markets in the policies of this
Government?
Mr
Hain:
That is simply not the case. As I will explain in
due course, if we look at the picture since 2008 and the picture
leading up to the global financial crisis, we see that the Labour
Government rescued the country from the prospect of dramatic economic
collapse.
Several
hon. Members
rose
—
Mr
Hain:
I will give way in a few moments. As we have heard
this morning, Ministers claim that the economic crisis was caused by
the Labour Government through reckless spending and excessive
borrowing, but they can back up neither that claim, nor the
coalition’s claim that there is no alternative to the path they
have embarked upon. It is time to tackle those myths head-on. Let us
start by looking at the picture before the global financial crisis hit,
starting with debt. International Monetary Fund figures show that in
2007 British Government debt as a proportion of GDP was below that of
France, Germany, the USA, Japan and even Switzerland. In 2013 it is
still forecast to be below that of France, the USA and Japan. There was
no decade of debt. That is a Tory myth. In fact, the Labour Government
had been paying down debt; public sector net debt fell from 42%
of GDP in 1996-97, left by the Conservatives, to 36% in 2006-07, before
the global financial crisis. That 6% reduction is worth around
£90
billion.
Alun
Cairns:
Will the right hon. Gentleman give
way?
Mr
Hain:
I will make my argument and then happily give way.
By bringing down Government debt, we effectively saved the taxpayer
around £3 billion in annual interest payments. We did fix the
roof when the sun was shining. On Government spending, coalition
Ministers like to pretend that Labour was the last of the big spenders,
but in 2007 UK Government spending as a proportion of GDP was lower
than that of France, Germany, the Netherlands, Norway and Sweden, and
our non-age-related social spending as a proportion of GDP was lower
than the European Union average. Our education spending was almost
identical to the OECD average of 5.7%. Our NHS spending in 2008 was
7.2% of GDP, compared with 8.2% in Germany and 8.1% in France. So much
for the overspending myth, for myth it
is.
Simon
Hart (Carmarthen West and South Pembrokeshire) (Con):
The
right hon. Gentleman will have to forgive me; I am a Welsh Grand
Committee virgin, having not attended the previous sitting. If the
picture is as rosy as he paints it, why was Labour’s main
election result so catastrophically bad?
Mr
Hain:
There are all sorts of reasons for that, and they
are nothing to do with the topic the Committee is debating. The
previous Government did not behave like a pools winner and spend and
spend. If we had, the Conservatives would never have accepted out
spending plans—but they did. The point is that until November
2008, they undertook to abide by Labour’s public spending plans
up to 2010. They sometimes demanded that we spend more—but the
Liberal Democrats demanded that we spend more all the time. This was a
Government who were supposed to be reckless; if we were so reckless,
why did the Conservative party back our spending
plans?
Alun
Cairns:
This comes back to the core of the argument about
debt. Will the right hon. Gentleman confirm that as Labour went up in
the polls leading to the last general election, spreads on bonds
widened; and that as the Conservative party increased in the polls,
spreads on bonds narrowed? That demonstrates the confidence of the
markets in the incoming Conservative
Government.
Mr
Hain:
I have already been challenged on the fact that
there was a low rate on UK Government bonds. The international
investment community had confidence in the strategy that we were
pursuing.
Alun
Cairns:
Will the right hon. Gentleman give
way?
Mr
Hain:
I want to make progress, or no one else will be able
to speak.
I turn to
annual Government borrowing. Britain was not a particularly big
borrower before the global financial crisis. In relation to GDP,
Government borrowing in 2007-08, just before the crisis, was far lower
than during 1996-97, the last year when the Conservatives were in
office and the present Secretary of State for Justice was at the
Treasury; it was 2.4%, compared with the 3.4% that we inherited from
the Conservatives. Labour’s borrowing helped to pay for much
higher level of public investment; in fact it was four times as
high.
Before the
global credit crunch, Labour borrowed mainly to invest, whereas in
their last year in office the Tories borrowed mainly to meet the weekly
wages and benefits bills. In 1996-97, 80% of the Conservative
Government’s borrowing went to pay the running costs of public
services, not to finance new schools and hospitals or to develop
Britain’s road and rail networks. That is the background to the
comprehensive spending review that we are debating
today.
