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General Committee Debates
Welsh Grand Committee Debates
|©Parliamentary copyright||Prepared 1st April 2011|
Publications on the internet
General Committee Debates
Welsh Grand Committee Debates
The Committee consisted of the following Members:
James Rhys, Committee Clerk
† attended the Committee
Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Before the Committee adjourned, I was talking about end-year flexibility and the sum of around £385 million a year that the Treasury has not allowed the Welsh Government to access this year. That is exactly the sort of money that would help to stimulate economic growth. There are double standards in the sense that we have a Budget about economic growth, yet the Treasury is taking away the very money—the capital investment fund money—that would aid the Welsh Government to drive economic growth through public investment.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones): It is indeed the case that the Government have decided not to extend end-year flexibility, but I am sure that the hon. Gentleman would agree that we have been more generous with the devolved Administrations than we have been with Whitehall Departments. Does he know why the Welsh Assembly Government, unlike the Scottish and Northern Ireland Executives, have decided not to take advantage of planned underspend EYF this year?
Jonathan Edwards: That is not my understanding of the situation. I understand that the Welsh Assembly Government have not been allowed to access the money—we will have to agree to disagree about that.
I make no apology for raising such issues in the debate. The comprehensive spending review imposed on the Welsh Government a real-terms cut of 11.4% over the course of the spending review period, which is a cumulative amount of £5.368 billion. The subsequent Welsh Government Budget announced cuts in capital spending of 41% but, as I was saying, capital spending is exactly the sort of public money that is best used to drive economic growth. It is all very well for the Secretary of State to reel off a wish list, as she did this morning, but when we are faced with such cuts, especially in capital spending, where will the money come from to achieve those objectives?
In the light of the CSR settlement, the least Wales deserves is financial justice on what ought to be its money. Following the referendum, that will be the major political issue over the medium term. It would be advisable for the Treasury to address quickly the injustices of the Barnett formula, the housing revenue account subsidy scheme and end-year flexibility, or the political consequences in Wales for both coalition parties will be severe indeed.
Alun Cairns (Vale of Glamorgan) (Con): It is a pleasure to have the opportunity to contribute to this important parliamentary scrutiny of the Budget in relation of Wales. I apologise that I was not able to attend this morning’s sitting, but that was because I was fortunate enough to have secured a debate in Westminster Hall on special educational needs. I want to focus first on the consequences for Wales of the Budget and, secondly, on what action should be taken to make the best use of opportunities.
Reference has been made to the Barnett formula under which, according to the calculations in the Holtham report, Wales was in the region of £300 million short at the time of that report. That is a fact of the formula as it stands. It has been in place since the 1970s and the previous Administration failed even to consider investigating it. Those who cry for additional funding now need to recognise the role that they played—or did not play—in bringing about fair justice and funding for Wales from the English spending Departments. I recognise that, for the first time, we have an Administration who are prepared to look at the data.
Hywel Williams (Arfon) (PC): Perhaps the hon. Gentleman can help my recollection, but when the Conservatives were in opposition, I do not seem to remember them damning the Barnett formula and calling for its reform, but perhaps I am wrong.
Alun Cairns: I am happy to tell the hon. Gentleman that, yes, he is wrong. The then shadow Chancellor—he is now the Chancellor of the Exchequer—always said, “Let’s see the data and look at it.” The Holtham report was an important submission and the response from the Treasury has been exceptionally positive, which shows that our party is pragmatic and prepared to look at the case as it stands. I am optimistic that a settlement that will properly reward all parts of the United Kingdom can be found.
If we are to make the fundamental change to Barnett that many parliamentarians would like, it can be done only on a UK basis. Scotland therefore needs to come on board, and the Scottish National party—the sister party of Plaid Cymru—needs to accept that. Plaid Cymru Members need to lobby their hon. Friends in the SNP to recognise the block that they are creating to delivering a fair funding settlement for Wales.
We need a balanced approach that recognises what is stopping progress. Despite the actions of the Scottish nationalists, with the support of Plaid Cymru, we have a Treasury and a Chancellor who are prepared to look at the formula based on the data that have been provided, of which Holtham is an important part.
Alun Cairns: I am happy to recognise that Scotland and the current Scottish Executive—the SNP—are extremely important for recognising how funding is skewed throughout the whole of the UK. We need every part of the United Kingdom to recognise the need for a review, and the approach it should take, so that fairness, which is the hallmark of this Administration, can perpetuate funding settlements throughout. Is the hon. Gentleman telling me that Scotland gets a fair share, or would he
The point about the Barnett formula is that it is mathematical, yet despite the fact that the Budget is fiscally neutral, Wales has benefited to the tune of more than £60 million, which demonstrates that the Budget has benefited Wales, as Wales is obviously receiving more than it would have done otherwise.
Of course, there are considerable details and opportunities in the Budget. Opposition parties always seem to focus on inputs, and that has been the habit of the Welsh Assembly Government over many years. We can look at the input of money into Wales. European structural funding is now close to £3 billion, so resources have not been a problem for Wales over the past decade or more because of that European aid. However, despite all the resources that have been made available, Wales remains the poorest part of the United Kingdom, although it has had exactly the same opportunity as every other part of the United Kingdom. The Welsh Assembly Government need to accept responsibility for failing west Wales and the valleys, for which the European aid was intended, and for the knock-on effects of that failure in all parts of Wales.
The Budget takes a completely different approach. Rather than focusing on inputs and how much cash is being spent, it is an attempt to create opportunities to release the private sector, because there is a disproportionate dependence on the public sector in Wales. The Welsh Assembly Government need to accept responsibility for that, because whenever there was a problem, their response was to create a job to try to fix it and simply to pump money at it, rather than looking for opportunities to bring the voluntary and private sectors together to generate wealth.
That point relates to our exciting policy of enterprise zones. Vale of Glamorgan has not received a penny of European aid from structural funds since the agreement was reached in 1999 and the money started to be drawn down in 2000. Obviously, it did not form part of the map that was submitted for west Wales and the valleys. Enterprise zones offer a real opportunity to the Vale of Glamorgan, however, and particularly to a town such as Barry, which is Wales’s largest town and has significant pockets of deprivation. The zones offer an opportunity for the private sector within those areas to have reduced business rates and better opportunities.
Again, however, it comes down to the policies of the Welsh Assembly Government if the benefits are to be delivered. I have asked them formally about this, and I would hope that there would be cross-party support on where we can win and gain these enterprise zones. Barry needs to be one of those, not only because of its deprivation and need, and the excitement that could be generated within Barry, but on the basis of what Barry has not received over the last decade when so much money has been thrown at west Wales and the valleys.
Alun Cairns: It is fair to say that the enterprise zones of the past were not always as successful as they could have been, but as someone who has a strong link with Swansea, I know that the Swansea enterprise park has been a fantastic success that has transformed Swansea. If the hon. Gentleman tells the thousands of people who are employed on that site that enterprise zones are not worth while, they will tell him something very different. If he does not want an enterprise zone in Pontypridd, that suits me just fine, because it will strengthen the case for one in Barry and I hope I can welcome his support for that.
Owen Smith: I am not saying that we do not want an enterprise zone in Pontypridd. We would be delighted to accept all help—macro or micro—that the Government can offer. However, I am saying that the evidence for the enterprise zones of the past is flimsy at best and does not compare well with the evidence for the future jobs fund, which was working in Pontypridd, as I saw at first hand, yet has unfortunately been taken away by the Government.
Alun Cairns: Again, the hon. Gentleman falls back to that old socialist Labour habit of thinking about how much money can we throw in rather that what can we do to release the private sector to generate wealth. I have spent the past 10 minutes focusing on how much money Labour threw into west Wales and the valleys in European aid, but it is now the poorest part of the UK, and among the poorest areas in the whole of Europe. Furthermore, because of the failure of the Welsh Assembly Government and the previous UK Government, when it comes to the next round of European regional aid, the whole of Wales might be classed as a needy area that should receive the highest levels of support.
Guto Bebb (Aberconwy) (Con): The cynicism of the hon. Member for Pontypridd is not well placed. I seem to recall that when the announcement was made, a number of his colleagues welcomed the fact that enterprise zones would be located in their constituencies.
Owen Smith: I must respond. I did not say that we know definitively that enterprise zones will not work. They might work, and we will scrutinise the evidence and offer an opinion of whether they have succeeded. If we have one in Pontypridd and it is successful, I will be the first to fete it. However, I urge him and his hon. Friends to look at the evidence of past success. It is not evident that such zones were successful, yet it was evident that the future jobs fund was succeeding. That is the mistake, because the fund cost a lot less money than enterprise zones might.
