Session 2010-11
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General Committee Debates
Welsh Grand Committee Debates

Comprehensive Spending Review (Implications for Wales)

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)  

Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury) 

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Welsh Grand Committee 

Wednesday 1 December 2010  


[Albert Owen in the Chair] 

Comprehensive Spending Review 

2.30 pm 

Question again proposed,  

That the Committee has considered the implications for Wales of the Government’s comprehensive spending review. 

The Chair:  Before I call Mr David Davies, I remind Members of the time element. Although I cannot impose time restrictions, the briefer people are, the more Members I will be able to call. 

David T. C. Davies (Monmouth) (Con):  I shall keep that very much in mind, Mr Owen. I am quite missing the shadow Secretary of State for Wales, because for all his many faults he has a similar effect on me as reading the Daily M ail in the morning does, in that as soon as I have heard him speak I want to get up and do likewise, at great length and with great passion. But as with so many other things, when one starts off with great passion and is cut off halfway through, it is hard to maintain the same level of enthusiasm. [ Laughter. ] I feel the same about sports; I do not know what right hon. and hon. Members are laughing at. 

I came back to the Committee Room early, and I amused myself with a few mathematical calculations. On my little piece of paper, I drew a depiction of 1 cm, and I thought, “If that centimetre equals £1 million, what would equal £1 billion?” I did the maths, and found out that it would be 10 metres, so a graph showing £1 billion would stretch halfway down the room. To properly show £160 billion, which is the deficit that the previous Government left us, we would need a graph stretching back to Waterloo station, and if we wanted to show the £1 trillion debt, the graph would stretch to somewhere to the west of Hammersmith bridge. That all goes to show that the previous Government left us with a mighty problem. 

The shadow Secretary of State for Wales made a load of comparisons. He talked about the bond market, but ignored the fact that that market was clearly reacting to the presumption that any Government formed after the election would cut spending in this country. He made some comparison with Japan, but Japan is not a very good country for anyone to compare themselves with. It has had the lost decade, with some of the worst debt of any country and a huge economic collapse; yet it was mentioned twice. I suppose that it is an improvement on Rwanda, with which the right hon. Gentleman once compared Wales. 

The right hon. Gentleman kept making the point, in various ways, that debt as a percentage of gross domestic product was not that great. I hear that phrase a lot, and I do not understand it. The reality is that if a country’s spending is £680 billion and its earnings are £520 billion,

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the deficit is £160 billion, which is a serious problem. It is all very well saying, “Compared with GDP, it is not that bad,” but if one’s income is £52,000 and one’s spending is £68,000, that is a problem. 

Owen Smith (Pontypridd) (Lab):  Perhaps I could explain the debt to GDP ratio issue for the hon. Gentleman. The point that my right hon. Friend the Member for Neath made was that when we came to power in 1997 the debt to GDP ratio was 42%, and by the time we left office it had gone up. However, at the end of 2008 it was down to 36%. 

The Lord Commissioner of Her Majesty's Treasury (Mr Brooks Newmark):  No, it was not. 

Owen Smith:  Yes, it was. As debt to GDP that is absolutely what it was, and I will show the hon. Gentleman the figures in a minute if he likes. The ratio is now up at 77%, compared with 75% in Germany, 82% in France, 118% in Italy and 225% in Japan. The debt to GDP ratio matters because it is a reflection of this being a global crisis, which struck at the end of 2008 with the collapse of Lehman Brothers. 

David T. C. Davies:  I thank the hon. Gentleman for that intervention, but I suggest that having a large deficit with a smallish debt is still a worse situation to be in, in many ways, than that of a small deficit and a very large debt. At some point—I hope by about 2014 or 2015—we will have the debt under control and the deficit will be down to zero, but at the moment the deficit is running completely out of control and that is what is likely to scare the financial markets. That is the situation that the previous Government bequeathed us. I am suggesting that the deficit is even more of a problem than the actual size of the debt. 

I will not spend a long time reciting an economic history of the country since 1992, fun though that would be, but it would show that the Conservative party’s record on the economy has at all times been good. We could go back to the 1940s and show that every Labour Government have precipitated a financial collapse that the Conservative party has had to clear up. Clement Attlee almost ruined the country and was only able to set up the welfare state on the back of American war loans. It was Harold Wilson who devalued sterling and said that the pound in our pocket would remain exactly the same, and it was Jim Callaghan who came out with the line, “Crisis? What crisis?” That was just before practically everyone went on strike, which was the last time we had to go to the International Monetary Fund. 

Chris Evans (Islwyn) (Lab/Co-op):  Will the hon. Gentleman give way? 

David T. C. Davies:  I will give way because I like opposition and I want to hear what the Opposition have to say for themselves. 

Chris Evans:  The hon. Gentleman’s remarks are a complete symptom of what is happening on the Government Benches: economic illiteracy. What about 1981? Who was in power then? Mrs Thatcher. Let us

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not forget 1990 and 1991, which saw the worst economic recession, with businesses going to the wall and people losing their houses. What about that? We are again seeing history being rewritten by Members on the Government Benches. 

David T. C. Davies:  What happened in 1991 was a direct result of the steps that had to be taken to clear up the mess left in 1979, which is exactly why Tony Blair, in his excellent and interesting biography—I recommend it to hon. Members—made the point that he had to accept that a lot of what Mrs Thatcher did was absolutely right. 

Alun Cairns (Vale of Glamorgan) (Con):  My hon. Friend talked about the implications of the deficit increasing out of control and the contribution that that would make to the debt in the long run, but is the situation not even worse than he has stated? There is also £1 trillion of debt off balance sheet, which is a further 80% debt to GDP ratio? 

David T. C. Davies:  My hon. Friend makes an excellent point, because the official figures of course do not take into account the public sector pension deficit, private finance initiatives, things such as Metronet or debts accrued by Railtrack. An independent study has shown that the actual figure is about twice the official figure. Many hon. Members wish to speak, so I will not go on. I could go on—[Hon. Members: “Yes, go on.”] No; I always think that in most situations it is best to leave people wanting more. I assure hon. Members that I and everyone else on the Government Benches are committed to getting the deficit under control, starting to repay the debt in around 2014-15 and handing over to the next Government an economy that is in good shape. We hope that the next Government, whoever they are, take note of that and do not ruin it. 

2.38 pm 

Paul Murphy (Torfaen) (Lab):  I welcome you to the Chair, Mr Owen, as this is the first time you have chaired the Committee. I know that you will do an excellent job and we all wish you well on this and other such occasions. 

The hon. Member for Monmouth, whose constituency neighbours mine, said that he did not like the legacy that the Labour Government had left his constituents and mine, but my constituents and his—I know plenty of them—would have welcomed the legacy of more hospitals, schools, teachers and police officers, the minimum wage and all the other things that the Labour Government did over the past 13 years. 

Alun Cairns:  rose—  

Paul Murphy:  I knew he would stand up. 