Mr
David Jones:
Will the right hon. Gentleman give
way?
Mr
Hain:
I shall give way in due course.
That was
then, but what about now? Did we lose control of spending and borrowing
in response to the credit crunch? The short answer is certainly not. We
boosted public spending to offset the collapse in private spending, as
firms and households cut back on business investment and consumer
spending.
Mr
David Jones:
I thank the right hon. Gentleman for giving
way, and I am grateful to him for the interesting alternative history
lesson that he is giving us. Would he remind the Committee which was
the first G8 country to go into recession and which was the last to
come out of
it?
Mr
Hain:
We were, as the hon. Gentleman know, hit by the
large—[
Interruption.
] I shall answer the
question. We had a particularly large financial sector, and as a result
of the global banking crisis we were harder hit. Everybody understands
that. Even GCSE economic students understand that that is why we were
badly affected. The extra public spending that I was describing,
coupled with the loss of tax revenue as output profits and employment
fell, led to much higher Government borrowing. Of course it did. It is
that extra borrowing—that much maligned deficit—that has
kept the economy afloat in the face of the worst downturn since the
1930s.
Without the
borrowing that is so strongly criticised by the Conservatives and the
Liberal Democrats, the financial crisis could have become a financial
collapse and the recession could have turned into a depression. The IMF
has acknowledged that the worldwide increase in Government borrowing
since the 2008 credit crunch staved off an economic catastrophe. It
certainly did, as a result of our then Government’s
actions.
Geraint
Davies:
Does my right hon. Friend agree that the deficit
was the price paid to avoid a massive depression, a price that the
present Government would not pay, and that the way to get that deficit
down is through a combination of focusing on jobs and growth,
progressive taxation and savings over a longer period, and not throwing
nearly 500,000 people from the public sector onto the scrap heap,
alongside another million from the private sector? It is throwing
people into poverty. We do not require an unfair and unnecessary return
to the failed policies of the past.
The
Chair:
Order. That intervention is too
long.
Mr
Hain:
It may have been too long, Mr Caton, but it was very
good.
My
hon. Friend is absolutely right. As I was saying, the Conservatives and
the Liberal Democrats maintain that it was Government spending that
created this crisis. The crisis did not originate in the British public
sector. It stemmed from irresponsible lending by financial institutions
right across the world. When their loans began to go bad, they realised
that by slicing and dicing the mortgage-backed
securities—
Mr
Newmark:
Where was the
regulator?
Mr
Hain:
I shall come on to that point. And by playing a
massive game of financial jiggery-pokery, the financial institutions
had made it impossible to say with confidence who was solvent, who was
insolvent and who was simply short of liquidity. Their reaction was to
conserve cash, refuse to lend—even overnight—and thereby
threaten a seizure in the world financial system. When banks stop
lending, firms and consumers stop spending, throwing jobs into jeopardy
everywhere.
It is a fair
question—the point that was muttered from a sedentary position
is in that direction—to ask where the regulatory bodies were
while all that was going on. Actually, the Conservatives are demanding
less regulation, even given the historic judgment that there was
inadequate regulation before. But it is not fair to claim that the
crisis was due to reckless spending by Governments and excessive public
borrowing, certainly not in the United Kingdom and certainly not by our
Labour Government.
Jonathan
Evans:
As the right hon. Gentleman is presenting this
image of a responsible Government, perhaps he will tell us what
happened between that historic low that he mentioned of 36% public
spending as a proportion of GDP and 2007? What happened to that
proportion?
Mr
Hain:
I am coming to all of that, but I think it is
important for this Welsh Grand Committee to have a serious discussion
about the origins of the comprehensive spending review, because a
series of big lies and myths have been peddled in relation to the
background of this CSR.
Chris
Evans (Islwyn) (Lab/Co-op):
May I ask my right hon.
Friend’s advice? If we had been so bad at managing the economy
as the Conservatives and Liberal Democrats say we were, why did the
then shadow Chancellor say that he would follow our spending plans for
the first two years in Government?