Alun Cairns: I cannot say that the hon. Gentleman is talking so enthusiastically about enterprise zones that it will inspire private sector confidence. If anyone is going to damn some sort of success, I think the hon. Gentleman has sought to do that. Again, he returns to the future jobs fund and focuses purely on the amount of money that was going in, not what was coming out. He forgets that, given the debt that this Administration inherited, that fund and other programmes that wanted to spend money hand over fist were simply neither possible nor credible. I question how long the fund would have lasted even if the Government had not changed at the last election.
I should like to focus on jobs in Wales and the programmes that were pursued by the Welsh Assembly Government. In spite of private sector jobs being created throughout the United Kingdom, the situation in Wales is different. In Wales, we focused on inputs and on how much money was being spent to create jobs. Consequently, the scale of public sector job creation was much greater than that of the private sector. Some analysis shows that in west Wales and the valleys in particular, where all the European aid money was being spent, all the net new jobs created in the economy were in the public sector.
Surely we all realise, no matter how big or small we like the public sector to be, or what ideals all sides and colours in the House hold, that that is not a sustainable position. The only way to generate wealth and prosperity is through the private sector. Money spent in the public sector does not have the same gearing in creating wealth as money spent in the private sector. Not only did the previous Administration leave office with higher unemployment, but they did so with many fewer private sector jobs and with public sector jobs at such an unsustainable level that some difficult decisions must be taken now.
This is a Budget for growth. It provides a significant shift from the attitude of asking how much money we are spending to a line of policy that asks what we can do to free the private sector to correct our errors on generating wealth and prosperity. That is what the enterprise zones focus on, and that is what we will do to release the enterprise and freedom of the private sector. I hope that there will be an opportunity to expand the role of enterprise zones and the concessions and benefits that they will bring. They are an effective means and mechanism to gain investment in parts of the country that do not normally attract it.
I have already highlighted Barry in my constituency. Similarly, I can talk about the western parts of the Vale of Glamorgan—Llandow, for example—that have some small manufacturing units and have to compete with counties within spitting distance—some 10 miles or so away—where people who want set up in those areas can draw on grants and assistance that they cannot get in my constituency. That is not right, so I hope that the Welsh Assembly Government will heed my call and, I think, that of the hon. Member for Pontypridd, who seemed earlier to support an enterprise zone in Barry. He does not necessarily think that it will be particularly successful, but I am prepared to give it a great try in my constituency in the largest town in Wales.
Chris Ruane (Vale of Clwyd) (Lab): I want to repeat to the hon. Members for Clwyd West and for Cardiff North some statistics on public sector jobs and how constituencies such as mine will be devastated. Of the 650 constituencies in the UK, the top one for public sector jobs is Edinburgh South, with 68% of workers in the public sector. Number 15 is Cardiff North, with 48% of workers in the public sector. Number 23 is my constituency, the Vale of Clwyd, with 46% of workers—13,000 people—in the public sector. Clwyd West is number 26, with 45%, or 10,000 people. Within Clwyd West and the Vale of Clwyd, the central part of north Wales, there are 23,000 public sector workers, 10% to 25% of whom will become unemployed. That is bad news for the individuals who lose their jobs and for their families, who will not be able to afford Christmas presents or holidays this year. It is also bad news for the people who keep their jobs, because they live in fear of losing them. Every pound that is lost from those pockets does not circulate in the local economy. There is no economic multiplier of times seven supporting the pubs, the clubs and the shops.
Kevin Brennan (Cardiff West) (Lab): Is not my hon. Friend forgetting the fact mentioned in the letter to my hon. Friend the Member for Newport East? Those people will get redundancy money, which they can spend in the local economy and thus stimulate local business. That is the Government’s position.
Hometrack did some research for The Guardian last August and named the three towns with the highest levels of public sector jobs in the UK, two of which are in Wales: Aberystwyth, Rhyl and Morpeth, which I think is in the north-east of England. Those towns will suffer the most through house prices. So there is a knock-on effect.
It not only affects the workers, but everybody who owns a house in the area. Their house prices are going to go down. Norman Tebbit’s famous advice was, “Get on your bike and search for work.” How can someone get on their bike if they are tethered to a community with a £150,000 mortgage? There will be no geographical mobility if people have to keep two homes to maintain a job.
I will give way to two people: the Under-Secretary of State for Wales and the hon. Member for Cardiff North. I want to ask them what specific help they have requested for those areas with high levels of public sector jobs, because I have asked for it. I asked the Chancellor at
Mr Hanson: My hon. Friend will recall the National Insurance Contributions Act 2011 in which the Government brought forward a proposal to give national insurance holidays to new businesses in areas of high public sector employment. Their target over three years is 400,000 new jobs. From last June, when the scheme commenced, to last month, 1,500 jobs have been created. Big success!
Alun Cairns: I recognise the problem that so many such communities have with dependence on the public sector and jobs created within the public sector. Does the hon. Gentleman think, therefore, that it is an indictment of the previous Administration to have left such communities so dependent on one source of employment? Does he not think that a successful Government would have left them with a far greater diversity of employment opportunities?
The Tories built the St Asaph business park. It cost £11.5 million; £2.5 million for a flyover alone. That business park was empty for seven years. Some 100 jobs were created in a seven-year period, 54 of them with the Welsh Development Agency. That was until 1997.
In 1997, the Labour Government engaged with Europe and, with the help and agreement of my right hon. Friend the Member for Neath, the objective 1 boundaries were changed to include Conwy and Denbighshire. We engaged with the Wales Office, which positively engaged with Europe. As a result, £124 million of objective 1 funding has come to Denbighshire and to the county and constituency of the Vale of Clwyd. Here we are: a desolate, barren £11.5 million business park empty under the Tories—
There are now 3,500 jobs, including the Technium OpTIC, a £17 million research and incubation centre that works. It is the third biggest opto-electronic centre in the world. It works with 50 established opto-electronic companies in north Wales, which will turn out 100 new high-tech companies over a 10-year period. That is our record. The number of jobs created in my constituency since 1997 rose from 23,000 to 30,000, but has now gone down to 27,000. We created an extra 7,000 jobs over 13 years, and I am tremendously proud of that figure.
The Government say that they hope to create private sector jobs in new high-tech, 21st-century industries to replace public sector jobs. In north Wales, 21st-century industries are in wind generation. Eight years ago, I opened North Hoyle wind farm and two years ago, my right hon. Friend the Member for Neath opened Rhyl Flats. They have 60 turbines. There will be 200 turbines behind them, off the north Wales coast, creating the largest body of wind turbines in the world.
In The Guardian yesterday, it was revealed that in the space of one year the UK has slipped from the third-best performing country in the world in green technologies to 13th. That information is from the independent Pew Foundation in America. The Guardian report states:
“of the UK’s climate change targets beyond 2020. There are still deep divisions between the Department of Energy and Climate Change, which is calling for tough targets to stimulate green growth, and the Treasury and the Department for Business, which argue that the current economic situation calls for less stringent targets in 10 years’ time…The Pew Foundation blamed the UK’s fall down the rankings on ‘a sharp decline in offshore wind energy investments and uncertainty surrounding government policy’.”
The other big growth area for the private sector in north Wales is in solar panels. The Sharp factory in Wrexham is the biggest manufacturer of solar panels in the whole of western Europe. There is another one—Kingspan—in the constituency of my right hon. Friend the Member for Delyn. Dysol, an Australian company at the cutting edge of solar electricity, travelled 12,000 miles to locate at the OpTIC research centre in St Asaph. Dysol is working on organic photocells—not crystal, organic. It has teamed up with Corus to take that work forward.
Those are three excellent cutting-edge companies that have been denied the right to grow because of recent changes to the feed-in tariff—introduced by the Labour Government—made by the Tory Government so that they do not have solar farms in the south-west or in Dorset. Those are not national policies; they are aimed at pleasing Lib Dem and Tory constituencies in the south and the south-west, and against constituencies in north Wales.
The parties on the opposite Benches are changing the rules on housing benefit. As Boris Johnson said, they want Kosovan-style clear-outs in London and the big cities. “We’re not going to pay money to scroungers”, they say, but those are decent people, many of them in a difficult position. The Government are treating them like trash, moving them round the country. We know where they will go. The Government are finishing Lady Porter’s work, which was started 25 years ago. They will cleanse those areas to make them safe Tory seats, and droves of people will go to seaside towns—to Hastings, Margate or Jaywick, which yesterday was deemed the poorest ward in the UK.