Alun Cairns:  I am grateful to the right hon. Gentleman for giving way. That might be some of the legacy, but our constituents certainly did not like the legacy when Wales became the poorest part of the United Kingdom. The right hon. Gentleman’s constituency is one of the poorest in Wales. 

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Paul Murphy:  On the contrary, my constituency, as far as unemployment is concerned, did better in the last dozen years—until just before we had the problems with the banks—than it had done in the previous 30 years. There is no question about that. The unemployment rate in my constituency fell dramatically, and there were more people in work in Torfaen than there had been for 30 or 40 years. 

Nick Smith (Blaenau Gwent) (Lab):  I remind my right hon. Friend and neighbour that Ysbyty Aneurin Bevan hospital in Gwent, a Labour legacy, is due to open in just a few days. We have also had a new railway line running from Cardiff to Ebbw Vale, and we had much better employment under Labour than we ever had under the Tories. 

Paul Murphy:  That is the message that consistently comes from our constituents. 

I want to refer to the different context in which the comprehensive spending review is now undertaken. When, years ago, Governments came to the Welsh Grand Committee to discuss how money was to be spent, the Secretary of State ran Wales through the then Welsh Office, but it is now different. The relationship between the devolved Administrations and the United Kingdom Government is necessarily different from what it used to be. The Secretary of State for Wales will know that not long ago the First Ministers of Scotland, Northern Ireland and, of course, Wales jointly issued a statement declaring that Government economic policy, which she and her colleagues outlined this morning, was fundamentally wrong. There is a real difference of view about how we should tackle the economy and the deficit between those who head the three devolved Administrations, the Government and the Opposition. 

The shadow Secretary of State, my right hon. Friend the Member for Neath, has made an excellent case to show that the issue about the deficit is not what Ministers have described today. It may happen before we finish this afternoon, but none of the speeches so far today has mentioned the word “bank,” which is also never mentioned in the Chamber. It is an inconvenient word for the Conservatives, because they know that the deficit we faced was overwhelmingly caused by the banking crisis. I know that, because I was then a member of the Cabinet and of the National Economic Council. Every day, we knew that the Government had to take decisions to tackle the fundamental problems of the crisis, otherwise all our constituents in Wales would have gone to the holes in the wall in town centres and no money would have come out. As a consequence of a collapse of the banking system, society as we know it would have collapsed. Overwhelmingly, the deficit was the consequence of the banking crisis. The world knew that; the only people who do not know it are the Conservatives. 

Simon Hart (Carmarthen West and South Pembrokeshire) (Con):  Actually, I had the word “bank” written on the page in front of me, so the right hon. Gentleman has stolen my best line, but I have a question for him. At the early stages of the previous Labour Government, a commitment was made to regulate the banking system. How does he think that went? 

Paul Murphy:  I think, with hindsight, that the regulation could have been better—of course it could—but we did not have any help from the Conservatives over the crisis.

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Every decision that we had to take they ran away from. They were wrong on Northern Rock and on how to deal with the banks, because they ran away from the issue. I remember that in the week that the big decisions had to be taken, they were nowhere to be found, because they could not come to a decision on what to do. [ Interruption. ]  

The Chair:  Order. 

Paul Murphy:  There is a fundamental difference between us and the Government on how to deal with the deficit. There is no difference over the principle that we have to deal with it—of course, we have to. Our view is that it was caused by the international banking crisis and most of our constituents would agree. Of course we have to deal with the deficit. The difference between us is that we think the deficit is being cut too deeply and too quickly. I think that some members of the Government—I do not say this of the Secretary of State—may be using the argument that they have to deal with the deficit in that way as a cover for the ideology of their own party. 

Geraint Davies (Swansea West) (Lab/Co-op):  My right hon. Friend is making a strong case to show that the deficit was the cost of avoiding a depression. Does he agree that supporting the banks was not bailing them out, but taking a public stake in them at a time when their prices were low and they needed our support? That stake will appreciate over time and will be paid back more than once downstream as economic growth proceeds. It was therefore a good investment, yet it is portrayed by some Government Members as just bailing out the banks, which is outrageous. 

Paul Murphy:  I entirely agree. Over the past 11 years, in every Welsh Grand Committee that I have had the privilege of taking part in, on and off, and at which the Government announced, for example, major hospital building or extra money for the Assembly—the Welsh people never had more money than they did under the Labour Government—I never heard the current Secretary of State or her predecessors complain. Indeed, the junior partners in the coalition certainly did not complain about the money going to Wales. In fact, they did the opposite and said, “We want more—and more and more.” Saying we spent too much during the past 13 years is nonsense. It was not said at the time. 

Susan Elan Jones (Clwyd South) (Lab):  We are seeing a paradox in the position taken by Government Members. On one level they speak for a certain ideological doctrine, but on another they will not tell us where they wish the cuts to fall. For example—[ Interruption. ] I do not know which schools Government Members attended, but mine was much better in terms of discipline. Let me remind Conservative Members that we have a Welsh Assembly—even though most of them did not want it—where they have a leader of the Welsh Conservatives. He now thinks that it would be totally acceptable to have a 20% cut in education. Will they tell us which schools they want the cuts to fall on? No, they will not. We see a total contradiction. Does the former Secretary of State agree? 

Paul Murphy:  Of course, I agree. The Conservatives do not know where they are at all, certainly with their coalition partners. In terms of what happens on the

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cuts, something is said in Cardiff and something is said here in London. As for the Liberal Democrats, they are changing the constitution as we go along. I spent 17 years teaching young people about the British constitution and collective Cabinet responsibility. Yesterday, that particular doctrine disappeared. The textbooks will have to be rewritten. The Business Secretary said that he is going to abstain on the issue of tuition fees. [Hon. Members: “No, he didn’t.”] Well, he has changed his mind then. Yesterday, the junior coalition partners could not decide what to do about the cuts that have led to the increase in tuition fees. I am not saying that the principle of tuition fees is wrong—far from it, because the Labour Government introduced them. I am simply not sure what the Government are doing about individual cuts to individual services, because they are all over the place, with cuts in education and elsewhere. 

On the electrification of the railway line from our capital city to the capital city in England, the Secretary of State for Wales indicated that we must wait for news. I hope that the news will be good, because she and I, and others, have fought for a long time for the electrification of the line. However, there are other troubling issues. 

The hon. Member for Vale of Glamorgan must be worried about what is going to happen to the St Athan project. We were given an indication that some of it might continue, but we do not yet know. All of us are worried about the 40% cut in capital spending on projects in Wales. That is a huge worry, because reducing capital spending has a consequence for unemployment and so on. 

Alun Cairns:  As the right hon. Gentleman invited me to speak by naming me in his speech, I reassure him that I have complete confidence that St Athan is still a viable location for defence training and for other military operations. I do not know why he has such doubt. 