Mr
Hain:
My hon. Friend makes a very telling point. If we
were the reckless, irresponsible Government that the Conservatives and
the Liberal Democrats are now maintaining that we were, why did they
say that they would carry on with our spending plans before the
financial crisis? He is absolutely right to make that
point.
Hywel
Williams (Arfon) (PC):
On the point about regulation, is
the right hon. Gentleman aware that the current Chancellor, in his
article that praised the Irish economy, said that one of his complaints
about the UK was that, in contrast to Ireland, the UK had not set the
markets free? That shows the attitude of the Government when they were
in Opposition. They wanted less regulation; not better regulation, but
less regulation.
Mr
Hain:
The hon. Gentleman is absolutely right. Indeed, he
gives me the opportunity to quote the Chancellor, who said in
2006:
“Ireland
stands as a shining example of the art of the possible in long-term
economic
policy-making.”
So
much for that particular myth.
Since the
financial crisis, UK Government spending as a share of GDP has risen by
more than 5%. That deals in part with the point that the hon. Member
for Cardiff North raised. Much of that extra spending was automatic, as
firms cut back, unemployment rose and revenues decreased. Some of
it—less than 2% of GDP—was discretionary and temporary in
the form of the 2009 fiscal stimulus, which the Labour Government
introduced when the economy was at its weakest. Some of it was public
sector capital investment programmes that we
brought forward from future years. We raised net public investment from
£27 billion in 2006-07 to £49 billion in 2009-10, which
was higher than in any other year in the past four decades, to ensure
that we strengthened the economy when the private sector was at its
weakest.
Ian
Lucas:
My right hon. Friend is making a powerful and
important case. Is it not right that the consequence of the fiscal
stimulus was that we maintained relatively high levels of employment,
unlike the position in the ’80s and ’90s, when the
Conservative party presided over unemployment rates that were more than
1 million higher than those that existed in the worst economic crisis
since 1929? Tory Governments always mean more unemployment, which is
what Wales will
get.
Mr
Hain:
I could not agree
more.
Alun
Cairns:
Will the right hon. Gentleman give
way?
Mr
Hain:
I want to finish my argument about why public
spending rose. Some of the increase was deliberate, but by far the
biggest factor was the direct cost of Government support for the UK
financial sector. About £90 billion—way more than half
the amount of the deficit—was spent up to June this year on
recapitalising Britain’s banks, without which everyone’s
savings would have disappeared and the entire banking system would have
collapsed. That is how Labour stopped a slide into slump and how we
promoted recovery from
recession.
Borrowing
was certainly not out of control. The Office for Budget Responsibility
reckoned that borrowing last year, in 2009-10, would come out more than
£10 billion lower than we had forecast when in
government, and £8 billion lower in the current year.
Unemployment has also stayed lower than was forecast, and the economy
had started to grow again by the end of last year—recovery was
fragile but real in the run-up to the general election, as a result of
our Government’s spending and investment
policies.
Alun
Cairns:
Will the right hon. Gentleman give
way?
Mr
Hain:
Not
yet.
Government
borrowing must, without doubt, be brought down and public sector debt
reduced as a proportion of GDP; otherwise, future Governments might not
be able to fight any future economic shocks of the kind that we are
still recovering from. Labour had planned to halve the public sector
annual deficit by 2013-14, which is in accord with the June 2010 G20
Toronto declaration. The Office for Budget Responsibility has confirmed
that, under Labour’s plans, borrowing would have been more than
halved by
2013.
The
coalition, however, has adopted a far riskier strategy, as seen in the
comprehensive spending review. It plans to cut the UK fiscal deficit by
much more than was required by the Toronto accord—much more. The
UK fiscal tightening plan for next year, 2011, is twice as fast as that
planned by the USA and four times as fast as Germany and Japan. Why the
rush?
IMF
figures show that the UK’s gross financing needs as a proportion
of GDP this year and next year are below those of Japan, the United
States of America, France, Canada and many other comparable countries.
The alarm bells are not ringing, so why risk derailing
the recovery by squeezing the economy at the very moment it is beginning
to grow again? The IMF figures also show that, in the next three years,
the UK plans to make about two thirds of the fiscal adjustment that is
required in the coming 10 years for the UK to be on target to reduce
the public sector debt to 60% of GDP by 2030. Again, why the
rush?