The top three poorest wards in the UK are in seaside towns. When people are driven out for political advantage and end up in seaside towns, the situation will be even worse. They will end up in houses of multiple occupation, with slum landlords—Rachman types. The charity, Shelter, has seen a 23% increase in complaints about landlords in the past year, according to an article in The Guardian today, which adds that last year, the Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps),
Hywel Williams: Does the hon. Gentleman share my despair at the Government’s decision to bring in the single room rates for people up to 35 many months early, presumably increasing the number of HMOs in his constituency, which I have visited?
Chris Ruane: It is not just in my constituency; it also applies to the constituency of the Under-Secretary of State for Wales, the hon. Member for Clwyd West. He shares exactly the same problems in Colwyn Bay as I have in Rhyl, and he is making a bad job worse.
Turning to the final section on help for young people. The future jobs fund created 450 jobs in my constituency for young people between 18 and 25 over a one-year period. Of those on the future jobs fund, so far 50% have got employment and 10% to 20% have gone into education. It costs £6,500 to turn a young person’s life around, from one of idleness and getting involved in crime and negative pathways, to something positive. A sum of £6,500. How much is spent by Tories on educating and turning around the lives of their children? Eton costs £30,000 a year. However, £6,500 for a young lad or lass on a council estate in Rhyl is too much for them. It is one rule for the rich and one for the poor.
Chris Ruane: We have made great progress over the past year in putting 450 young people back to work in the Vale of Clwyd. That finishes today. Job opportunities available yesterday will not be available tomorrow. All that will be available tomorrow is the dole, a lack of dignity, and lowered morale and confidence. They—and probably their children, if nothing is done—will end up in the new coal and steel towns of the UK. Those coal and steel towns were decimated by the Conservative party in the 1980s. The new communities are going to be public sector towns and seaside towns, because nothing is being done to help those young people.
The Government want to replace the future jobs fund at £6,500 per person with skivvy schemes, a return to the youth training schemes and the Manpower Services Commission that we saw in the 1980s. These schemes will not do; the people in seaside towns—including Colwyn Bay—deserve better. We will see decay in those societies, because local communities need jobs, not just for the money, but the feeling of self-worth and community that jobs provide. If nothing specific is done for those communities, we will not have a big society in a better Britain but a beg society in a bitter Britain.
Guto Bebb: It is a pleasure to serve under your chairmanship, Mr Owen. First, I would like to refer to some of the comments made by the hon. Member for Vale of Clwyd. I am the father of five children. I am proud to say that four of them are in a state primary school and my eldest son is in a comprehensive. I was also educated in a comprehensive school, as was my wife. I do resent the comments from a member of the Labour party when its Administration in Wales spent £700 per head less on children in Wales than the equivalent in England. That is the real disgrace about education.
David T. C. Davies (Monmouth) (Con): Did it also surprise my hon. Friend, as a fellow comprehensive boy who sends his kids to a state school, that the hon. Member for Vale of Clwyd made no mention of the leaders of the Labour party, who all send their kids privately because of the mess that they have made of the state system?
Guto Bebb: As usual, my hon. Friend makes a very strong point and I agree entirely. Another point made by the hon. Member for Vale of Clwyd was about the great job creation at the St Asaph business park under the previous Labour Government. I know the St Asaph business park extremely well, and there are undoubtedly
In the St Asaph business park, there is TRB, a Japanese automobile factory that represents the first-ever foreign inward investment in the vale of Clwyd. There is Green Thumb, which relocated from the Deeside industrial estate to the St Asaph business park. There is Kent Periscopes. There is Macbryde builders. There are dozens of private sector jobs in that business park.
Guto Bebb: I obviously know that there is a mix there, but I suspect that the vast majority will be public sector organisations. They include two housing associations that have moved from the centre of towns, which I cannot see is of great help to their tenants.
Alun Cairns: It is easy to cherry-pick individual projects, but do we not need to consider the totality? If we examine the data—the gross value added, the gross domestic product or whatever measure we want to use—we see that Wales is the poorest part of the United Kingdom. That is our inheritance. Although the hon. Member for Vale of Clwyd picks out individual projects that might well be successful—we are happy to back those—the totality means that Wales is still the poorest part of the United Kingdom.
To turn to the Budget, it was an incredible achievement in very difficult circumstances. Some Opposition Members should be slightly less churlish about the fact that a fiscally neutral Budget resulted in an extra £65 million being made available to the Welsh Assembly. Clearly, we would all like more money to become available to Wales, but in the circumstances, a fiscally neutral Budget that has resulted in an extra £65 million for Wales must be welcomed.
What I very much appreciate about the Budget is the fact that it targets the real need of the economy of the United Kingdom and Wales—the need for a private
However, we cannot carry on with a situation in which the Welsh economy derives some 70% of its added value from the public sector. We cannot carry on with a situation in which the Welsh economy is more dependent on state spending than East Germany was in 1989, because that is simply unacceptable in 2011.
The only way to tackle the situation is to encourage businesses to grow. I stated this morning that I welcomed the fact that we were reducing corporation tax. We want to make the United Kingdom a competitive place for large businesses to come and invest. In the same way, I welcome the fact that small company corporation tax is being reduced from 21% to 20%, but I would like that to go further.
Guto Bebb: Clearly, the higher the growth figure, the happier I would be, but the fact that we have a growth figure at all in an economy that was decimated by the previous Labour Government is incredible. Again, we need to have growth that is sustainable, and that cannot be derived from public spending. We need to get away from the concept that Governments can create jobs. They can create the opportunity for jobs, but they cannot create sustainable, long-term employment.
Owen Smith: Does the hon. Gentleman accept that it is not the Labour party saying that growth has slowed, but the Government’s own Office for Budget Responsibility? Last August, it projected that growth would be 2.1% to 2.6%—that is now down to 1.7%. It is not us saying that: it is your guys.
Guto Bebb: I do not think that I have stated anything to the contrary. Economic growth is not as we would like, but there are international reasons for that. The huge increase in fuel price is a big concern—
Jonathan Evans: Just for clarification, my hon. Friend will want to tell the shadow Minister that although the figure for next year has been revised, the later figures show increased growth compared to the figures originally predicted.
The truth is that we need to rebalance the Welsh economy. I call for reductions in the small company rate of corporation tax, too, in due course. If the corporation tax rate comes down from 30% to 23% during the course of this Parliament, I would like to see a corresponding reduction for small companies.
In my constituency, a large number of self-employed people are sole traders or partnerships. No doubt the huge increase in personal allowances will be a direct benefit to such businesses, because when business people are allowed to keep more of their money within their ventures, they have the opportunity to invest.
In the Budget debates, I was delighted to refer to a company in my constituency, in the town of Llanrwst, which—as a direct result of the Budget—felt confident enough to invest a further £160,000 in its business and give its staff their first pay rise since 2008. That is a sign of a responsible small business, which is sharing its success with its staff and investing for the future. That investment decision was made because of confidence in the business as a result of the Budget. We need that type of growth and investment to ensure a sustainable future for the Welsh economy. We need a sustainable future, because we cannot carry on with this over-dependence on the public sector.
Finally, the right hon. Member for Neath and the hon. Member for Pontypridd challenged the Secretary of State for Wales on the alleged barriers to economic growth in Wales. I made a quick intervention on that to highlight that one of the barriers was the Department of Economy and Transport in Wales. When we look at economic prosperity in a Welsh context since 1999, the picture is atrocious—the performance of the Welsh economy has fallen. Despite our having created a structure that should be supporting business and the fact that we have received massive amounts of European money, the performance in west Wales and the valleys has gone backwards. We have to ask ourselves, why is that so? We have heard evidence in the Welsh Affairs Committee about international businesses having a lack of confidence in investing in Wales, because when they meet Welsh Assembly Ministers, they hear fine words, but they see no action.
Guto Bebb: I am more than happy to acknowledge that the ProAct scheme was a success, but in that session, the comment was also made that staff at the Department of Economy and Transport, who were responsible for the scheme, have already undergone four audits, I think.
Guto Bebb: It was six audits. A structure that insists on six audits of a successful project is saying, “If you show initiative and a willingness to work hard on behalf of the economy and businesses of Wales, you will be rewarded with six audits.” That says everything that we need to know about why that Department is not working to the satisfaction of businesses in Wales.