Paul Murphy:  It is a question of uncertainty. An announcement is made one week, and then another is made the next week. We have the passport office in Newport closing, but the Secretary of State says that she has helped to save some jobs there, so the situation changes all the time. By the way, in First Minister’s questions in the Welsh Assembly yesterday, the First Minister indicated that he has not yet had a reply from the Secretary of State’s colleague. I urge her to talk to her colleague to ensure that a proper response is given to the First Minister for Wales. 

Alun Michael (Cardiff South and Penarth) (Lab/Co-op):  The hon. Member for Vale of Glamorgan appears to have some line that suggests there is still hope for the St Athan project. That would be good news. However, can he be invited to explain why the answers to parliamentary questions that I received a couple of days ago seem to be adamantly closed in terms of any hope in that direction? 

Paul Murphy:  We shall have to wait and see. 

Alun Cairns:  As I have been invited to respond, I can only report on the discussions with the Secretary of State for Defence and with the Minister. I also recognise the support of the Secretary of State for Wales and the Under-Secretary of State for the project. I am upbeat

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about the opportunities of St Athan within the budget approach available. St Athan is the right location, as is recognised by many in the military. 

Paul Murphy:  I share that view, but discussions are one thing, and a result is quite another. I had plenty of discussions over the years with my ministerial colleagues, but I did not get my way all the time. I hope that the hon. Gentleman is right, but we will wait and see. 

The Secretary of State sits on Cabinet Committees, as I did, and her job on such committees is to fight the Welsh corner. I am sure that she is doing her job in that respect, but my fear is that many people in the British Cabinet and, certainly, on the Government Benches in the House of Commons—I exclude all Members here—really do not know much at all about the business of Wales and how we operate. We now have a totally different situation for dealing with the spending review from when the Government had the responsibility. The context in which we are dealing with spending and other issues in Wales has been deeply distorted by complete ignorance on the part of Members of Parliament not from Welsh constituencies—they may be on the Government Benches or, possibly, in the Cabinet. They see things in a very different way. 

Devolution means that the Welsh Assembly, the Scottish Parliament and the Northern Ireland Assembly are not Departments of the Government, but are now Governments, Parliaments and Assemblies in their own right, and they have to be dealt with in a certain way. That is the new constitutional settlement, and I am not sure it is being dealt with in that respect. 

The Secretary of State for Wales (Mrs Cheryl Gillan):  Did the right hon. Gentleman face the same issue when he was appointed Secretary of State for Northern Ireland? Did the right hon. Member for Neath (Mr Hain) have the same problem? 

Paul Murphy:  In Northern Ireland? 

Mrs Gillan:  The right hon. Gentleman was a Welsh MP in Northern Ireland. 

Paul Murphy:  No; I am not referring to the fact that I was not a Northern Ireland MP. That is not my point at all. I make no criticism of the Secretary of State whatever—in fact, I exempt her from what I am saying. My point is that there is a lack of knowledge about how the constitutional settlement works and about how we deal with such issues in the House of Commons. Nowhere was that more vividly expressed than in our debates on the constitutional Bill—the Parliamentary Voting System and Constituencies Bill. There is a relationship with the comprehensive spending review, because my fear is that if, as proposed, we reduce the number of our Welsh MPs by 25%, it will mean a 25% reduction in the pressure on the Government and Parliament over the issues we are talking about. The voice of Wales will be different. 

I do not expect English Members of Parliament on the Conservative Benches to understand the issue of Wales in a bigger context or a bigger state—that is totally ignored. However, I would have thought that the Liberal Democrats would understand that the idea of

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the representation of Wales in a bigger unit is an issue. It has a huge impact on what we are dealing with today; in fact, there can be no bigger impact, because the biggest impact that any Government can have on their citizens is in how much money they are allowed to spend on services to improve their quality of life. If our representation is to be reduced, which it will be, we are facing a serious issue. 

The Secretary of State must continue to fight the cause of Wales in the Cabinet and its Committees, but I am not at all convinced that her colleagues are listening, whether in terms of the constitutional settlement or of the comprehensive spending review. That is a great pity, because our job as Welsh Members of Parliament, in the Welsh Grand Committee and on the Floor of the House of Commons, is quite specific: to defend the interests of our constituents. Everything that has been said today about the cuts—whether capital spending, revenue spending or other issues—and every single decision made by the Government through the Chancellor of the Exchequer and the Treasury will have a direct impact on our constituents in Wales. That is why it is so important that we have sufficient representation in this place to fight our cause. 

David T. C. Davies:  The right hon. Gentleman said something that surprised me. He said that it is our duty—I think he said our only duty—to fight for our constituents. Surely, he recognises that sometimes we must think about the interests of our entire country. 

Paul Murphy:  In that respect, I do not think there is a difference. The hon. Gentleman and I are fundamentally divided on how we would deal with the deficit, but not on the fact that a deficit has to be dealt with. He is arguing that we have to do it quickly and deeply, while I am arguing the opposite. We tried to do that in the 1930s, when we had the biggest depression in the history of the past 200 years. We would not have got out of it had there not been a war. The second world war brought us out of depression and stimulated production. 

There is a fundamental divide. We cannot solve our country’s problems, be it the economy or the deficit, unless we stimulate production and demand. There is a basic difference between us, but I am sure that the hon. Member for Monmouth would agree that the economic fortunes of the country and our constituents’ interests are related. However, the hon. Gentleman and I, and others, may not be back next time to make that case, because of the reduction in the numbers of MPs. That is a real, deep shame. 

Geraint Davies:  Does my right hon. Friend accept that, in this year’s election, many Welsh constituents—in particular those voting Liberal Democrat—thought that there would be no increase in VAT, that there would not be rapid cuts to public services and so voted in good faith for something that did not happen? Now, they find that a quarter of their MPs are to be cut. Those facing the biggest cuts will have their ability to respond to that lie taken away. That is absolutely disgraceful. 

Paul Murphy:  My hon. Friend makes a valid point. The problem with the creation of the coalition is that it has left our Welsh people confused about what the

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Government stand for, because of the nature of the coalition. We have elections next year, and it will be up to the Conservatives and the Liberal Democrats to persuade the people of Wales of the merits of the comprehensive spending review and its associated cuts. I would not want to be in their place when they have to do that. 

Roger Williams (Brecon and Radnorshire) (LD):  The right hon. Gentleman is as courteous as ever in giving way. Will he explain why it was left to the coalition Government to undertake a comprehensive spending review, when we were waiting for one from the previous Government? Of course, the previous Government would then have had to say where the cuts would come from, because cuts had been accepted. 