The
coalition’s plans could seriously undercut growth. The IMF
estimates that the cost of front-loading the squeeze on the UK fiscal
deficit is a 0.3% reduction in our growth rate next year. That cut in
growth rate might be seen by the coalition as valuable insurance
against the risk of a costly loss of confidence in Britain’s
public finances, but in the absence of any sign of such weakening
confidence, it all smacks of giving in to one’s worst
imaginings.
Mr
David Jones:
The right hon. Gentleman mentioned the danger
of a lack of growth, but this week the Office for Budget Responsibility
estimated real GDP growth of 1.8% this year, 2.1% next year, 2.6% the
year after, and then 2.9%, 2.8% and 2.7%. Does he doubt the
OBR?
Mr
Hain:
The OBR also said, in paragraph 1.3, that the
recovery from this recession will be slower and more sluggish than from
those of the 1970s, 1980s and 1990s, because of the Government’s
mistaken
policies.
The
hon. Gentleman must know that such growth as there is in the pipeline
is as a result of the action that we took as a Government. He knows
that economic indices on employment and growth take about a year to
work through the system. As a result of the action that we took, growth
has been stronger than forecast in this last
year.
What
is real is that the OECD has slashed its forecast for UK Government
growth next year from 2.5% to 1.7%. The latest CBI industrial trends
survey suggests that manufacturing expectations have collapsed. The
Office for National Statistics’ retail sales figures show that
households are reining back on spending. October saw a welcome fall in
the unemployment rate in Wales, but the Institute of Directors has
warned that such figures may give a false sense of security. It expects
the UK labour market to weaken in 2011. There is a difference between a
squeeze and a straitjacket. Plenty of experts—not just the
Institute for Fiscal Studies—warn that the Chancellor may have
gone too far, that his constraints on expansion are too tight and that
he may need to ease the fiscal squeeze. In short, he may need a plan
B.
The latest
figures for GDP growth show a fallback from the second quarter’s
results. The danger is that the economic recovery may lose momentum and
that the Chancellor’s measures are damaging what might be called
the economy’s bounceback
ability.
Ian
Lucas:
Is it not the case that this Government have so
little to say about growth that they have put back their White Paper on
growth until next year? They have nothing to say in one of the most
important areas of reducing our fiscal
deficit.
Mr
Hain:
I agree with my hon. Friend. Growth could stall in
the new year, and slower growth means few jobs. Bank of England
projections already point to a substantial amount of slack remaining in
the economy in three years’
time. This week’s report from the Office for Budget
Responsibility still expects hundreds of thousands of public sector
jobs to be lost as a consequence of the spending
cuts.
Alun
Cairns:
I am grateful to the right hon. Gentleman for
finally giving way. Specifically on this point about job creation, and
in reaction to the comments that were made by the hon. Member for
Wrexham, does he not recognise that every Labour Government have left
office with unemployment higher than when they
entered?
Mr
Hain:
Before this global financial crisis, there were 3
million more jobs in the British economy than when we took over from
the Conservatives. Employment in Wales was at a record high; there were
more than 140,000 extra jobs.
I was talking
about public sector jobs being lost, but they will be more than matched
by private sector job losses, as PricewaterhouseCoopers has forecast.
Some 60,000 of those job losses are likely to be in Wales. The
Chartered Institute of Personnel and Development reckons that Britain
could lose more than 1.6 million jobs across the country by 2015-16, a
large number of which will come from Wales.
More than 1
million women are now unemployed, and the number of people working
part-time because they could not find full-time work has reached a
record 1.15 million in October, up by
67,000.
Mrs
Gillan:
I am grateful to the right hon. Gentleman for
giving way. First, let me correct something. We have already launched
“The path to strong, sustainable and balanced
growth”—it was launched by the Chancellor and the
Business Secretary on 29 November—and it will involve a complex
body of work. I am surprised that the right hon. Gentleman has not
welcomed some of the statements by the OBR, not least that general
Government employment is expected to fall by 330,000 over the next four
years, which is 160,000 fewer than the 490,000 that was forecast in
June, so we are moving in the right direction. The OBR central forecast
was that the Government will meet its fiscal mandate to eliminate the
structural current budget deficit one year early, which means that
taxpayers’ money will be spent not on interest on debt to
foreign lenders but on this country and the people in
Wales.