Hon. Members do not need to hear from me about the Department of Economy and Transport’s lack of performance, because we have received leaked letters from its staff. I know many staff at the Department, and they are hard-working and committed to supporting businesses in all parts of Wales. They feel, however, that they are not led properly and that they face reorganisations time and time again. I am sure that the hon. Member for Clwyd South will remember that it was also said that if someone talks to an officer in the Department, when they go back, that person has always moved. The evidence comes from the officers themselves, who have leaked comments. They have said that top management of the Department lack leadership skills and the ability to motivate staff. Staff have stated that there is no ability within the Department to understand, lead and manage change. We have also heard comments from staff who say that the Department of Economy and Transport in Wales is supposed to be open for business, but it is not. We have heard that staff morale in the Department is at a record low, and I can attest to that.
Alun Cairns: My hon. Friend’s point about staff morale and the leadership shown by the Department for Economy and Transport is recognised not only in the papers that he has shared with the Committee, but by the right hon. Member for Neath. He was extremely condemnatory about Ieuan Wyn Jones as Deputy First Minister and the Minister responsible for economic development and transport in the Welsh Assembly Government. I look for a defence of Ieuan Wyn Jones from Labour Members—obviously not.
Guto Bebb: I was going to finish my comments, and I regret allowing that intervention. I wanted to mention issues concerning the Department for Economy and Transport in Wales, which is an imperative and important Department that works with the Treasury to ensure that enterprise zones and so forth are placed in Wales. The right hon. Member for Neath asked whether it is justifiable to have a Minister who is
As long as that situation remains, we can do many things in the Budget in Westminster, but the tools remain in the Welsh Assembly. If those tools are not being used for the benefit of the Welsh economy, we are in a difficult place.
Jessica Morden (Newport East) (Lab): I did not expect to be called so early. In view of your earlier comments, Mr Owen, I will concentrate my remarks on the Budget, and given the comments from Government Members, I will speak about private sector jobs in Wales. I want to return to the carbon floor price, to which my hon. Friend the Member for Llanelli referred in the last Welsh Grand Committee. Although on that occasion the Minister did not have the chance to address her points in his concluding remarks, I ask him to take on board the real concerns of hon. Members who have an interest in steel in their constituency and listen to what we are saying.
We have heard much from Government Members about Wales being open for business, and the need for private sector growth and increased manufacturing. In the Budget, however, after a paltry six-week consultation over the Christmas period, the Government introduced the carbon floor price, which will hit hard some of our largest and biggest employers that are intensive energy users, such as Tata Steel in my constituency. This not only relates to steel; the measure will also hit producers of ceramics, papers, cement and glass, who employ about 250,000 people in the UK. Obviously, the steel industry is also a huge employer.
The inaugural meeting of the glamorously titled energy intensive industries all-party group two weeks ago was one of the largest such meetings that I have ever attended. All those industries were represented and it demonstrated the strength of feeling from industry about the measure. I appreciate that the aim of the carbon floor price is laudable in seeking to encourage investment in low-carbon generation. In his Budget speech, the Chancellor made great play of the fact that the UK will be the first country to implement such a measure. However, he has taken no account of the fact that it will involve a significant extra cost for intensive energy users. A balance must be struck.
I noticed today during Prime Minister’s Question Time that in response to my hon. Friend the Member for Swansea West, the Prime Minister seemed to suggest he knew better and spoke about investment in steel. Nevertheless, that was Tata Steel’s response to the Budget. This is a unilateral tax that no other country in Europe or the world will enforce. Steel produced elsewhere in the world will not be subject to the extra cost, thereby making UK steel less competitive. Many of the industries affected are owned by foreign companies that can choose where to invest. There is a real threat to the UK if it adopts different policies to the rest of the world.
David T. C. Davies: The hon. Lady makes a powerful point. Does she agree that, in general, it would be foolish for the Government to implement environmental measures in the United Kingdom that are not implemented across the rest of the world?
Jessica Morden: I agree that a balance must be struck. There is no sense in losing steelmaking in the UK and then having to import steel from other countries that produce the same amount of emissions.
There is a real threat to investment and to jobs in the UK. Steel is a crucial industry in Wales, where it employs approximately 7,500 people and is the largest private business. A couple of weeks ago, I visited Llanwern and was pleased to see the work force back up to 700, with many more employed in support roles. Half of UK steel is now exported—we are now a net exporter. The Government need to listen to companies such as Tata, so that we do not end up putting that at risk.
When I go to Llanwern, I see an industry that supports plans to make the transition to the low-carbon economy and is trying to be part of a solution to reduce CO
2emissions. For Tata, that might mean developing projects
I urge the Government to consult more and to listen to industry. A balance needs to be struck. If we are not careful, the result will be carbon leakage, with manufacturers choosing to go to parts of the world where the environmental regulations are less stringent. We would then end up in the ludicrous position of importing steel from countries who produce the same amount of emissions, and we will have lost the industry. Will the Minister consider that and encourage the Government to conduct a proper impact assessment, so that a compromise can be found? UK Steel wants to be part of the solution to climate change but needs to work on a level playing field.
Finally, I should like to return to the issue of the Newport passport office. I urge the Minister and Secretary of State to increase the pressure on the Home Office to reverse this ludicrous decision. During the consultation, we heard a whole raft of evidence that shows how devastating the decision will be for Newport. The only people who are really welded to the decision are the chief executive of the Identity and Passport Service and the Minister responsible. It will hurt the city centre, which is already reeling from the loss of major retailers such as Marks and Spencer, Monsoon and Next. The city has been cited in the Centre for Cities report as one of those most struggling to recover from the recession. The lack of an economic impact assessment was astonishing, and the Welsh Affairs Committee report picked up on that.
What is clear after this long process—the consultation was extended—is that it will not actually save anybody any money at all. I have met the owner of the building that is used by the passport office, and the IPS will have to spend millions to buy itself out of the office contract, while the skilled and dedicated staff lose their jobs. I walk past the passport office every week, sometimes twice a week, and there are queues and queues of people. The demand for the service in Wales is there. Finally, to add insult to injury, we had the Government’s equality impact assessment, which said, basically, that giving people redundancy payments could boost the local economy in some way. The vision of people running out and spending their redundancy payment in local shops really beggars belief and is deeply insulting to those who risk losing their jobs.
In conclusion, the Budget will do nothing for those passport workers in Newport. It also risks harming industry and private sector jobs, as I explained, through the carbon floor price, and I ask the Minister to do all that he can to try to affect the outcome.
I broadly welcome the Budget, particularly the intention to recast our taxation system, moving the burden from those on low incomes and paying for it by increasing taxation on those on high incomes. I particularly welcome the increase in the personal tax allowance, which has been trailed for many months. As a result, people on low incomes in my constituency will find themselves paying either no tax, having been taken out of the tax system, or a reduced amount of tax. I look forward 12 months to the further increase of £630 in the personal allowance, which, once again, will make a difference to those who are on low incomes.
Roger Williams: The hon. Gentleman makes a point about the rate at which people can keep the money that they earn and not pay tax on it, but he must realise the straitened financial situation in which the country finds itself. People on low incomes really do welcome the fact that the Government have addressed the matter, making an incentive for people to get into employment; because of the taxation system, that was not always the case.
I also welcome the fact that the child tax credit has been increased above the rate of inflation, which will have an impact on child poverty. It was unfortunate that the Labour Government were not able to meet their child poverty targets. They were not able to meet their fuel poverty targets either, and we ended up with a larger gap between the rich and poor than when they first came to power.
Jonathan Evans: My hon. Friend may recall that we discussed this at the last meeting of the Welsh Grand Committee, when it was pointed out that it was not a question of Labour not meeting the target of eliminating fuel poverty; it is that fuel poverty doubled.
Roger Williams: My hon. Friend makes a good point. The Labour Government’s excuse was that it was the result of increases in fuel prices, but we look to the Government to get things done, not to make excuses for things that were not achieved.
I wish to raise two small points—things that I believe the Budget could have achieved for people in Wales and, indeed, for people throughout the UK. It was our national saint who said, “Do the small things.” I should like the Minister to pass on to the Treasury a few suggestions of small things that would make a difference. The first is the child care voucher scheme—a matter that I raised with the Chief Secretary this morning. Much emphasis has been put on the need to encourage self-employment, and I believe that Wales needs to have
Susan Elan Jones: I do not recall our national saint saying that we should remember the little things but totally ignore the big things. Surely, that describes exactly what the Government did with fuel. They took a penny off, but added many more pennies in the VAT increase.
Roger Williams: The hon. Lady makes a point, but I believe it was the Leader of the Opposition who suggested a differential in the prices for fuel and other products. I will come to that, but in the context that she is talking about, such a change would have been illegal and difficult to achieve.