Paul Murphy:  There is no doubt that, had my party won the election, there would have to have been a review. There is no question about that. Of course, we would have faced the same situation. By the way, I think the hon. Gentleman’s moustache is great. Anyway, lots more people need to speak in this important debate, which the Secretary of State was right to call. I only wish she had called one on the other issue as well—we are having another on energy in the weeks ahead—because, as this debate is proving, MPs who represent Welsh constituents, from all parties, can express their views and their constituents’ views in a special way. I hope that when my colleagues speak they will say the same as me. Our chief interest is in creating the best quality of life for the people of Wales. The only way that we can do that is by ensuring that our services are kept up to scratch, but I am not convinced that will happen. 

2.58 pm 

Guto Bebb (Aberconwy) (Con):  It is a pleasure to be here today. This is my second Welsh Grand Committee, and it has been much better behaved than my first. I was expecting this debate to be on the comprehensive spending review and its impact on Wales, yet it appears that we still have to look at the reasons for and context of that review. Opposition Members will still not acknowledge why we have to make difficult decisions as a coalition Government. It is worth remembering that, when the coalition was formed, we were looking at a deficit for this financial year of £155 billion. A deficit is not the debt; it is the increase in the debt in this financial year alone. It would have been irresponsible not to deal with the deficit. Because we want to deal with the £155 billion deficit, we will provide the opportunity for businesses to invest with confidence. 

Owen Smith:  We made our position absolutely clear. We would have dealt with the deficit—half of it—over the spending period, and that would have been a responsible way to do it. [hon. Members: “How?”] Had we got into government, we would have spelled out precisely how.

Guto Bebb:  That is the crux of the issue. The Opposition continually state that they would have dealt with the matter by reducing the deficit by half within this Parliament, but where is the detail? You keep saying no to every

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single proposal that the coalition makes, and you sit in Committee unwilling to explain to the people of this country, and of Wales, how you would have dealt with the matter. Your own Chancellor, Alistair Darling, stated that if the Labour party were re-elected, its cuts would be worse than any that happened in the 1980s. 

The Chair:  Order. Will the hon. Gentleman please refer to hon. Members correctly? 

Guto Bebb:  I apologise. 

Geraint Davies:  The recent autumn forecasts for economic growth have been massively pared down since the Conservative-coalition Budget. The current deficit is £30 billion less than was forecast in the pre-Budget report. The answer to the hon. Gentleman’s question is that there would have been more growth, and savings would have been spread out over time, so less harm would have been inflicted on communities and we would not have an extra £6 billion a year cost when unemployment goes up by a million—that is how it adds up. 

Guto Bebb:  With all due respect, the hon. Member for Swansea West should consider the impact of the Leader of the Opposition’s questioning of the Prime Minister this afternoon, and refrain from making such comments. It is important to point out that the report stated that growth was looking positive—the Office for Budget Responsibility’s statement was positive. 

Returning to the deficit, we must recognise that we cannot continue with a situation in which a Government propose to borrow £1 for every £4 that are spent. We are unable to carry on in that way, so the coalition is willing to take difficult decisions. Opposition Members are unwilling to tell us how they would perform the necessary changes. 

Nick Smith:  It is interesting to listen to the “children of Thatcher”, as they were described by the Prime Minister today. This morning, I asked the Economic Secretary to the Treasury what percentage of the £530 million that is supposed to be invested in broadband across the UK will come to Wales. She could not answer. Will someone from the Government answer me now? 

Guto Bebb:  I am as disappointed as the hon. Gentleman about the broadband application. The issue is quite clear: the Welsh Assembly made a mess of the application—that is the unfortunate fact of the matter. I respectfully request that the hon. Gentleman raise that issue with his colleagues in the Welsh Assembly. 

We face a situation in which we are borrowing more than we are spending on the NHS and the defence budgets put together, which is unsustainable. If Opposition Members are happy to see the country continue to pay £120 million a day in interest, so be it. I feel proud to be associated with the coalition, which believes that taxation should be used for the benefit of the people of this country—and that means that we reduce the cost of interest payments. 

The coalition’s decisions have undoubtedly been good, and have been recognised as such by the markets. As I said this morning, it is clear that the long-term interest

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rates that the country faces have reduced dramatically since the coalition came to power. The credit reference agencies have responded positively to the way in which the coalition has dealt with that matter. If we consider how the international markets now regard the UK situation compared with other eurozone countries, it cannot be denied that the decisions that we have taken have been extremely positive. Those were reflected in the OBR statement on Monday. 

Opposition Members have stated strongly that the coalition is going to reduce the deficit by decimating the public sector, but I do not believe that to be the case. Within the public sector there is a need for efficiency and a need to ask ourselves whether we can do things better than we have done in the past. In May, the OBR stated that we would lose 490,000 jobs in the public sector; the new report, which was announced on Monday, shows that the figure has been reduced to 330,000. Yet there has been no positive response from Opposition Members to that huge development. 

I made the point this morning—and I shall make it again, because it is important—that the difference between the OBR statement in May and that announced on Monday is some 10,000 public sector jobs in the Welsh context. As a Committee, we should welcome that development. 

It is important to point out that the public sector job losses indicated in the OBR reports are modest compared with the losses suffered by the private sector under the previous Government. It is important to contrast the way in which Opposition Members are making a huge issue about the potential loss of jobs in the public sector and how they were relatively quiet when the private sector was being decimated in Wales. 

Chris Evans:  I was here this morning when the hon. Gentleman welcomed people losing their jobs. There are people in my constituency who still think that the Government believe that unemployment is a price worth paying to bring the deficit down. If they lose their jobs and are about to lose their houses, what message does he think he is giving them? 

Guto Bebb:  With all due respect, the hon. Gentleman is making a claim about what I said this morning. I welcomed the fact that there will be 10,000 fewer job losses, and I would be grateful if I could see the same welcome coming from him. 

Jonathan Evans (Cardiff North) (Con):  My hon. Friend is surely bored of these chants about people losing their jobs. Does he not find it a bit surprising that even though the latest statistics showed that unemployment in Wales had fallen by 12,000, that it was falling faster in Wales than any other part of the UK, and that it has been falling for three successive months, there has not been a word of praise from the Opposition? 

Guto Bebb:  My hon. Friend makes an excellent point. That is indeed the situation in the county of Conwy, where my constituency is located. 

Owen Smith:  I thank you for giving away again. 

The Chair:  Order. I remind new Members that we do not use the word “you”. 

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Owen Smith:  I am grateful to the hon. Member for Aberconwy for giving way. I want to point out a simple fact. He repeated several times today that unemployment rose under Labour. Yes, it rose at the end of our period in government. However, when we came to office, 2 million people were unemployed. At the end of 2008, when the financial crisis struck, 1.5 million people were unemployed, and then it rose due to the crisis. [ Interruption. ] It is not selective. 

The Chair:  Order. I call Guto Bebb. 

Guto Bebb:  The economic inactivity rates showed very little change in the period that the Labour party was in government. 

Mrs Gillan:  My hon. Friend is making a sterling speech, and there are no bounds to his generosity in allowing people intervene. 