Mr
Hain:
The Secretary of State did not mention in the
statement that most of the projected fall in unemployment and job
losses is a result of temporary stock building and construction
investment, which the Labour Government introduced with the big
investment that I mentioned and which is now flowing
through.
For
hundreds of thousands of public sector workers, the front line has
become the firing line. While City bankers pocket huge bonuses, all
that public sector workers can look forward to is a P45 instead of a
pay
packet.
Guto
Bebb:
I thank the right hon. Gentleman for giving way; it
is appreciated. He will be aware that the report yesterday announced
that likely public sector job
losses had fallen from 490,000 to about 330,000. Even in a Welsh
context, that means a reduction from about 28,000 predicted losses to
about 18,000, yet we have not heard a word of appreciation today for
the fact that 10,000 fewer people in Wales will lose their jobs.
I wonder
why.
Mr
Hain:
I do not think that any Member—certainly not
any responsible Welsh constituency Member—should applaud
anybody’s job loss. The fact that tens of thousands of workers
in Wales will lose their jobs—not just in the public sector but,
as PricewaterhouseCoopers says, in the private sector, because the
private sector in Wales depends disproportionately on the large public
sector—means that thousands of jobs will be lost in Wales as a
result of this Government’s
policies.
Jonathan
Evans:
Will the right hon. Gentleman give
way?
Mr
Hain:
I want to make some progress, because others need to
speak.
This
Government’s actions have hit Wales harder than anywhere else.
The comprehensive spending review was a reckless gamble. Families,
workers and businesses in Wales are worried stiff about their future.
Nothing can disguise the savage cuts inflicted on the Welsh budget, on
top of closing the passport office, cutting the St. Athan defence
training college—which, by the way, would have saved the
Government money—abandoning the Severn barrage and kicking rail
electrification to Swansea into the long
grass.
While
the Chancellor was still on his feet delivering the CSR, part of it was
already being judicially reviewed. There are all sorts of issues with
the S4C Authority, but we support S4C in seeking a judicial review of
the Government’s decision about its
future.
Several
hon. Members
rose
—
Mr
Hain:
I am going to make some progress. The Government
have handled the whole issue badly, showing arrogance and contempt for
Wales. No prior consultation was held with the Welsh Assembly
Government or S4C.
[
Interruption.
]
The
Chair:
Order. Mr Hain has made it clear that he will not
give way at this
stage.
Mr
David Jones:
On a point of order, Mr Caton. I am sure that
the right hon. Gentleman would not wish to mislead the Committee, but
he said a moment ago that S4C is judicially reviewing a decision in the
CSR. He knows that no judicial review is going on. Will he apologise
and correct his
error?
The
Chair:
That is not a point of
order.
Mr
Hain:
What I said, Mr Caton, was that we supported S4C in
launching its judicial review of the Government’s decision. We
supported it in launching its judicial review because, as I am about to
say—[
Interruption.
] At the time, S4C
launched a judicial review. [Hon. Members:
“No.”] The question that I have to ask is this: when the
Secretary of State for Culture, Media and Sport made that decision from
London in a high-handed, arrogant way, where was the Secretary of State
for Wales?
Nick
Smith:
Will the right hon. Gentleman give way?
Mr
Hain:
No, I am not going to take any more interventions. I
said that I wanted to make a bit of progress, and I am going to make a
bit of
progress.
Small
businesses in Wales, particularly those in the creative industries, are
understandably anxious about the future of S4C and what the decision
means for them and the jobs involved. In addition, cuts to benefit
levels and eligibility will be introduced under the radar, in a
vindictive and pernicious attack on Wales’s most vulnerable
communities.
Nick
Smith:
On that point, does my right hon. Friend agree that
it is not justifiable that housing benefit for the long-term unemployed
will be cut by 10% should they be unemployed for a year? Is that not
disgraceful, absolutely wrong and not at all
progressive?