Roger Williams: Let me finish dealing with the point made by the hon. Member for Clwyd South. There has been an increase in VAT, but if her party had been in government, we would have had the fuel escalator as well, which would have meant an increase of 4p, plus 1p, which would have been 5p.
Nia Griffith: Is the hon. Gentleman aware that it possible to have different rates of VAT and that various countries in Europe do? If he looks at his own electricity bill, he will see that it is charged at a different rate. It would have been perfectly legal to set a separate rate if the Government had wanted to do so.
Roger Williams: The hon. Lady makes a good point, and I will shortly come to something in a similar vein, but a spike in fuel prices cannot be dealt with overnight. Long-term agreement is needed with the European Union, and that cannot be done immediately. I went out on a limb on a television programme on the Sunday before the Budget to ask for a cut in fuel tax, which is a good way of addressing the problem. That was achievable, and was done.
The child care voucher scheme is important—my son and daughter-in-law make use of it—and it is highly tax efficient. There was criticism that it benefited those on higher tax rates instead of those on lower rates, but figures show that 85% or 90% of all recipients are on the basic rate of tax. The money that the Government provide goes to child care, so there is no issue about its being used for other purposes.
A quirk of the system, however, is that self-employed people cannot benefit from it, and that is a disincentive for people going into self-employment—even into full employment, but particularly self-employment. Extending the child care voucher scheme to self-employed people would dismantle at least one hurdle that could discourage people from going into employment. If more people were in employment, more taxation would be generated and the scheme could be almost self-funding.
A second small matter that I would like the Minister to take to the Treasury is one that Opposition Members have raised. Changing the rate of VAT on certain products is entirely possible, but requires long-term planning. The Budget set out the principles of the green deal, and
One issue that could be addressed more easily is that certain products used in the green deal—for example, insulation and services such as installing that insulation— attract a VAT rate of 5%, whereas other materials, such as double glazing, attract the full rate of VAT at 20%. That is not an incentive for people to become involved in the green deal. If the 5% VAT rate applied to all the materials that could be used in the green deal, not only would that encourage people to enter the scheme, but the money made available for it would go further and we could treat more houses.
Certain products other than insulation attract the 5% rate. One is low-energy light bulbs and the other is contraceptives—I am not sure whether there is a link between those products. I am not suggesting that contraceptives should be part of the green deal, but there is an opportunity for the Government to do something rather small to improve a scheme that will be very successful.
I turn now not so much to the macro-economics, but to a couple of points made by my hon. Friends about the role of public sector money in Wales. I have argued in the past that although the Barnett formula delivers more money per head for the people of Wales, there is a good case, as some of the published reports confirm, for saying that it has passed its sell-by date and that we should have a needs-based rather than a population-based formula. In the past, Wales has received not only more money per head than England, but more investment than many areas in England through two tranches of European money.
Alun Cairns: Does the hon. Gentleman recognise that the Barnett formula also offers protection during a period of expenditure cuts? Therefore, the £300 million shown in the Holtham report some time ago will be a lot less, and is projected to be less, as a result of the changes in public expenditure.
Roger Williams: That may well be the case, but I say to my hon. Friend that I hope that in the course of this period of government or in future years, there will be increased investment and increased money going to Wales. It is in relation to that aspect that we really need to consider reform. However, that is not my point. The point is that Wales has received a lot of public money over the years, yet has not used it to best effect. We need to examine that. I am not one to say that we should have less public money, but I am saying very directly that we need to ensure that when we have public money, we use it well.
When I was young, I did not understand what the parable of the talents meant—that we should not necessarily give more money to someone who has not invested it wisely, but give it to someone who has invested wisely.
David T. C. Davies: Does the hon. Gentleman accept that that is proof that the argument about Keynesian economics and the Austrian school of economics has been around for a while? Even in the Bible, the Austrian school trumps it every time.
I anticipate that Wales will receive more European money in future, but I see that not as a triumph, but as a real disappointment that we have not made the same progress as other European countries or regions that have made a real difference to their infrastructure, whether it is roads or railways, and to their training schemes so that people have the skills to take the economy forward. Wales has not achieved that, but must achieve it in future if it is to justify the public money that I believe needs to be spent there.
Nia Griffith: I would like to deal with one of the issues relating to the money that is being taken out of the Welsh economy. The Budget has been quite deceptive this year. Because the VAT rise was introduced in January, many newspapers, in reporting on the Budget and considering the effect on family income, did not factor it in. It will have a very significant effect. We welcome the raising of the personal allowance. That is sensible and progressive. However, a family who will gain perhaps £40 plus will spend some £450 during the year on increased VAT, so it will not help families as much as it might appear. It will also take money out of the local economy, which is the point that I really want to make.
Let us consider fuel duty. Yes, we have seen fuel duty reduced in the same way as we cancelled or postponed fuel duty rises in the past, but the VAT remains. Therefore, as the Secretary of State for Transport himself said, families on low incomes, families who are squeezed, will be saving—stopping their spending—in other areas. Families who live in areas where they have to use a car, who have jobs that mean they have to use a car or who have to buy products whose price is increased because of the cost of fuel will reduce their spending elsewhere in the economy.
Now we come to the winter fuel allowance. We were accused of scaremongering dreadfully before the last election—how dare we suggest that any incoming Conservative Government would even consider touching the winter fuel allowance? But here we are. We have it in black and white—a reduction from £250 to £200 and, for the over-80s, a reduction from £400 to £300. That is at a time of rocketing fuel prices. One thing about that benefit, of course, was—
The Chair: Before we resume the debate, I remind the Committee that we will start the winding-up speeches 15 minutes later, at 4.25 pm. Two Members have indicated that they want to speak after Miss Nia Griffith.
Nia Griffith: As I was saying, the winter fuel allowance helps pensioners who do not qualify for things such as cold weather payments or pension credit. It helps a lot of people because it is universal, and it will be very much missed.
Roger Williams: I am listening to the hon. Lady carefully, but does she agree that one problem with the winter fuel allowance is that I get it, which surely goes above and beyond the duty of any Government?
Nia Griffith: One of the things about universal benefits is that the hon. Gentleman will pay a lot more tax. These things actually work themselves through, because those on higher incomes, and who have high pensions, will pay back the money in taxation. For those who are just above the level at which they can get pension credit and so forth, however, winter fuel allowance is extremely useful.
This morning, the Chief Secretary to the Treasury said something about the least well-off being able to get help from the Department for Environment, Food and Rural Affairs. Given that the money for the winter fuel allowance was originally Treasury money and came directly out the taxation system, what will happen about that DECC money? Will the Welsh Assembly be given extra money to make similar payments to people on similar levels of income in Wales, or is the Welsh Assembly Government expected somehow to Box and Cox and try to produce the equivalent from whatever they are given? I would be grateful if the Minister can confirm exactly what will happen.
The significant changes to the tax credit system mean that people with a joint household income of £26,000 or above will lose all their tax credits. In addition, certain people will lose child benefit and the child trust fund. All those things take money out of circulation in the local economy. Added to that is the stealth tax that will result from changing the way we calculate a large number of benefits and pensions and moving from the retail prices index to the consumer prices index. Yet again, more money is being taken out of the economy. People with a small disposable income will therefore have an even smaller income. In places such as Llanelli, we might want to talk about regenerating the town centre and private sector business, but the money being taken out of the system is not there to generate wealth, to generate business for local firms or to help the local economy.
For historical and geographical reasons, residents in some areas face much higher charges for their water. At the top of the table is the south-west of England, but we in Wales have similar problems. We have a long and beautiful coastline, and we want to encourage tourism, so we want our seas to be as clean as possible. At the same time, we have a relatively scattered population. That means that we, too, suffer from high water charges. It will come as no surprise to anybody to learn that Wales comes second in the league table after south-west England. Nor will it come as a surprise that Ofwat, as the regulator, looks at these charges and says, “We really can’t hammer the consumer any more. We must ask Dwr Cymru to keep its charges down.” However, if Welsh Water does that, it will have to limit its expenditure on new infrastructure, which will have a knock-on effect on what it can do to decrease the number of sewage
If south-west England can have special terms and conditions, why was the whole of England and Wales not looked at in one go in the context of cross-subsidy and helping people in areas such as Wales, who also suffer from high charges and who need massive investment in infrastructure to support our rural communities and the tourism industry that we want to develop? If cross-subsidy for water charges across the whole of England and Wales is not the way forward, what about some sort of system of water benefit? Water is the one charge on which no concession is made for people on very low incomes. On council tax, there can be council tax benefit; on housing costs, there can be housing benefit; work has been done on fuel poverty, giving some help towards fuel costs for those on low incomes; the one area that has not been tackled yet is water. If we are to consider those high charges, what about a system of water benefit right across the UK? That would put the help in where it is most needed.