My hon. Friend will be pleased to know that I checked up on a written answer given to the right hon. Member for Cardiff South and Penarth, who, I believe, left the Committee with the impression that St Athan did not have a future. I have taken advice and checked the written answer from my right hon. Friend the Secretary of State for Defence, and in fact it states no such thing; the line on St Athan has not changed at all. I am sure all Members, on both sides of the Committee, will welcome the fact that we think that 

“technical training co-located on as few sites as possible remains the best solution for our armed forces”, 

and that 

“we have a new programme in place to assess requirement and options”—[Official Report, 23 November 2010; Vol. 519, c. 220W.] 

—something that the Labour party did not do when it was in government. 

Guto Bebb:  I am obviously delighted to hear that clarification, and I am sure that my hon. Friend the Member for Vale of Glamorgan will be delighted to hear it. 

We heard that the Welsh settlement has been particularly bad, and that the coalition Government have been extremely ungenerous towards Wales. I am staggered at that response. We are looking at a cut of around 2% a year in revenue terms. As someone who has come to the House with a background in business, I know that if someone went to a small business in my constituency and said that it would have to save 2% a year from its revenue cost, it would say that it would do that as a matter of course. I fail to see why the Government should be excluded from the discipline that private businesses are employing in constituencies the length and breadth of Wales. Why should the Government be excluded from those efficiencies? 

Paul Murphy:  The hon. Gentleman is making an interesting speech. He is right to say that it is important for public bodies to be businesslike and ensure that they deal with efficiencies in a proper way. However, he represents a constituency, as I do, where a large percentage of people work in the public sector. What happens if those public sector jobs go and there are no private sector jobs to take people on? That is a problem. 

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Guto Bebb:  I shall come to that point. My constituency is less dependent on the public sector than many in Wales, and we are particularly proud of that. Small businesses make a huge contribution to the economy of Conwy and Aberconwy. We would argue that those small businesses know that they have to cut their cloth according to their income, which is apparently mysterious to Opposition Members. 

Jonathan Edwards:  In terms of the Welsh block grant, does the hon. Gentleman not acknowledge that over the term of the spending review there will be a cumulative cut of £4.6 billion? That is not small money. 

Guto Bebb:  It is important to note that the reduction is subject to the Barnett formula. One could argue, and some Opposition Members would, that the Barnett formula needs to be looked at. Why, during 13 years of Labour Government, was that issue not addressed? The settlement is subject to the Barnett formula and, as such, that is an issue for the hon. Gentleman to raise with his party’s coalition partners in Cardiff bay. 

Plaid Cymru should acknowledge that, before the general election, it was very proud of its economic consultant, Eurfyl ap Gwilym. I doubt whether anyone in this room failed to enjoy his appearance on “Newsnight”, but he has made it clear that the settlement is significantly better than the Welsh Assembly was planning for prior to the May election. It is interesting to note that the economic guru of Plaid Cymru, as he was described, welcomes the settlement, and I would be interested to know whether Plaid Cymru Members also welcome the settlement. 

I shall now focus on the key issue, which is the need for the Welsh economy to grow and to create private sector employment. The Welsh dependence on public sector jobs is not the solution; it is part of the problem. We have created a situation in Wales in which we are totally dependent on the public sector in too many parts of the country and in too many communities. The challenge should be to ensure that we have a private sector that grows and creates employment. To put the cuts in context, we are now looking at potentially 18,000 public sector jobs being lost in Wales. That means that, over the next three years, we need to see the private sector generating some 7,000 jobs a year. Well, 7,000 jobs a year is equivalent to one in 30 Welsh businesses creating a job each year over the next three years. I have confidence that our private sector companies can do that, and I am mystified by the lack of confidence shown in Welsh businesses by Opposition Members. It is clear that, if such jobs are created in all parts of the United Kingdom, this Committee, of all Committees in the House, should send out a message that we have confidence in the Welsh business community and in the people of Wales, and that we can create those jobs. I would argue that if we cannot see our way to creating 7,000 private sector jobs a year over the next three years, we are in serious trouble. 

When one considers the Labour party and the Labour representation that we have in Wales, it is important to point out that the concept of creating jobs in the private sector, of depending on businesses for growth and prosperity, is perhaps difficult for Labour to grasp. When one looks at statistics on those areas of Wales that have the least dependence on the private sector, the

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areas that come out on top are: Merthyr Tydfil, which is traditionally a Labour area; Blaenau Gwent; Neath-Port Talbot; Caerphilly; and Torfaen. Those areas have shown confidence in the Labour party, and that confidence has been misplaced, because they have ended up with a dependence on the state and on the public sector. 

I ask the Committee to compare and contrast. When one looks at Wales and asks where those areas in which people generate their own jobs and in which there is a high degree of self-employment are, I would be glad to tell hon. Members. 

Geraint Davies:  The coalition Government have proposed that council tenants earning more than a certain amount should be evicted. What signal does that send to people who have small businesses or generate employment? What about the council tenants? Is that not dumbing down innovation? There are further impositions, too, which is a ridiculous recipe. 

Guto Bebb:  That is an interesting view of the policies that have been put forward. Council tenants who want to buy their own houses should be allowed to do so, but it seems that that view is not shared by the coalition Government in Cardiff, who want to have state control in Wales. 

Nick Smith:  Does the hon. Gentleman therefore deny that if someone is on jobseeker’s allowance for more than a year, their housing benefit will be cut by 10%? Does he defend that decision? 

Guto Bebb:  It is part of a package of measures that have been taken because of the mess that was left to us by the previous Labour Administration. It is important to point that out. 

Going back to self-employment, if we are to create an economy in Wales that is not dependent on the public sector and public spending, we need businesses that create jobs and wealth. Areas without any real business involvement are generally those represented by the Labour party, and areas that are creating self-employment on a large scale are Powys and Ceredigion, which are represented by the coalition, Pembrokeshire, which is represented by the Conservatives, Monmouthshire, represented by my hon. Friend the Member for Monmouth, and of course my own county of Conwy. Those areas are creating jobs and wealth, and leading to a better Wales. 

Susan Elan Jones:  How does the hon. Gentleman feel about the fact that the Federation of Small Businesses in north Wales, which we can assume contains business people at least as well qualified as him, is totally opposed to the rise in VAT? 

Guto Bebb:  As a small business owner, I would obviously be against increasing any taxes, but I accept that we are in a difficult situation. I would not have come into this House with a view to increasing taxes, but we have to deal with the deficit. Returning to my main points, we need to have stable finances as a country to ensure that we have the opportunity for businesses to grow, and I welcome the fact that as a coalition we are looking to reduce corporation taxes, and to reduce national insurance on new employment. 

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In Wales, the dead hand of generations of Labour control lies over too many parts of the country and, as a country we can, and must, do better. Wales needs a more balanced economy, and that will come as a result of a coalition Government who believe in enterprise and in the people of Wales. This is an opportunity for us to change the political mindset in Wales, and to show the people of Wales that they can act on their own behalf. It is not Governments that produce jobs but people and businesses, and we will give them the opportunity to do that. 