Mr
Hain:
Indeed. My hon. Friend is right: it is a
reactionary, pernicious policy, and it will affect all our constituents
very badly indeed.
Because Wales
relies more on public sector jobs, the savage cuts will damage Wales
more than any other part of Britain. There are already far fewer
vacancies than there are unemployed people looking for work. For every
job vacancy five people are unemployed. The situation will get worse as
the cuts hit home, with Ministers once again telling the unemployed to
get on their bikes and search for a job. How
contemptuous.
Jonathan
Edwards (Carmarthen East and Dinefwr) (PC):
Does the right
hon. Gentleman think it was ironic that when the Secretary of State for
Work and Pensions was in Abertillery calling on people to get on a bus
to get a job, he turned up in a
Jaguar?
Mrs
Gillan:
It was his Jaguar; I inherited it from
him.
Mr
Hain:
I was very happy to give the right hon. Lady a
temporary loan of my Jaguar, but not while she was telling everyone
else to get on their
bikes.
In
view of Ministers’ enthusiasm for everyone to cycle, we should
do well in the 2012 Olympic cycling event. The unemployed know that as
in the Tour de France the pursuit pack may be crowded but at the end of
the race there is only one yellow jersey. Unless the economy recovers
from recession and growth picks up speed, their search for a job will
remain a pointless quest. Ministers say that we are all in this
together. They conjure up an image of the British economy as if it were
the Titanic holed below the waterline by an iceberg of Government
borrowing that Labour carelessly parked dead ahead of the ship of
state. As I have made clear, in demolishing all of that big lie and all
those myths, none of that stands up at all.
The
Government also, through the comprehensive spending review, have
students in their sights. Already the £30 a week education
maintenance allowance for 16 to 19-year-olds at school and sixth-form
or further education colleges is to go; except in Wales, where, to
their great credit, Labour Ministers are keeping it. Average student
debt in Wales is already more than £6,400 a year. Throughout
Britain students starting at
university this year are forecast to finish their studies with an
average debt of £25,000 hanging round their necks, before any
increase in fees arising from the Government’ s decisions. That
is nearly three times today’s average household debt, excluding
mortgages, in the United Kingdom. On 9 October
The Daily Telegraph
reported fears that under the Tory-Lib Dem policies the cost of a
three-year degree and its associated living expenses could reach
£80,000.
Thankfully,
in Wales the Labour-led Assembly Government yesterday announced that
Welsh-domiciled students will not have to pay those extra fees. The
cost will be met by the Assembly Government. Variable progressive rates
of interest will be charged, depending on income. That is a fair way to
fund higher education. The Government could learn a thing or two from
Labour Welsh Assembly Ministers.
Alun
Cairns:
Will the right hon. Gentleman give
way?
Mr
Hain:
No, I am not going to give way. Despite massive cuts
in the Welsh Budget—[
Interruption.
] The
Secretary of State is muttering about cuts in the Welsh
Assembly’s budget; she is responsible for cuts in its
budget.
Mrs
Gillan:
I am not responsible for cuts in the Welsh
Assembly budget. The Welsh Assembly Government have decided that their
priority will be to put money into student fees in Wales, which will
result in cuts in the health, education, economic and transport
budgets. The right hon. Gentleman should read the Welsh Assembly
Government’s budget; it is their
choice.
Mr
Hain:
I cannot believe this nonsense. The right hon. Lady
and the Government are cutting the Welsh Assembly’s budget by
£1.8 billion; the Welsh Assembly Government are not doing it
voluntarily. She and the Conservative-Liberal Democrat Government are
cutting it. Despite those massive cuts to the Welsh budget the Tories
in the Welsh Assembly have the audacity to suggest that ring-fencing
the health budget in Wales is affordable.
On Tuesday 2
November during First Minister’s questions, Nick Bourne, the
Welsh Conservative leader, talked about how the UK Government would
safeguard the NHS budget in England, and demanded that we should do the
same in Wales. The Tories in Wales have said that to pay for
that—I wonder whether the Secretary of State agrees—of
course they would be happy to cut the schools budget by more than 20%.