I will conclude on enterprise zones, which have been heralded by the Government as very desirable and special. The Welsh Assembly Government are being challenged to do something similar in Wales, but let me challenge some of the assumptions. As my hon. Friend the Member for Pontypridd has quite clearly stated, the cost of the jobs in the enterprise zones in the 1980s and 1990s was in the region of £26,000 per job created, as opposed to something like £6,500 for the jobs created through the future jobs fund, which the Government have scrapped.
What are enterprise zones getting? First, will the Minister clarify what the enterprise zones in England are being given? In exchange for relaxing planning rules, they are being allowed to keep the rates, but what else will they have? What else will encourage anyone to go to them? Quite honestly, I wonder what the Government are asking the Welsh Assembly Government to mimic and whether it is worth having.
Secondly, it is very difficult to define exactly which areas will most benefit from enterprise zones. One of the difficulties is that there is a lot of displacement from one area to another, and people complain that their area has not been included. As my hon. Friend the Member for Vale of Clwyd has pointed out, the areas of traditional unemployment in Wales may not be the only areas that suffer significant amounts of unemployment in the coming few years, and different patterns of deprivation may emerge in Wales as the cuts take effect.
If the Welsh Assembly Government are being challenged to create enterprise zones, will the Minister tell us exactly what the enterprise zones get in England and what he anticipates the Welsh Assembly Government will wish to copy? My advice is that the Welsh Assembly Government should consider the matter very carefully and come to their own conclusions on the best way forward. I really do not think that we should put up with this nonsense of enterprise zones being wonderful things, because I do not think that that will be the case.
Jonathan Evans: I will endeavour to conclude my remarks by 4.15 at the very latest, to ensure that the hon. Member for Islwyn gets an equal amount of time. That may well reduce the amount of time that I can take for interventions.
The most important aspect of the Budget has been rather missed in the debate; all the Budget forecasts that we are looking at are, for the first time, made by an independent body. As we heard during the Budget debate in the House, the creation of the Office for Budget Responsibility stimulates Labour Members to talk about whether there has been, as there has been, a revision of the growth forecast for the next year or so—although further revisions have indicated that there might be larger growth later.
Those forecasts are, however, not Treasury or the Chancellor’s ones, but independent. They make for a different background to what we saw over the past decade. The right hon. Member for Neath stimulated me to look back in the break at some of the halcyon golden days of the Labour Government. I have some of the remarks—
The right hon. Gentleman said that that was completely backed by the Conservative party. I am absolutely prepared to accept that the Prime Minister, when he was Leader of the Opposition, did make such a statement. His predecessor Michael Howard, however, said something rather different, according to the BBC article:
“Personal debt is at record levels. Conservative leader Michael Howard said on Wednesday that spending was being financed by borrowing to be paid for by future higher taxes…‘This is a credit card budget from a credit card Chancellor’”.
Not everyone was gloomy about that 2004 Budget, with Goldman Sachs saying that some economists were predicting real extra cash for the Government because City bonuses would rise significantly and would be taxed, adding to the overall take of the Treasury; it is interesting what we hear now about bankers when set against that context.
“The Budget has not changed our view that the government will start the next cycle with a structural current budget deficit. Correcting this is likely to require some combination of tax increases and lower public spending growth in the years ahead.”
“Many economists believe that despite the unusual rosiness of January’s public finance figures, Brown’s books may be in a worse state than first thought as the figures were propped up by one-off tax payments”.
“A report out from the Ernst & Young Item Club say that although the Chancellor may be able to muddle his way through the Treasury’s new 12 year cycle, the outlook for the UK economy is shaky. Rising taxes and energy bills are sapping spending power, raising doubts over Brown’s forecasts for economic growth.”
Owen Smith: Interesting though that historical tour was, and interesting as it was to hear what doubts might have been in the minds of some media and commentators about Labour Budgets, would the hon. Gentleman not concede that during the vast majority of the Labour years—11 out of 13—we saw successive periods of growth in our economy? Only in 2008 and 2009 did we see contraction.
Jonathan Evans: I am certainly prepared to accept the growth figures. However, the growth figures were financed by borrowing on a scale that was being fiddled in the figures. Statements made by economists at the time showed that to be the case. There was going to have to be a reckoning, and now we are dealing with that reckoning.
Although the hon. Member for Vale of Clwyd is not in his place, I want to respond to his challenge. I represent a constituency with the largest number of public sector jobs in Wales, with HMRC—the Inland Revenue does the taxes for everyone currently in the room and for many people throughout the UK—Companies House and the University hospital of Wales. Many of those who work for the BBC live in my constituency, as do many who work at the university. Many of my constituents work for the Welsh Assembly and for a range of Government agencies.
Be in no doubt that the public sector unions campaigned during the last election to ensure that I was not elected. They campaigned on the basis that the Conservative agenda would be to tackle this deficit. The right hon. Member for Neath has left the room, but he was in the forefront of campaigning with the unions against my election, so I make no apology for making it clear that the deficit must be tackled.
I believe that I was elected by my electors—almost half of them work in the public sector—in recognition of the fact that we had to tackle the deficit. That was accepted in a poll last week by The Economist, which found that 57% of people supported the current level of cuts, or even tougher cuts. I am bound to say that there is a much stronger sense of realism among the electorate as a whole than there appears to be on the Opposition Benches.
Opposition Members are voicing extraordinary indignation about proposals on public-sector reductions, yet as we have heard today they also oppose everything to do with taxation. In other words, if we were not taking the steps outlined by increasing taxes, there would ultimately be even less public spending.
Nia Griffith: Does the hon. Gentleman not agree that the regressive nature of the taxation will hit Wales harder? The Budget will take a lot of money out of Wales—money that could have been used to generate private-sector growth.
Jonathan Evans: It follows from what the hon. Lady says that she is in favour of either significantly higher direct taxes or higher public spending cuts. She cannot have it both ways, saying, “We’ll have lower taxes and we’ll just spend more money.” The public understand, even if Opposition Members do not.
I wish to speak about another aspect of the poll published last week. It is a warning to my side. The electorate clearly understand the need to tackle the deficit, which is why they voted against Labour and gave the Conservative party significantly more seats at the election. However, they also want to ensure fairness. I say this for the Opposition; in their attacks on unfairness, they had a bit more traction with public opinion. There is no doubt about that, and the coalition Government need to be careful when taking the matter on board.
Many things can be said to show that there is fairness. One factor, referred to by my hon. Friend the Member for Brecon and Radnorshire, is the increased personal allowance. In 2001, it was only £4,000. It was £6,000 when we came into office, and it had been frozen for the preceding year. In other words, lower paid people were brought into taxation as a result. It is now proposed to increase the allowance to £8,000. That is as much of a leap in two years as was achieved in almost eight years under the previous Government. That is fairness. At the same time, we are seeing significant increases in taxation for higher-rate taxpayers. Fairness is there, given what we are trying to achieve with corporation tax.
Not mentioned in the Budget statement, but still important, is consultation on the proposed non-means-tested pension of £140 a week. That is really good news. It was welcomed by the age charities, but has gone completely unremarked in this debate. However, two areas still concern me. One is about the announcement on gift aid, which is there to encourage the development of the voluntary sector. I worry about the attitude of the Welsh Assembly Government towards the big society agenda. It is derided as a party political matter. I am concerned that we might miss out on opportunities across the UK.
I turn to the statement made by the Prime Minister today on the impact that the increase in inflation may have on the NHS budget in England. The Prime Minister gave a clear commitment that we would stick to our promise to inflation-proof the NHS. Yet in Wales, we see its budget cut back by 7%, which is another real issue about fairness.
My final point is on the funding formula. I agree that there is a need to address it in the interests of fairness but, from my discussions with Ministers, I believe that they understand that as well. We can look forward to more progress in that area than we had in 10 to 13 years from the previous Government.
Chris Evans (Islwyn) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Owen, although, with the Divisions that we have had, you have not had much luck chairing the Committee. I thank the hon.
I do not believe that anybody in any part of the Committee wants to see the economy fail; we do not want to write off hard-working families and pensioners. But I come to this debate as someone who grew up in a valleys town in the 1980s—I see the hon. Member for Vale of Glamorgan smiling—when we knew everyone in the street. This might sound sentimental and sloppy, but we knew that no one in the street had a job. We knew proud, hard-working men—mineworkers—who were laid off, because their industry was gone. We knew that the wasteland at the end of the street, which we called the pit, used to employ thousands of people. We knew that the regular visitor to the street was the Provident woman who, every Monday, hammered on doors and demanded money, and we were fearful.