3.18 pm 

Mrs Siân C. James (Swansea East) (Lab):  I make no apology for talking about rail electrification today. My background is very much steeped in rail; one could say that I am gamekeeper turned poacher. As I have worked for the industry, made every excuse possible, including the well-known hackneyed phrase, “leaves on the line,” and explained to irate people how members of their family have got lost on the Welsh rail network, I have got to know the industry very well. 

Swansea is a rail city. That might not mean a great deal in today’s terminology, but it means a great deal to us in Swansea. We have inherited the mantle of Isambard Kingdom Brunel. He built this railway to last—a legacy that would continue long into the future. The news that the finances for the electrification of the south Wales main line had been shelved was a bitter disappointment to us in Swansea. I was bitterly disappointed that another prestigious project in Wales had been shelved, and the decision did not meet great acceptance in Swansea. 

We have all heard about the battles between Cardiff and Swansea, about how we have to have what Cardiff has, and that we have to have everything that is going because we are Swansea—the second major city in Wales. But it is important. We are the gateway to west Wales. There are Government Members who rely on the service. They have to make the journey down to Pembrokeshire and beyond, and it is not easy. 

When I joined the rail industry, we had a regular service to Fishguard and further west—I mean to the west [ Laughter. ] My mistake, but we would have gone further if we could have. We saw that wither on the vine. I am afraid that if we do not stand up for Swansea and if I do not stand up for rail electrification in Swansea, we will in effect become that extra bit at the end of the line. The thought of people hopping off electric trains when they get to Cardiff and then hopping on to tired old rolling stock and making a further, longer journey on older trains cannot be contemplated and must not be allowed to happen. 

Dr Hywel Francis (Aberavon) (Lab):  I congratulate my hon. Friend on her work in championing the cause of electrification and also her work in the all-party group on rail in Wales. Does she agree that in the new year that group should invite the Secretary of State for Wales and the Secretary of State for Transport to explain to it why there has been this delay in the announcement of electrification? 

Mrs James:  That is an excellent idea. We have written on several occasions to the Transport Minister, but as yet he has been unable to attend. However, I am sure that the Secretary of State for Wales will be happy to do so in future. 

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Jenny Willott (Cardiff Central) (LD):  Does the hon. Lady agree that it is not helpful to describe the project as having been shelved? My understanding is that the decision is still to be made. There is a great deal of support and strong feeling on both sides of the House among Welsh MPs that we need to pull together and lobby as hard as we can on this to make sure that it goes ahead. 

Mrs James:  I thank the hon. Lady for that contribution. My concern is that we have been here before on several other projects. Delay at this point will create more than a delay at the end of the line, pardon my pun; it will mean that we fall behind. When we talk about working for the railways, we mean a European network, a modern network, a network that plugs into Europe-wide travel. I do not want Wales consigned to being like Moldova and Albania, without a millimetre of electrification. We need to be up there and we need to be up front. If we talk about development and bringing jobs in now, we have to have modern transport and communication networks. 

Jonathan Evans:  I should like to follow up the point made by my hon. Friend the Member for Cardiff Central because many of us have been lobbying on this issue. The Secretary of State for Transport made it clear at the time of his announcement that he has to make a decision about whether rolling stock, particularly engines, should be fully electric or hybrid electric or diesel, and on that may turn the issue of electrification, primarily because of the challenge of electrification in the Severn tunnel. 

Mrs James:  We heard about the Severn tunnel very early in the debate, when it was used as an excuse for not bringing electrification into Wales. It is funny what a bit of pressure did at that point because when we talked to Network Rail, it overcame those problems. One can overcome problems. We know that the Severn tunnel is old but it has been well maintained and is extremely fit for purpose. We have other issues with that tunnel but we have overcome the electrification one—after a great deal of pressure. Somebody has already talked about £1 billion for a railway station in London and £1 billion for electrification. I was on the Select Committee that considered the Crossrail Bill for 23 months. They made a mistake because, unlike a lot of the people on that Committee, I am what is known in rail terms as a chuffernutter, so I was quite happy to discuss rail and I enjoyed the visits to various exciting rail places such as Royal Oak, which we pass on our journeys in from south Wales. 

Mrs Gillan:  I am almost tempted to say, “from one chuffernutter to another”, because the first job I wanted when I was little was train driver from Cardiff. I know the hon. Lady shares my concern and my interest in making sure that we have good connectivity from south Wales. May I reassure her that the fact that my right hon. Friend the Secretary of State for Transport is taking time over this decision is not sinister? The previous Labour Government made that announcement during a brief trip to Wales by the then Prime Minister, who held a Cabinet meeting there. I think it was probably one of his first—and perhaps only—visits to Wales. An awful lot of work needs to be done on the proposal. Even on that off-the-cuff announcement, without the

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money to back it up, the Labour Government were not going to commence the work until 2017, as I understood it. So she should be very pleased, and she should welcome the announcement of the electrification down to Didcot. It takes 15 minutes off the journey to south Wales, which is good news, and I want to reassure her that we will do everything we can to ensure that the business case is made. 

Mrs James:  I am grateful to the Secretary of State for those comments, but it is not just me, her, or anybody else here who relies on that line and will benefit. It is an opportunity, because 4.5 million people depend on that service, so both the transport and the upgrade are essential. What was exciting about the opportunities that the then Prime Minister announced that day—and I was there when Lord Adonis made some of the announcements—was that we would at last address this issue. I urge the Secretary of State and Transport Ministers: please, please keep to that plan, because we need it. 

Didcot is a means to an end, but if we want Cardiff, Swansea, Newport and Bristol to be really relevant to the future development of the country, we must have electrification. We need to grow and prosper, and it needs to be a line with a future—I think that the future is bright there. We have heard a great deal from the coalition Government about how they are going to bring jobs to difficult places, where jobs have not been available before. Without a modern train system, and without modern forms of transport, we will never achieve that. The whole idea of me—ha, ha!—trying to ride a bike from Swansea to Cardiff does not bear thinking about. We do not need that, and I could not do it anyway—[ Interruption. ] Thank you. 

We have heard a great deal about the facts and figures; this morning, the Secretary of State mentioned the savings that electrification would bring. They are significant, and we are all waiting for them. Trains are 20% cheaper to ride and 35% cheaper to operate. They travel 40% further, on average, than a diesel train before it needs maintenance. It is not only that; we have the exciting prospect of regenerative brakes, which convert lost heat back into power and energy and make the trains even more efficient. Such benefits are tangible. Not only do they provide cleaner, better, faster trains, but they are good for the environment. The idea of electrification is not a passing fancy or a fad; it is needed. 