That would create chaos in the education system in Wales. Schools would
shut overnight. This is an unrealistic, irresponsible and unaffordable
spending commitment by the Tories in Wales, and the Secretary of State
should condemn, not support
it.
The
Government say that we are all in this together, but some are being
gripped tighter than others by the Chancellor’s python policy.
Families in Wales are feeling the pinch more than most, as Welsh
household incomes are more than 10% below the UK average. Tens of
thousands of working Welsh families on low-to-middle incomes face a
triple whammy. What they gain from a higher income tax allowance they
more than lose through cuts in tax credits, child care support and
benefit
entitlements. Their pay is being overtaken by rises in the cost of
living. They are the squeezed middle and they are hurting. Many of them
are struggling to make ends meet. Small wonder that the latest figures
show a sharp downturn in household spending.
I notice that
the Prime Minister wants to build a happiness index to keep our spirits
up during the tough times that lie ahead. Devotees of the songs of Ken
Dodd may remember that his string of hits began with
“Happiness”, but was followed by “Tears”
and ended with “Brokenhearted”—a fitting epitaph,
I fear, for the Government’s disastrous and savage public
spending cuts that will damage Wales so
badly.
11.21
am
David
T. C. Davies:
The shadow Secretary of State began his
little oration by asking about bond yields on UK gilts. It is worth
reminding him of a headline that was in The
Sunday Times
business supplement just before the election, which said that Britain
was not to lose its triple A rating yet. The article went on to explain
that the reason why yields remained low was because all the rating
agencies assumed that no matter who won the election, the new
Government would take drastic steps to cut the budget deficit. That was
the assumption, and the agencies openly said that they did not expect
any political party to spell out exactly what it was going to do before
the election. That is why confidence was
maintained.
There
was also the fact that it was quite clear that in the rest of western
Europe, and across much of the western world, no Government were
willing to take similar steps. Of course, much of western Europe was
already locked into the euro. It is now obvious to all of us the
problems that that caused—the idea of trying to lock so many
different types of economies into one single interest rate when
clearly, economies such as Ireland’s needed much higher rates.
However, the rates were kept artificially low by the Germans. Of
course, Opposition Members were huge enthusiasts. I believe that the
shadow Secretary of State is a huge enthusiast for the euro. Had we
made the calamitous mistake of joining the euro, we would be facing
exactly the same situation as Ireland, possibly Portugal and even Spain
may face shortly.
That is the
answer to the question that the former Secretary of State for Wales
asked. That is the reason why bond yields continue to remain low, and
will continue to do so because Britain will maintain its triple A-rated
status. It is important that we do so, because across the rest of the
world, many sovereign investment and pension funds will only—and
indeed can only—invest in countries and organisations with a
triple A-rated status. If we lose that status, even if we are
downgraded in a small way, there will immediately be pressure on all
sorts of organisations to sell UK bonds. The result would be higher
interest rates, which would immediately feed into the national economy,
meaning higher interest rates for everyone.
Geraint
Davies:
Does the hon. Gentleman accept that if 1 million
more people are on the dole, it would cost the country something in the
order of £6 billion a year, increase debt and bring about the
problems that we had in the previous Tory Government under John Major,
when debt was rising because of incompetent policies and
cuts?
David
T. C. Davies:
Interest rates that are rising significantly
will have a significant impact on the economy, and we want to ensure
that rates are low.
Despite what
we have just heard, Britain went into the election with a debt of
£1 trillion. The previous Government started with a debt of
£350 billion, which has gone up to £650 billion before
2008, before any collapse of the banks. The Government then spent
another £300 billion trying to shore up their position for the
next general election. The Opposition talk about the banks, but the
banks had only £50 billion; they may get more, and we may get
some back, but they physically had £50 billion. I accept that
that was a lot of money, but it is not a great percentage of
£950 billion, which is what the debt is today. What happened to
the other £900 billion? The former Secretary of State for Wales
says that it was invested, but I believe that much of it was wasted, as
we certainly did not see an improvement in public
services.
11.25
am
The
Chair adjourned the Committee without Question put (Standing Order No.
88).