David T. C. Davies: I am the grandson of a miner. Will the hon. Gentleman accept, first, that miners generally did not want their children to go into the mines and, secondly, that historically Labour shut down far more pits in the ’60s than the Conservatives did in the ’80s? He cannot rewrite history.
Chris Evans: That was not my point. I was making a point about how we felt so desperate in the valley town where I grew up. When we went to school, we were told that we had been written off before we even started. That was the real situation that we faced in the valleys.
Alun Cairns: I came from a similar community and background. I recognise the failure of socialism that led to such a situation, and that Wales was a far more prosperous country when we left office in 1997 than it was in the circumstances that we inherited last year.
Chris Evans: My recollections are not the same. I remember walking past the jobcentre and seeing the TUC protest outside it, because there were 3 million unemployed. I remember seeing interest rates of more than 15% and inflation running away with itself—that is what I remember, and the figures bear me out.
My point is that, now that I have been elected to Parliament to represent one of those valleys communities, which I am proud to do, I receive e-mails from people worried about disability living allowance, benefit reform and what they will do next. When we have public sector workers worried that they will lose their jobs and when old people tell me that they go to bed at 8 o’clock at night because they cannot afford to heat the rooms, we become worried again.
Chris Evans: The point I am trying to make is that, during periods of Tory government, we saw unemployment go up to record levels. The hon. Gentleman cannot deny that. In 1981, we were told it was the worst recession in living memory and, in 1992, we were told the same. I find it amazing, when I come to the House, that you want us to apologise, but in 1992 you were responsible
My point is that when old-age pensioners tell me that they watch television in their coats and go to bed early because they cannot afford to heat the rooms, and I find out from Budget papers that the winter fuel payment is being reduced by £50 for pensioners up to the age of 79 and by £100 for those over 80, I am amazed. It is a deception on a grand scale that the Chancellor waved the flag and said that he would clamp down on Learjets—but he did not say that in his Budget statement, which is what worries me.
As I said, I do not think that anyone wants to see the economy fail. If the public sector is cut, there will quite simply be no private sector boom. I will use an example from my constituency, where General Dynamics have created high-quality high-technology jobs. My right hon. Friend the shadow Secretary of State visited when it was awarded a contract for the future rapid effect system. The key thing, however, is that that is a public sector contract. On that same estate—the site of the old Oakdale mine—we also have a carpet company, which has an MOD contract for MOD accommodation. The public sector permeates everywhere.
If public sector jobs are cut, that does nothing for confidence. When I walked down Blackwood high street the other day and talked to the shopkeepers, they said that business is already down. When I was working for my predecessor, I remember that that high street was absolutely booming with different kinds of shops, and now I see them boarded up. The one boom industry seems to be charity shops, and they say that they are already struggling, even before the VAT rise comes in. What do we say to those people?
There has been much talk of anger. There is anger in the country, but the anger is not directed at the public sector, the primary care organisation or the nurse, who provides care to the sick, vulnerable and needy; the anger is directed at the bankers. Nobody stood up to the bankers. The truth of the matter is that everybody in this country employs the bankers. They are Government-owned, and we must stand up to them. The simple truth is that they were responsible.
Alun Cairns: I am grateful again to the hon. Gentleman for giving way; to his credit, he has been extremely generous. Will he remind us, however, which Government were in power and due to be regulating the banks at the time? Speaking of standing up to the bankers, why did the last Government not stand up to the bankers before the crash?
Chris Evans: Apart from Russell Grant or Mystic Meg, I do not think, to be brutally honest, that anybody could have seen it coming. At the end of the day, the Conservatives said that they wanted light-touch regulation for the banks. It all comes down to one simple fact. The bankers are getting a tax cut. Yes, the Chancellor is bringing in a bank levy, and I support that because banks should pay their share. At the same time, however, corporation tax is being reduced. Who will benefit from that? It will be the bankers and the energy companies, which are squeezing vulnerable people all the time. [ Interruption. ]
Chris Evans: I have no problem with somebody making money and contributing to the economy, but when they are completely failing and getting massive bonuses, I do not agree with that at all. That is what the bankers are doing. They are failing, and yet they are still getting bonuses. What are the employers—the Government—doing about it? Absolutely nothing.
We must realise that everybody needs banking. People need a bank account to pay money into, and they need money to pay their bills, but we need to reform banking. That is what the Government are not standing up to. The massive issue here is that we need to reform our economy, but we need to find the balance between the public and private sectors. The issue is about finding a way of investing while paying off the deficit. It is also about breaking up the banks into regional banks. If that happened and if we saw a more mutual element, we might see some of them relocating to Wales and creating more jobs.
There is all too little time to wind up what has been, as ever, an interesting and wide-ranging discussion. There have been many contributions from hon. Members on both sides of the House, which have provided extremely interesting and thoughtful arguments. I do not propose to run through all of those, but I hope to pick up on some of them as I go through my remarks.
I am also mindful of the admonition from this morning’s Chair that we should not recount too much history. I do not propose to repeat the remarks made by my right hon. Friend the Member for Neath on the history of the last Labour Government, but I will briefly look at the history of what this Government inherited and what they are doing with that inheritance, because that is entirely relevant.
For all the difficulties that the Labour Government had in respect of the banker-driven deficit and the global banking crisis that created the recession, we left this Government with unemployment falling, growth rising and inflation low and stable. We were on track, according to independent forecasts, to halve the deficit in four years.
Only a few months ago, the Government felt that they were building on that legacy and increasing the prospects for growth, and that the policies they were pursuing in the earlier Budget would be successful. The Secretary of State reminded us of that when she said in the Welsh Grand Committee in December that she felt that there was confidence in our economy and the Government’s economic policies, and that we could look positively to the future.
What have we seen in the intervening months? The Government have effectively squandered the low inflation they inherited—it is rising at twice the Bank of England’s target rate. Consumer confidence is at its lowest ebb for 20 years. Inflation’s rise is being pushed up, I fear, by the VAT rise, and that is compounding the global rises in commodity and food prices. Crucially, of course, growth is effectively nowhere to be seen.
We heard a lot from the Secretary of State—it was an acceptance, I think—about growth being the only way in which Wales will get out of the problem with the deficit. She accepted that we cannot cut our way to an improved economic situation, but I have looked in vain through the 50,000 words of “The Plan for Growth” to find any reference to “Wales” or “Welsh” and it is not there. I suggest that that is indicative of the extent to which the Government are not thinking carefully enough about Wales, and, with respect, the extent to which the Wales Office does not have sufficient purchase or influence in the Treasury. When the Minister gives his winding-up speech, will he tell us about the conversations he has had with the Treasury and give some inkling of what in particular the Treasury ought to have done to boost our economy that is not included in “The Plan for Growth”?
Growth is, without a doubt, stalling. The hon. Member for Cardiff North, who is no longer in the room, gave us some slightly erroneous figures. The evidence from the OBR’s independent forecast is very clear. I absolutely welcome the fact that we have an independent OBR, and I therefore take its predictions of what our economy will do as having even greater force. It predicted in the autumn that our economy would grow by 1.8%, but in reality it grew by 1.3% last year. It predicted that our economy would grow next year by 2.1%, but now it thinks that that will be 1.7%. It has also downgraded the prediction for the year after by a further point. There might be an OBR prediction that growth will rise in succeeding years, but I ask Members of all parties how much confidence they can place in those projections when all the predictions that the OBR has made on growth to date have been wrong. We are not hitting the targets and the Government have not hit their stride in terms of performance.
Only today in Wales, we have a further worrying signal from Experian, which suggests that the Welsh economy over the next 10 years is even less likely than the rest of the UK to grow with any vigour—it predicts 1.6% versus the UK average of 2.2%. That reflects the legacy of post-industrial Wales with which the Labour Government wrestled yet failed to turn round to the extent that all parties would have all liked. We must acknowledge that Wales is still behind the curve in some key respects, and we wish that we could have done more, but that is testament to the difficulty of the process.