I am glad to hear that the Secretary of State feels that she has been fighting Wales’s corner on this. I urge her to keep up the pressure on our behalf, as we will on this side of the House. We deserve that upgrade and we need it. It will create more opportunities and in particular, as the upgrades come along, I am sure it will create job opportunities. 

I make no apologies for calling for this expenditure. It is a huge amount of money, and, in difficult times, it may appear unfair. Some may say that we could spend the money in other ways, but even if it is not a cheap option, it is one we cannot afford to miss. The consequences of failing at this point are critical and do not bear thinking about. Swansea is a rail city, first and foremost, with a long association of inter-city services, and services that are provided for people who are going beyond our

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borders to Ireland, and so on. So, from an Irish and a European point of view, it is important. On Thursday evening, when I catch the 8.15 pm from Paddington, I get home near to midnight. A difference of 20 minutes—wow!—is very tempting, as it is for anybody who commutes along that route. Those cuts to the overall travelling time will benefit us all. 

I want to see Swansea and west Wales grow and prosper, and I have been pleased to hear today, both inside and outside this room, about the support for the project. I urge everyone to keep up the pressure. In many ways, Swansea should not be the end of the line; it should be a prime and important player in the rail network of Great Britain and a gateway to better services for west Wales. 

The Chair:  Order. Before I call the hon. Member for Carmarthen West and South Pembrokeshire, I inform the Committee that we will begin the winding-up speeches at 4.10 pm. There are eight Members who wish to catch my eye, so the briefer the contributions, the more Members we shall get in. 

3.30 pm 

Simon Hart (Carmarthen West and South Pembrokeshire) (Con):  Thank you, Mr Owen. I will take your advice to heart. 

One of the depressing features of the sorts of conversations that we have had today is the lack of reference to our voters’ views. It has been about politicians and political parties for politicians and political parties. I know that he would not mind my saying this, but it is not often that I regret not being in the same room as the right hon. Member for Neath, the former Secretary of State, but on this occasion I want to follow up on a point that I made earlier about the election result, which was, of course, the last opportunity that anybody had to express a view about the various offers on the table. He said, kindly, that bad election results have many reasons behind them, but he failed to articulate a single one, and I simply want to put this to him. In May, we had a situation in Wales where, and I quote from my favourite local newspaper, the Carmarthen Journal: 

“In a move seen as rolling out the big guns,”— 

their words, not mine— 

“the cabinet minister strolled through Llanelli and Carmarthen town centres, warning against letting David Cameron seize control.” 

The right hon. Member for Neath said: 

“I believe as people face up to the choice for the country, do they want a Tory Government back in power or a Labour Government taking Carmarthenshire forward, then I think they will come back to Labour.” 

I had an opportunity to thank the right hon. Gentleman for his help, because we managed to achieve a slightly above-average swing from Labour to the Conservatives in Carmarthenshire, and that was with 39% of the electorate being public sector workers. 

More importantly, whether you consult a private citizen or a small, medium or large business in west Wales, these are the expressions—their words, not mine—that come up time and time again; hon. Members on both sides may have similar experiences: “exasperation”, “let down by Labour” and “please sort out the mess”. Those expressions were put to us before and since the election by people who had no particular axe to grind. 

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The reasons given include banks, which the right hon. Member for Torfaen, a former Secretary of State, mentioned. Of course, banks and lending policy form a major part of that. Over 13 years, the lack of regulation exasperated small and medium-sized businesses in my area. The approach to increasing, overwhelming and strangling red tape and regulation was something that completely confused and, in some cases, frustrated the progress of those businesses. Yet, over 13 years, the Labour party could only ever approach those kinds of problems with two answers: create a new law or write a cheque. Neither of those two solutions worked when it came to the deregulation of business in Wales. 

Mr David Hanson (Delyn) (Lab):  Does the fact that there were 26 elected Members out of 40 not give the hon. Gentleman a little bit of recognition that there was some support for the Labour party at the election? 

Simon Hart:  I am not for one moment denying that in certain solid areas, not much changed, but the shift was significant. Let us not forget that it took 35.5% of the vote to deliver that number of people. The constitutional reforms, which our hon. Friends in the Chamber are debating, will actually remove the inherent— 

The Chair:  Order. Will the hon. Gentleman come back from the election to the comprehensive spending review? 

Simon Hart:  Indeed, Mr Owen, I apologise. I was so carried away by the right hon. Gentleman’s intervention that I forgot what I was trying to argue—not for the first time. 

I want to talk about the exasperation of small and medium-sized businesses in west Wales. I also want to touch on the exasperation of ordinary voters, who possibly supported the Labour party over many years but were driven, much against their better judgment in some respects, to desert the party of their choice because of the sheer lack of progress in important areas such as education and health. For most of the voters in Carmarthen West and South Pembrokeshire, it is no good at all turning around to say that some things are devolved, some are not and some might be a little devolved—as far as they are concerned, they just want good, honest and transparent government, and they do not really care where it comes from. 

Alun Cairns:  May I share some helpful figures? At the last election, the Labour party gained 531,601 votes— 

The Chair:  Order. Let us stick to the comprehensive spending review. 

Simon Hart:  The most frustrating thing of all is the absolute failure of the former Government to accept any responsibility for anything that went wrong. This morning, I felt that I had arrived on a different planet, as though the past 13 years had never happened. I cannot believe, and no one has yet persuaded me, that the previous Government were a shining example of competence and honesty—they simply were not. The result in May surely reflected that; people lost faith and trust in that Government in exactly the same way as they did in the Conservative Government in 1997. 

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Chris Evans:  When will the hon. Gentleman mention the comprehensive spending review? I am tired of analysis of the election. I want to hear what he thinks about what his Government are doing to communities in Wales. 

Simon Hart:  Like a good race horse, the hon. Gentleman is a few lengths ahead, but I will be catching up, I assure him. 

Most people—whether they are citizens, whether they are old or young, whether they are wealthy or not—recognise the grim reality of our situation. Out in the real world, there is no denial. Outside the political bubble, people realise that serious things must be done to address a serious situation. The fact that we have somehow redacted—to use a recently created expression—the past 13 years seems to lie at the heart of people’s mistrust of politics. 

I want to finish by dealing with the CSR and with why people have confidence in what the coalition is doing, even though they recognise that it comes with a certain amount of pain. As with all good doctors, sometimes the advice or surgery has to be a little painful; nothing is different in this case. I shall quote a few things from my little patch of west Wales. Let us forget the big political message, the spin and all the parliamentary announcements, and drill down to Carmarthen West and South Pembrokeshire to hear what people have to say. 

My two local councils, Carmarthenshire and Pembrokeshire county councils, recognise that they got a better than expected settlement, which will be tough but deliverable. They are not expecting meltdown in west Wales—I see nods from the hon. Member for Carmarthen East and Dinefwr—they can do this. Dyfed-Powys police recognise that they are in for a tough time, and that policing will not be the same as in the past, but they can do it and still genuinely look after the interests of the community, given the settlement on offer. Local business men, in important industries such as tourism, agriculture and energy production scattered around my constituency, employing anything from two to 200 people, recognise that the measures in place are essential and will deliver proper, long-term growth and prosperity, which will I hope absorb any possible job losses in the public sector. 

Everyone understands what has to be done to restore growth in our economy, apart, it seems, from the Opposition. That is why people recognise that the comprehensive spending review acknowledges the problems discussed by other Members. People also recognise the importance of infrastructure, whether broadband, road or rail. I was talking to someone who was a Member of this place many years ago; he was bemoaning the closure of the sleeper service that used to run from Paddington to Haverfordwest. Those were the days—he would have finished his dinner by the time he got to Reading. However, things have moved on a little way since then. Decentralisation and deregulation are key aspects covered in the comprehensive spending review, and they have been welcomed. 

I finish with a quick reference to my good friend Mr John Starzewski, who runs a company called Magstim in Whitland, which is right on the border between Pembrokeshire and Carmarthenshire. He met the Prime Minister and the Chancellor of the Exchequer last

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week, which indicates how seriously the Prime Minister and the Chancellor are taking the regrowth of small and medium-sized businesses in Wales. There were only 18 people around the table, including a proper representative from Wales. In their conclusions they recognised that employment laws created by the previous Government form a barrier to SME recruitment; that although the value of interns is good, employment law discourages the opportunity to learn; that banks are not a useful source of advice; that without real-world experience one cannot make decisions at local level; and, finally, that people and skills are a crucial part of expansion and the emphasis on the value of knowledge transfer partnerships and research and development tax credits has been restricted by over-zealous HMRC people. They recognised that a number of measures that were passed by the previous Government—often with the best of intentions—frustrated private sector growth. Those discussions last week were at the highest level, and involved business people from small and medium-sized enterprises in Wales. 

That should be a reflection that the comprehensive spending review is realistic, even if at times it is a painful pill that we have to swallow. I have every confidence that it will deliver the proper balanced economy to which my hon. Friend the Member for Aberconwy referred in his excellent speech. 

3.41 pm 

Jonathan Edwards (Carmarthen East and Dinefwr) (PC):  I will take your advice, Mr Owen, and cut my speech in half. I will concentrate only on the effect of the CSR on Wales rather than engaging in the wider debate on fiscal consolidation, on which I was eager to have my say. 

It is obvious that the cut of 11.4% in real terms over the next four years, which is an accumulative sum of £4.6 billion, will have a massive impact on the ability of the Welsh Government to deliver the services under their remit. Without the ability to borrow or increase their revenue, the Welsh Government have had little choice but to make some seriously difficult decisions over the course of the spending review. The scale of the cutbacks will inevitably result in job losses in the Welsh public sector and a reduction in services. 

The case has been made in the CSR for Barnett reform. Leaving aside the fact that the formula underfunds Wales by at least £300 million per annum, it gave Wales a worse deal than any other devolved Government because of the way that it calculates the consequentials on non-domestic rates. I have read Gerry Holtham’s excellent article on this on the Institute of Welsh Affairs blog a number of times, but I still can’t get my head around it, to be perfectly honest. Essentially, because national non-domestic rate payments are devolved in the case of Scotland and Northern Ireland they had better settlements under the CSR than we did. 

Jonathan Evans:  I have read Gerry Holtham’s blog, too; he suggests that there has not actually been a request for non-domestic rates to be devolved to Wales. 

3.43 pm 

Sitting suspended for Divisions in the House.  

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4.16 pm 

On resuming—  

The Chair:  Order. I remind the Committee that under Standing Orders we have to finish at 4.30 pm. I ask the hon. Member for Carmarthen East and Dinefwr, who was halfway through his speech, to give us a brief overview of it before I call the Front-Bench spokespeople. 

Jonathan Edwards:  As I was saying, Barnett is bad for Wales in the good times, and also plainly bad for Wales in the bad times. The effect on the block grant under Labour’s budget plans would have been much the same as the Wales Audit Office had reported. The big difference between the Labour and Tory plans was, of course, in the reserve budgets, which account for about 38% of spend in Wales. The savage cuts now being implemented by the UK Government will have a disproportionate effect. In social protection, for example, spend on welfare benefits and those sort of areas equates to 116% of UK average spend, so the severe cutbacks that we will see there will have an effect on local economies and on the most vulnerable in society. 

I was going to talk about the fact that there are four main areas that drive economic growth. In the CSR, three of those elements have been attacked severely: we are aware of the 19% cut in public expenditure. Housing spending will obviously be hit because of the legacy of consumer debt, which is 100% of GDP, and exports will be held back due to the sluggish growth of our main trading partners. That leaves only private investment, and that is why my party believes strongly that countervailing measures are important, as they will give the Welsh economy and the private sector a competitive advantage. I shall finish there, to let the Front Benchers wind up. 

4.18 pm 

Owen Smith:  It is a great pleasure to serve under your chairmanship, Mr Owen. Given that we are very short of time, I shall address some of the factual areas that we have heard about today, and perhaps offer a few truths. 

The debate has been instructive about the real dividing lines between the Opposition and the Government. Those dividing lines are between what I believe is the truth about the causes of the deficit that was born in 2008-09 as a result of what happened with the banks, and the revisionism regarding those causes that we are seeing from the Government. That revisionism has been repeated throughout today’s debate. There is also a stark contrast between the honesty of our position now on the economic prospects in the light of the cuts that we are about to see, and the Government’s blind hope and optimism. Our honesty is in tune with the views of the City, to which we have so often been bid to look. 

Right now, the City agrees with us, not with the Government—certainly on growth. A factual inaccuracy about growth has been repeated several times today, sometimes from a sedentary position. The Office for Budget Responsibility has revised its growth figures for 2011 downwards, from 2.3% to 2.1%. It has revised this year’s June to December numbers up to 1.8% from 1.2%, but that is not much of a claim when a revision is done in December. 

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Lastly, there is a real difference between the Opposition’s interest in and understanding of Wales and its particular needs, including the long-term systemic problems that we have in our economy as a result of our post-industrial heartlands, and the callous indifference, or disinterest, that we see from the Government. That indifference was most harshly exemplified by the welcome, but sadly lacking, response from the Economic Secretary on the CSR’s impact on Wales. We had a rehash of the Chancellor’s speech on the CSR. There were no specific details about the impact on Wales; in fact, there was the temerity repeatedly to present issues that related to only England, with a blind reading-out of that which had already been read out by the Chancellor. 

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I fear also that when we heard from the Economic Secretary—[ Interruption. ]  

The Chair:  Order. I am afraid that I have to suspend, and then adjourn the Committee. 

4.22 pm 

Sitting suspended for a Division in the House.  

4.30 pm 

The debate stood adjourned (Standing Orders Nos. 108 and 88 and Order of the House, 25 November ) .  

Committee adjourned.