I genuinely urge the Government to think much harder about what they are doing, because I do not see a real proposal for growth in Wales in their plans. Instead, I see booming unemployment. I again turn to the independent figures from the OBR, which clearly state that unemployment will rise by 200,000—that is 200,000 lost jobs above the original projection—in each year of the period. That means that 10,000 extra jobs will be lost in Wales in each of the next five years. My hon. Friend the Member for Vale of Clwyd raised the
What is the more textured reality of the situation in Wales? For our young people in particular, we face the prospect of a return to the 1980s—I do not think that that is fanciful. There is the very real prospect of another lost generation of young people, as the facts bear out. Since 2008, when Wales was seventh out of 12 for youth employment in this country, we have shifted to being the No. 1 hot spot for it. There are more young people who are unemployed in Wales than anywhere else in Britain, which is a desperate concern to me, and ought to be a deep and abiding concern for everyone on the Committee and across our public sector.
What are the Government trying to do about that? We have heard some discussion today of personal allowance changes. At face value, it is good to take more people out of taxation, but the reality is that the Government, as in so many other respects, are giving with one hand and taking away with the other. The £48 a year that people in the relevant income bracket will be given through the change to the personal allowance is completely offset by the £450 extra that they will pay due to increased VAT.
Secondly, the corporation tax cut that has been trumpeted by the Government will benefit big corporations headquartered in the UK, but it will not benefit many companies in Wales. A reversal of the decision to cut capital allowances in respect of manufacturing would have benefited Welsh companies. That would have led to a potential rebalancing of the economy, which is ostensibly what the Government wish to deliver in Wales. Those two things do not add up and, in my view, the Government are not being straightforward.
We will see whether enterprise zones work. The hon. Member for Vale of Glamorgan is confident that they will, but I hope that the Minister will put a bit more flesh on the bones of what they will deliver for Wales. The carbon floor price is a crucial issue for Wales, too. The Minister ought to give some idea of the situation to many of us—certainly to my hon. Friend the Member for Newport East—who represent constituencies that have steel manufacturing and companies with high energy usage. It might be that a carbon floor price is a good idea in the long run, but I suspect that introducing it in such a draconian fashion without due consideration of how it will impact on Wales is a bad idea, so I would like to hear what the Minister will say about it.
It is clear that the Budget will not deliver growth for Wales, particularly given the more difficult starting place in which we find ourselves. The Government have failed to learn lessons from history. My right hon. Friend the Member for Neath referred to the 1930s in America and the failure to understand the difficulties caused by sucking demand out of the economy and putting the brakes on far too early. I think that we can look closer to home. Labour Members may want to look to our past and our national Government when we were coming out of our recession of the 1930s. Mistakes were made then by Philip Snowden, which is something that the Chancellor should bone up on to understand the risk that he is taking with our economy.
The hon. Member for Cardiff North made an interesting contribution. I am not sure that I subscribe to all of the facts that he gave us, but I agree that the Government need to take heed of what people in the country are saying about the innate unfairness of what is being done. The Government purport to want to reduce the divide in wealth and opportunity in different parts of our country, yet we find that bankers are being let off while the public sector and poorer, more vulnerable members of our communities are being asked to pay the price.
I have one final challenge in respect of bankers for the Minister, who chuntered earlier that we should have regulated more. I agree that we should have regulated the banks more, but the big challenge for the Government is whether they will back the calls that we are hearing from the Bank of England in respect of capital ratios and the Basel III agreements that must be struck to force the banks to hold more capital to act as a buffer if another banking crisis strikes. Will he indicate whether he agrees with those who believe that the regulations should be more stringent, or will we see a repetition of what the Tory Government advocated in opposition: light-touch regulation of banks?
Mr David Jones : I thank you, Mr Owen, for your chairmanship this afternoon, and I also thank Mr Havard for chairing this morning’s sitting. This is the second time that the Welsh Grand Committee has met this month, which emphasises the Government’s commitment to ensuring that Welsh affairs and concerns remain central to the work of the House. The Budget is an ideal topic for such an occasion because the decisions that my right hon. Friend the Chancellor announced last week will affect every area of public expenditure in Wales, whether devolved or not.
The Secretary of State opened the debate by pointing out that the Budget builds on last year’s emergency Budget and spending review by consolidating the economic rescue mission, moving to reform, and setting the United Kingdom on the road to recovery. No one can or should underestimate the scale of the challenge facing the country in seeking to address the appalling economic bequest left to the Government, and appalling it is, despite the confession—although there was more avoidance than confession—with which the shadow Secretary of State regaled us. His speech was a long way of simply saying, “Not me, guv.” He insisted that Labour had behaved with the utmost prudence in its stewardship of the British economy.
If one accepted the right hon. Gentleman’s thesis, which was echoed by the hon. Member for Pontypridd, one might reasonably wonder why Government Members were not rejoicing at the golden economic bequest that the previous Government left us. The right hon. Member for Neath referred repeatedly to investment, which is a word that Labour Members use repeatedly to create a smokescreen for the devastation that their Government wrought on the British economy. For “investment” read “debt”, occasioned by imprudent, profligate borrowing, and it is that debt with which every man, woman and child in this country is now saddled.
Given the scale of the indebtedness that the Budget tries to address, it is astonishing that the shadow Secretary
The right hon. Gentleman was critical about spending cuts, and while he acknowledged that a Labour Government would have had to make cuts, he refused to say what they would have cut. That common theme was developed by all Labour Members who spoke this morning. They seem to acknowledge that cuts must be made, but they are not willing to say where. In fact, they seem to think that public expenditure can be let rip without notable spending cuts and without increasing taxation. We would all appreciate it if they would indicate where the money might come from. The wonderful Welsh word for a mess is “llanast”, which my mother repeatedly accused me of creating in my bedroom when I was a boy. The simple fact is that until the Labour party says what it would do to address the economic llanast with which it has left us, it is in no position to criticise what we are doing as we try to clear it up.
In the brief time available to me, I want to deal with some of the specific points that were made. The hon. Member for Carmarthen East and Dinefwr referred to the Barnett formula. I think that everyone recognises that it is coming to the end of its life, and the Government are therefore initiating a Calman-like process to consider what should replace it. That will involve every aspect of funding, because it is absolutely clear that, if the Welsh Assembly Government are to have more powers, they should have more responsibility. The new Calman-like process for Wales will consider not only the possibility of a Holtham floor but whether the Assembly should have tax-varying powers, which I know the Labour party would not welcome, but that is the way it is.
The hon. Member for Vale of Clwyd made an astonishing speech. It was as if Aneurin Bevan had never died. I was absolutely amazed by the visceral hatred that he exhibited for every Member sitting on this side of the Committee. We are apparently all millionaires, and he of course is the working-class hero standing up to us. Well, I do not recognise his description of the area of Wales that I live in. Like my hon. Friend the Member for Cardiff North, I fought my election, in which I gained a substantially increased majority, on the basis that the next Conservative—or coalition, as it turned out—Government would have to do all in their power to address the appalling economic legacy left by the Labour party. I was proud to stand on that platform. It might be of interest to know that, far from its being an employment desert, the latest figures show some 354 vacancies in the hon. Gentleman’s constituency. That might have been of some comfort to him, had he bothered to turn up for the winding-up speeches.
We heard a very good contribution from my hon. Friend the Member for Aberconwy, who rightly said that the renaissance of the British economy will be private sector-led. He also referred to the Welsh Assembly Government Department that is responsible for the economy. I share his dismay at its performance, and
The hon. Member for Newport East raised a very important point about the carbon floor price, and I want to deal with that specifically, because it is a concern, given the reliance of much of Wales, and indeed the United Kingdom, on intensive energy users. Only yesterday, my right hon. Friends the Secretary of State and the Secretary of State for Business, Innovation and Skills had a meeting with Tata in south Wales. BIS and DECC are currently working on a joint project to assess the cumulative impact of Energy and Climate Change policies on energy-intensive industries in the United Kingdom. The research will be used to advise Ministers on how to de-carbonise the electricity generation sector while maintaining a competitive UK economy.
I can see that I am coming towards the end of my time—thank you for the signal, Mr Owen, which I am sure was meant charitably. All in all, this has been a very good Budget not only for the United Kingdom as a whole but for Wales. It has sought to start redressing the imbalance that we have in Wales between a dominant
There are a number of challenges for the Welsh Assembly Government. Will they support the creation of enterprise zones in Wales, to secure the clusters of economic growth that parts of Wales so badly need? Will they exempt start-ups and micro-businesses from regulation? Will they provide the relief that we are providing to home buyers with FirstBuy, and help boost the recovery in the housing sector in Wales? Will they, most importantly, look at the planning regime and seek to liberalise it, not impose appallingly heavy and burdensome regulation on builders? Finally, will they support apprenticeships?
Those are the challenges for the Welsh Assembly Government. We have given them the tools in this Budget to do the job. We in Whitehall and Westminster are more than happy to assist them and to ensure that Wales has a bright future.
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